Strengthening Canada's Digital Economy | Practical Steps Toward Canada's Future, a Submission from the Backbone Advisory Board

Summary

In the spring of 2010, Backbone magazine formed an Editorial Advisory Board comprised of 20 senior Canadian executives from technology companies, research institutions and industry groups. The Board provides ongoing guidance to the magazine's editorial staff and addresses issues relating to the business use of technology.

This group is therefore ideally suited to answer the call for input from the Minister of Industry, the Minister of Human Resources and Skills Development, and the Minister of Canadian Heritage and Official Languages regarding Canada's digital economy.

Following a series of consultations, the Board agreed on a number of specific recommendations. In summary, we propose the government take action in the following areas:

Education and skills development:

There exists a fundamental disconnect between students' connected lifestyles and their interest in technology–related careers, resulting in a drop in enrolment in related fields of study. We recommend:

• A greater emphasis on marketing relevant fields of study to teens and pre–teens
• Additional steps to attract and retain foreign students

Financial incentives:

Canadian businesses currently have access to numerous financial incentives but the very scope of these plans and the complexity of managing them is an active deterrent to many. We recommend:

• Accessible grants that are not tied to matching funds or revenue
• A bold tax incentive, such as a straightforward corporate tax holiday
• Sales and marketing–specific incentives, as these skills are often lacking in early–stage, technology–driven Canadian businesses

Incubators and centres of excellence:

These institutions have generated notable success and they should be strengthened and expanded. We recommend:

• Establishing a national presence which, at a minimum, would provide one point of contact for foreign investors
• Establishing marketing, sales and channel development expertise centres

International presence:

The Canadian brand needs more polish and prominence. We recommend:

• An approach similar to Own the Podium, in which stakeholders in Canada's sport system saw that simply setting the goal was the first step towards Olympic success
• Targeting emerging technology and technology–dependent sectors, such as clean tech and health systems

Government procurement and government as a model user:

Government can be a strong supporter of deserving domestic innovation. We recommend:

• A simplification of the qualification requirements for government suppliers

Although we have made specific suggestions that we consider both practical and achievable, we also encourage the government to act on multiple fronts, on each focus area outlined in Improving Canada's Digital Advantage.

Above all, we encourage definitive action. Following this valuable input and study process, the time for action will certainly be upon us. All members of our Board urge the government to move aggressively to ensure Canada is at the forefront of the ongoing revolution in digital technology.

We look forward to contributing further to this discussion in the weeks and months ahead.

Steve Dietrich and Peter Wolchak, Backbone magazine, on behalf of the Backbone Editorial Advisory Board

Submission

As a long–time advocate of the benefits of technology in the workplace, Backbone magazine agrees with the Government of Canada that a coherent digital–economy strategy is vital to the continued prosperity of our country and the well–being of our citizens. We congratulate the Minister of Industry, the Minister of Human Resources and Skills Development, and the Minister of Canadian Heritage and Official Languages for publishing this consultation paper on the issue and we welcome the opportunity to contribute to the discussion.

This consultation's timing is fortuitous for Backbone. Earlier this year Backbone formed an Editorial Advisory Board, comprised of some of Canada's leading thinkers, to examine the relationship between technology and business.

The Board's first objective was to prepare a white paper on the state of Canada's digital economy. This submission is the product of group discussion and debate by the Advisory Board's members. While it by no means reflects all of the thoughts generated during this process, it does embody those for which we found the greatest consensus — namely, in the following areas:

• education and skills development
• fostering innovation through financial incentives
• fostering innovation through incubators and centres of excellence
• increased visibility on the international stage, and
• government procurement.

For each item we have included specific recommendations for cost–effective actions we believe will make a measurable difference, to the benefit of all Canadians.

Backbone will continue to monitor Canada's progress on these issues, reporting to its readers and advocating for continued improvement.

We will be pleased to provide any additional comment or clarification to this submission as necessary. Our contact information is listed in Appendix 1.

Who we are

The Backbone Advisory Board is comprised of 20 senior Canadian executives at large companies, research institutions and advocacy organizations. This submission therefore represents a broad consensus of opinion.

Rather than advocate a single interest or outcome, our goal with this submission is to provide a consensus opinion from our Advisory Board on issues that affect all stakeholders in Canadian business and society.

Our membership is detailed in Appendix 2.

Backbone magazine (Backbone Magazine) launched in January 2001 and is one of Canada's largest and most successful business magazines.

