ABCtech #98 27-OCT-17 Thinking Growth and Embracing Competition

ABCtech #98 27-OCT-17 Thinking Growth and Embracing Competition

After years – many years, of living in the “innovation system” I am convinced that for Canada – and Alberta in particular, to thrive it must be competitive.  By that I mean succeed in innovation, we must transform our culture of fairness and equity to one that is highly ambitious and achievement oriented – dare I add “and more aggressive”. We need more acceleration; incubation is not enough. I am not alone. – Perry Kinkaide, Editor and CEO, Alberta Council of Technologies Society

Culture of fairness and equity impeding growth.  Anthony Lacavera and Kate in How We Can Win cite that “the small size of companies in Canada, while often celebrated, is actually a drag on productivity and the wider economy.”  FOR MORE  The same observation is cited in 2013 report by the Digital Entrepreneurship and Economic Performance (DEEP) Report. Each condemn the Canadian culture of “fairness” and “equity” as breeding marginal, mediocre businesses. There are just not enough disruptive start-ups and strong-armed rivals battling for market share: “the degree of creative destruction and competitive pressure in many sectors is insufficient to weed out poorly run companies, or reward superior enterprise performance.”

Pride in survival impeding growth. Among entrepreneurs and small business, pride in survival is stifling the drive for growth. An effective innovation ecosystem features survival of enterprise as a minimum, but without growth – acceleration, the innovation ecosystem has to be judged as ineffective. Many provinces are reporting pride on the effectiveness of their innovation ecosystem by heralding the flourishing of entrepreneurship and small business innovation, but there is woe little reporting and evidence of growth. Our report HERE on the “Missing ‘M’ in SME” cited the lack of a growth among Alberta’s small businesses as due to an overly strong product orientation and weak commercial skills.

Overall survival of start-ups is weak. While innovation may be strong – particularly in Alberta (GEM Report HERE), survival is weak and growth rare. Industry Canada’s national monitoring of SMEs (small and medium enterprises) is consistent – across all provinces and over time over 80% fail within 5-years.  When we surveyed the province’s SMEs, it was rare to find “growth” as an objective and never, not once, were “mergers and acquisitions” identified as a growth strategy despite the abundance of struggling small enterprises. When we subsequently surveyed impediments to economic development, the lack of vision and leadership took top honours.

Growth is a leadership issue.  For those that do survive, growth is constrained, competition is mediocre and the temptation to leave tempting. Simon Raby of Mount Royal University cites HERE the essential role of inculcating “growth” into an organization’s vision and leadership. ALSO

The innovation ecosystem discourages growth. The best response of most governments has been to adopt an “innovation” policy with support for incubators.  But the gap in growth remains: economic restraint is a lot easier to orchestrate than development and public service agencies are under no incentive to accelerate. Vision and leadership are consistently identified as critical to sustained innovation. Both are lacking. Public sector services including most professions lack competition; they are typically secure, slow to adopt technology, and unresponsive to market forces.

Quebec leadership apparent.  Quebec is emerging as an economic miracle HERE, transitioning from a “fiscally irresponsible and grumbling freeloader” to “a Canadian Centre of innovation and skillful adaptation to technological advance” while generating a budgetary surplus!  Conrad Black attributes the province’s advance to leadership in “slicing down public expenditures, ceasing talk of political upheaval, and incentivizing investment…a model for fiscal prudence and economic growth.”

Rarely thinking big – an attitude issue.  The contributors to the innovation ecosystem discourage growth: government taxes growth, institutions thwart ambition, and banks are risk averse to emerging technologies. Some years ago I became extensively involved in consulting to a university struggling with change. I was asked by the then retiring research university president what I would recommend for better managing change.  He was offended when without hesitation I responded, “In the face of rapid change the university is insensitive: rigid and slow in decision making and too dependent on sole source, government funding.”  Others would echo my sentiment as also applying to no growth corporate entities and governments in general.

Financial institutions are discouraging. I also recall a breakfast meeting with a bank president who put me straight, “Why invest in SMEs when we can let the market weed out the weak and cherry pick the survivors.  Start-ups are of no interest.” This attitude is prevalent among VCs too. Well, times have changed and banks are showing increased interest in serving – but still not financing, SMEs.  Hence growing interest in a recent proposal by ABCtech to establish a credit union and technology investment fund designed explicitly to finance and accelerate early-stage start-ups that banks will not touch: SMEs with intangible assets of the digital age that are more fitting with the emerging economy that the former industrial economy.  FOR MORE  BigTech firms aren’t blind to the opportunity, they even more than fintech are an emerging source of change that banks are having to weather.  FOR MORE

Growth must be the benchmark of success. If a growth culture is to be achieved it is abundantly clear that: 1. Government’s must review their policies and practices to incentivize growth and competitiveness – recognizing the merit of accelerators, 2. Collaboration and the development of strategic relationships is essential for survival particularly in early stage enterprise; at later stages, mergers and acquisitions should be a consideration for achieving growth, and 3. Growth and competitiveness, ambition and achievement, must be promoted for identifying rising stars.

No one wants a revolution … but, the impact of the tsunami of emerging technologies promises a socio-economic impact greater than most can imagine and more than any institution is likely to weather. When consulting in Taiwan some years ago my British counterpart profiled Canadian’s doing business in Asia as “nice but mediocre” and Americans as “aggressive and dominant”. Canadian services and products were often superior, but the business attitude was not competitive – other than in hockey.