Backbone’s digital-economy submission to the federal government

Backbone Editorial Advisory Board members

On May 10 the federal government asked for input on its digital-economy strategy. That’s good news: Canada has no formal plan for ensuring we are a player in the developing worldwide digital economy. That’s one reason we have been falling behind: in 2007, Canada ranked 11th among 21 Organisation for Economic Co-operation and Development countries in total economic investment in ICT, down from 10th in 2005 and 9th in 2004. Those numbers were quoted in the government’s consultation paper, so it is aware of the issue. Of course, this has been a concern for previous governments yet there has been little actual progress.

But the call for input is a legitimate step, and we applaud the government and welcomed the opportunity to contribute our views.

To craft our submission we turned to the Backbone Editorial Advisory Board, 20 senior Canadian executives at large companies, research institutions and advocacy organizations. We formed the group earlier this year to help guide the magazine and keep us on top of business and technology developments. The digital-economy call for input was an ideal project for us to tackle.

We held individual interviews with board members, gathered for a brainstorming session and fine-tuned the final submission.

Dozens of Canadians submitted papers. Our report is unique, however, as it represents the expertise of many individuals from a variety of industries; it is not the position of any one company or person.

What follows is a summary; the full digital-economy submission is available on the government’s site.

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Strengthening Canada’s digital economy

Practical steps toward Canada’s future, a submission from the Backbone Editorial Advisory Board

We recommend action in five areas: 

1. Education and skills development 
2. Fostering innovation through financial incentives 
3. Fostering innovation through incubators and centres of excellence 
4. Increased visibility on the international stage 
5. Government procurement

For each we have included specific recommendations for cost-effective actions we believe will benefit all Canadians.

1. Education and skills development

Digital technologies are changing every aspect of our lives, and changing the nature of work in all sectors—even those that have not traditionally been thought of as “high tech.” At the core of this revolution are the skilled people who create and use technologies.

Technology and science courses are not being effectively marketed to students in high school, much less in grade school. Enrolment in these courses is dropping and there is a fundamental disconnect between the technology-enabled lifestyle enjoyed by youth and their opinion of science and technology as career choices.

Meanwhile, Canadian technology companies warn that thousands of highly paid vacancies simply cannot be filled. We recommend:

Establish Tech Week: Technology and science programs are competing with other disciplines for students. And as in all competitive arenas, marketing is the key. One possibility is a national Tech Week promotion, involving classroom visits, advertising, Web sites, recruitment drives and other measures.

Provide incentives to qualifying foreign students: While Canada already encourages immigration within specific skillsets, we should adopt a more aggressive recruitment mindset. Incentives could include changes to immigration laws to make it even easier for students to remain here.

2. Fostering innovation through financial incentives

Innovation is the keystone to any digital society. It drives success by generating new technology products and services.

Financial incentives are a proven and effective method of supporting developing companies and fostering innovation. However, the board noted there are literally hundreds of such programs. Innovators must currently devote significant resources to identifying incentives and determining whether they qualify to apply. Even once this is done, innovators find that applying to the programs is often complex and time consuming. We recommend:

A tax holiday: Compared to the current regime of incentive programs, a bold and well-defined tax incentive—such as a corporate tax holiday for innovative new companies—would be easy to access and administer, especially for smaller companies.

Provide grants for innovation: While numerous government grants exist, these typically require matching funding, and this can be difficult if not impossible to come by. Overall, tax breaks are only useful when a company has revenue to tax. The reality is many new start-ups do not generate enough taxable revenue, and therefore receive limited benefit from such a scheme. For these companies, straightforward and accessible grants would provide access to much-needed funding.

Create incentives for sales and marketing innovation: While Canadian companies often demonstrate skills in product innovation, they regularly lack the sales and marketing expertise required to commercialize their products. Incentives that target sales and marketing would greatly benefit emerging companies.

A grand initiative to attract global attention: Other jurisdictions have employed high-profile programs to entice global companies. A five-year moratorium on corporate tax for new companies or R&D initiatives, as mentioned above, would attract international attention and draw significant investment to Canada.

3. Fostering innovation through incubators and centres of excellence

Canadians have successfully established incubators and centres of excellence that foster innovation across a number of sectors. Still, these could be expanded, and additional centres could be created in specific areas of focus and grown organically from local expertise. For example, a computer animation centre could grow from the seed planted at Sheridan College in Oakville, Ont. We recommend:

Establish a national presence: Canada would benefit from a national strategy encouraging the adoption and support of centres of excellence. At minimum this would serve as a central point of contact for foreign companies.

Establish marketing, sales and channel development centres of excellence: Marketing, sales and channel development skills are often among the weakest for new Canadian companies, yet it’s essential that we develop these skills and become innovators in these areas.

4. Presence on the international stage

Canadians are often tentative and even timid in their approach to the international market. Greater emphasis on Canada as a brand is required. We recommend:

Own the Podium: The stakeholders in Canada’s digital economy need to draw a page from the 2010 Olympic Winter Games in Vancouver, and adopt the Own the Podium approach as their model. The Canadian Olympic Committee developed Own the Podium to define our goals for the Winter Olympics. While the program was widely criticized early in the Olympics, this evaporated as Canada’s medal count rose. Simply setting the goal was an important first step to that success. Within our technology sector we have no such set goal.

Target emerging sectors in which Canada has leadership potential: Just as Own the Podium supported sport federations, we can target specific sectors within the high-tech space along with sectors that are dependent on the use of broadband and multimedia systems and services. Examples include: 

• Electronic health records and delivery: Canada is considered a global leader in the health care space. 
• Clean tech and renewable energy: Canada is well regarded in this space. 
• Water technology: Part of green tech, water is already an extremely valuable commodity and this will only accelerate in the future. 
• Waste and garbage management/reclamation: The world’s population is increasing rapidly, and technologies to manage waste represent a significant opportunity. 
• Digital content: We are a nation of creators: Hollywood is staffed with our directors, animators, special effects wizards, writers and actors; our musicians and novelists play to world audiences; and our video game industry is among the top three in the world. We should capitalize on this and concentrate on digital content creation.

5. Government procurement and government as a model user

Governments should never purchase a product simply because it is Canadian, but it is also true that governments can be powerful allies in the effort to commercialize innovation. But many domestic technology companies find selling to government extremely complex, or they run into barriers when trying to qualify to bid on contracts. We recommend:

Improved communication with potential suppliers: Government could dramatically simplify the process of vetting potential vendors, as the current processes prevent many domestic companies from participating.

Conclusion

In response to the Government of Canada’s call for input on specific ideas and initiatives, we have detailed a number of priorities. But we would encourage the government to move forward on multiple fronts, and to act on each focus area outlined in the government’s discussion paper. While there are specific areas that may be of greater value or urgency, each element identified by the government is important and for most, if not all, a significant foundation currently exists. Implementing these ideas will build on existing bases, making the funds and effort required less significant than those required for entirely new projects.
 

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Photos: Miguel Hortiguela