Backbone reports on the use of technology to enhance everyday business processes. Our mandate is to provide practical and actionable advice that will help readers run their businesses today and prepare for tomorrow. In addition, Backbone examines larger issues such as national competitiveness, the environment and Canada's educational and investment communities.

As such we are ideally positioned to contribute to a discussion on the future of our country's digital economy.

Recommendations

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.

Backbone magazine's Advisory Board has identified several education and skills issues that require attention.

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 despite hundreds of programs in Canada designed to recruit high–school graduates into post–secondary science and technology streams.

There is a fundamental disconnect between the technology–enabled lifestyle enjoyed by the youth of today and their opinion of science and technology as attractive career choices.

Meanwhile, Canadian technology companies warn that thousands of highly paid vacancies simply cannot be filled because they cannot find qualified candidates. While groups such as the Canadian Coalition for Tomorrow's ICT Skills are working in this area, more can be done.

Accordingly, the Backbone Advisory Board recommends the following:

Establish Tech Week

Technology and science programs are competing with other disciplines for students. And as in all competitive arenas, marketing is the key. Governments, technology and science schools, industry associations and other stakeholders need to consider new, more effective and better coordinated ways to deliver the message.

One possibility is a national Tech Week promotion, involving classroom visits, advertising, Web sites, recruitment drives and other measures to position science and technology careers as interesting, lucrative and exciting.

Regardless of the form they take, any such efforts should target not only high school students, but also those in senior grade school, in recognition of the competitive nature of modern education. And in addition to students, these efforts should also engage parents, teachers and career counsellors.

Provide incentives to qualifying foreign students

All Canadians benefit when students from around the world study at this country's academic institutions. But if those students return home after graduation, the majority of the benefit goes with them. While Canada already encourages immigration within specific skill sets, we should adopt a more aggressive recruitment mindset, particularly for those studying in fields where a shortage of qualified candidates has been identified.

While many foreign students already choose to stay, providing additional incentives may encourage even more to call Canada home. These incentives could include the right to work in the summer so they can afford to stay in Canada between academic years, as well as changes to immigration laws to make it easier for students to remain here after they graduate — including fast –tracked citizenship for the best scholars.

2. Fostering innovation through financial incentives
Innovation is the keystone to any digital society. It drives success by generating new technology products and services that improve quality of life and workplace productivity, while reducing costs.

The Backbone Advisory Board has identified several issues that must be addressed to ensure Canada continues to foster innovation and benefit from the digital economy.

Financial incentives are a proven and effective method of supporting developing companies and fostering innovation. However, the Advisory Board noted there are literally hundreds of such programs. Each has its own qualification requirements, sector focus and other criteria.

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.

As an example, larger companies often feel compelled to contract with a third party to handle administrative chores associated with Scientific Research and Experimental Development (SR&ED) incentives. Meanwhile, smaller businesses — even those that may qualify — typically do not consider SR&ED programs because of the complexity and administration required.

Furthermore, there are significant regional inconsistencies in the number and scope of incentive programs. This is an issue not only for large national companies but also for global corporations that may be considering Canada as a site for research and development.

Incentives are valuable and effective, but today's plethora of programs is confusing and costly to navigate. This makes all incentives less effective.

Fortunately, the Government of Canada is well positioned to address these issues, as most incentive programs are publicly funded. Consultation with provinces, territories and regions would be required.

Accordingly, the Backbone Advisory Board recommends the following:

Provide a tax holiday for innovation

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. This means existing government grants are underutilized.

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

Just as companies must employ marketing strategies, so must countries market themselves. 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, Ontario, and a networking or communications centre could be established in Waterloo, Ontario.

Accordingly, the Backbone Advisory Board recommends the following:

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 seeking expertise and information on Canada's digital expertise.

This national strategy should also encourage better coordination among centres of excellence in order to minimize duplication and increase focus on core competencies.

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. Targeted stimulus funds could be devoted to establishing such centres.

4. Presence on the international stage
Canadians are often tentative and even timid in their approach to the international market. Modesty is an admirable quality but it has no place in the highly competitive digital economy. When we are slow to trumpet our strengths or overly modest about our achievements, we leave the field open to others by default. Greater emphasis on Canada as a brand is required.

Accordingly, the Backbone Advisory Board recommends the following:

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. Governments and other stakeholders could — and should — replicate the Olympic success with the same commitment to succeeding in the international digital economy.

