With half a century in business and a stellar list of clients among humanitarian and non-government organisation groups, electronics manufacturer Codan Limited justifiably felt it had a secure foot in its market.

It soon became apparent, however, that the growing availability of the humble mobile phone
in developing countries, in particular, would test its business model like never before. The improvement in telecommunications infrastructure meant that clients no longer relied on Codan’s range of high-frequency (HF) radio systems, instead turning
to mobiles.

CEO and managing director Donald McGurk explains the dilemma in an African market such as Nairobi, for instance. “A few years ago HF radio was basically the communication (tool) that needed to be installed in every vehicle that was to be taken outside the city. Today, it’s a communication of last resort for the aid and humanitarian groups. They’re using cell phones and they’re using satellite phones where they can.”

Codan faced two options: it could concede defeat, or it could create new markets and improved products. Drawing on the entrepreneurial spirit that led to university friends Alastair Wood, Ian Wall and Jim Bettison creating the forerunner to Codan in 1959, it chose the latter.

McGurk says Codan, now a listed business that first started exporting to Papua New Guinea and the United States in 1973, has elected to expand into military, police and security markets which still depend on infrastructure-free HF radio systems that are less vulnerable to enemies disabling repeater towers or debilitating satellite signals. The evolution has proven highly successful for the Adelaide-based company, which employs about 500 staff at sites in Australia, the United States, the United Kingdom, China and India and provides HF radios, satellite equipment and metal and mine detectors.

Over the past year alone, it has delivered a sophisticated HF radio network to Kabul for the Afghan National Police; networks for counter-narcotics operations in Kyrgyzstan, Turkmenistan and Kazakhstan; and it is the sole contractor to the US Africa Command for HF radio networks that are used for peacekeeping efforts.
The contracts helped Codan amass revenue of almost A$170 million in the 2010-11 financial year, and an underlying net profit after tax of A$23.4 million. This is the second highest revenue and underlying profit in the company’s history. The results featured impressive export earnings growth of more than 40 per cent. Exports represent about 90 per cent of revenue, with products being sold into more than 150 countries.

“We’ve had to reinvent ourselves in the last three or four years, and this is where the real kick in our growth has come,” McGurk says.

Phil Marley, Codan’s  group commercial manager, believes that exporters must proceed with caution when entering new territories. The company takes a very calculated approach when assessing possible markets and customers.

“So before we even engage in a discussion about selling a product we spend a lot of time investigating who is making the enquiry,” Marley says.

Codan operates from 11 offices around the world, adding to the complexity of its export agenda. “We work through those offices to gather intelligence information and we’re quite geopolitically aware,” Marley says.

He adds that Codan remains committed to having a diversified sales base to enable it to cope with market cycles, hence its engagement in additional products such as satellite communications and metal and mine detection technologies.

“The mine detection product is largely humanitarian,” Marley says. “It is sold to military organisations which are looking to find anti-personnel devices, but it’s a product that saves lives and it’s one that we’re proud of.”

As it continues its sales evolution from the aid and NGO markets to the defence and security sectors, Codan is aware that it also has to adapt its human resources capability. It has quickly moved from having salespeople who specialise in high-frequency radio only, supplementing the team with former special services military personnel who understand the business’s new target audience.

“They can actually have empathy with the people on the ground because they have lived and worked in their shoes.” McGurk says.

The result is that Codan is taking on established market players and offering a credible alternative, for example, to a US$30,000 radio system supplied by Harris Corporation, a renowned Florida-based international communications equipment company.

As McGurk explains: “We’re selling the same capability at a fraction of that cost … for non-tactical operations, like border protection, police forces, wildlife, we’re able to actually get radio equipment into the hands of many hundreds of people.”

Clearly, there are challenges as new players such as Codan engage in changing export markets. For example, rival companies have unfairly derided Codan’s HF product as a “toy”, prompting the company to modify the product so that it is now a credible technology that matches military specifications. The fact Codan is not a North American company is also a perceived setback in some markets, despite free-trade agreements between Australia and the US.

Breaking barriers takes time, effort and money. Codan spends about 8 per cent of its sales revenue on new product developments in what it describes as ‘an innovate-or-die model’. “What we’ve had to do is demonstrate that we’re competent and capable and that our value proposition is so compelling that you need to take us seriously.”

As it competes in increasingly global markets, Codan is determined to evolve according to market requirements. “Our products are customer driven as opposed to a field-of-dreams approach,” McGurk says. “We used to [work] on the notion that if we build it they will come. We can’t afford to take that chance in a market that’s so competitive.”

Codan won the Information and Communication Technology Award at the 49th Australian Export Awards in December 2011.