Target emerging sectors in which Canada has leadership potential

Just as Own the Podium supported the efforts of a number of national 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. Some 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 as well.
• Water technology: Although part of green tech, water is already an extremely valuable commodity and this will only accelerate in the future. Water management and purity technologies and practices deserve a separate focus.
• Waste and garbage management/reclamation: Again, this is part of green tech, but it, too, deserves a separate focus. The world's population is increasing rapidly, and technologies to manage waste represent a significant business 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. In the new worldwide digital economy, we should capitalize on this strength and concentrate resources on digital content creation.
• The northern passage: As the northern ice melts, new shipping routes are opening through Canada's backyard. We should support any efforts at innovation that help us take advantage of the opportunity this presents.

5. Government procurement and government as a model user
Governments should never purchase a given technology or product simply because it is Canadian, but it is also true that governments can be powerful allies in the effort to commercialize innovation.

When an emerging company is struggling to make initial sales and gain mindshare, having a model user is an extremely valuable asset and, providing the innovation has merit, this is a role ideally suited to governments.

But many domestic technology companies find the process of selling to government extremely complex, or they run into barriers when trying to qualify to bid on contracts. As a result, many companies give up without trying.

Accordingly, the Backbone Advisory Board recommends the following:

Improved communication with potential suppliers

Governments must make responsible purchasing decisions based on the ability of the product or service to meet their demands. That said, governments are encouraged to look at ways to better inform Canadian innovators of procurement opportunities.

Government could also dramatically simplify the process of vetting potential vendors, as the current processes prevent many domestic companies from participating in the selection process.

Conclusion

Canadian society is in a period of transition comparable to the regulatory and standards changes required to build our national railway system.

Today, the first Canadians to have lived entirely in the digital world are entering adulthood and exercising their influence on all aspects of our society, from how we learn to how we work and play. As with any period of transition, it's impossible to predict the exact nature of the digital society of the future, but it is already apparent that the changes will be swift and dramatic.

It is for these reasons that consultations such as this are vital to charting a sustainable future for Canada. Equally, it demonstrates the need for regular reviews of our progress on current challenges, and the regular examination of the issues to identify and address new challenges and opportunities.

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 Improving Canada's Digital Advantage. 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.

The Backbone Advisory Board looks forward to continuing to play an active role in this process in the years ahead.

Appendix 1: Backbone magazine contact information

Publimedia Communications
187 Rondoval Crescent, North Vancouver, British Columbia V7N 2W6
(604) 986–5352

Steve Dietrich, publisher, sdietrich@backbonemag.com
Peter Wolchak, Editor, pwolchak@backbonemag.com

Web: Backbone Magazine
Blog: Backbone Magazine — Backblog
Twitter: Backbone Magazine — Twitter

Appendix 2: Backbone's Editorial Advisory Board membership

The members of Backbone magazine's Advisory Board bring to the table a wealth of experience from a broad spectrum of disciplines that shape both technology and business innovation. They are listed below.

In making this submission, the members are speaking in their capacity as advisors to Backbone magazine, not on behalf of their organizations.

Bruce Chin, Senior Manager, Deloitte Canada
Ken Coates, Canadian Digital Media Network; Dean of Arts, University of Waterloo
Bernard Courtois, President and CEO, Information Technology Association of Canada
Paul Day, Vice–President, Information and Communications Technology, Export Development Corporation
Rodney Dobson, Senior Vice–President, ADP Employer Services International
Martin Featherston, President, Brother Canada
Wayne Gudbranson, President and CEO, Branham Group
Mukesh Gupta, Director, Strategic Relations, Tata Consultancy Services
David Jacobson, Director, Emerging Technologies, PriceWaterhouseCoopers
Dave MacKay, President, Ceridian Canada
Kirk Mandy, President and CEO, Zarlink Semiconductor
Lou Milrad, Chair and CEO, Greater Toronto Marketing Alliance; Associate Counsel, Miller Thomson
François Morin, Senior Director, Business Communications, Bell Canada
Dragan Nerandzic, Chief Technology Officer, Ericsson Canada
Howard Quon, Partner, Canadian National Technology Leader, PricewaterhouseCoopers
John Ruffolo, Managing Partner for TMT, Deloitte Canada
Duncan Stewart, Director of Research — Technology, Media & Telecommunications, Deloitte Canada
Catherine Swift, President and CEO, Canadian Federation of Independent Business
Kevin Tuer, Managing Director, Canadian Digital Media Network
John Weigelt, National Technology Officer, Microsoft Canada