Chapter 6: Pursuing e-Business Achievement

Fast Forward 5.0: Making Connectivity Work for Canada
Canadian e-Business Initiative (CeBI)
September 2004

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Throughout 2003, the Canadian economy experienced slow progress across all segments of the e-economy. Though increasingly online, consumers and business are still not taking full advantage of their connectivity. In addition, as the e-economy has matured, new challenges and opportunities require renewed energy to capitalize on Canada's technological advantages. Steady progress, marked by a lack of coordination, is not sufficient to pursue global excellence as a leader in technological use and adoption.

Reviewing the contribution Canadian businesses, governments at all levels and the educational community have made in 2003 to build the e-economy, it is clear that a strong, renewed and continuing commitment to build partnerships that promote e-business is necessary in 2004 and for the future.

6.1 Governments

Governments have played an important role in building the Canadian e-economy. Through its commitment to connecting all Canadians, the federal government worked effectively with various partners to provide basic Internet connectivity to schools, libraries and public-access sites across the country. Industry-led broadband infrastructure provided 80 percent of Canadians with access to high-speed Internet. Working with industry and communities, the Government of Canada has allocated $105 million for building broadband infrastructure in rural and remote areas to extend services to under-served communities.⁴⁵ A further $155 million has been earmarked, through the National Satellite Initiative, to improve connectivity to remote communities that can only be served by satellite communications.

Provincial governments, as well, have been active in increasing connectivity. The Alberta SuperNet,⁴⁶ for example, is one province's attempt to create a province-wide, high-speed telecommunications backbone. When it is completed, it will tie together 4,700 schools, hospitals, libraries and other government facilities in almost every community in Alberta—422 in all. SuperNet will bridge the urban-rural digital divide, providing broadband connectivity to schools and hospitals, and aims to facilitate entry for Internet service providers to even the smallest of communities.

But connectivity is not enough. The federal government has not done enough to communicate the success of these connectivity and infrastructure development programs to the public. It must also move the agenda beyond connectedness and determine the next new and ambitious step. To enable Canada to grow aggressively as a global leader and innovator in ICT development and use, governments must lead by example, becoming model users of ICTs for improved delivery of services through initiatives such as Government Online (GOL). The number one ranking given to Canada by Accenture's latest international e-government study⁴⁷ indicates that, at the federal level, the Government of Canada has succeeded in focusing on key areas where electronic service delivery would provide value to Canadians, and is moving to integrate GOL into a general strategy to transform government service provision.⁴⁸ In addition to the BusinessGateway portal and various business-intelligence products, transactional services of interest to SMEs include online incorporation and business registration, a variety of business-and payroll tax-related services, and the pilot Record of Employment (ROE) on the Internet.

However, results of the move into "service transformation" are as yet undetermined. From a citizen's point of view, the GOL agenda is not visible; while the opportunity for some service provision exists, there is little imperative to interact electronically with the federal government except for the annual filing of income tax returns. Transactional services like the ROE and business tax filings can provide a "pull-through" impetus for SMEs, bringing them online and demonstrating the value of electronic transactions. In addition to underutilised services, the latest Auditor General's report noted that the federal government lacks a comprehensive strategic plan to achieve its ambitious outcomes, and raised severe doubt regarding the achievement of the program's goals by the 2005 deadline.⁴⁹ Furthermore, central funding for the GOL initiative will end in fiscal year 2005-06. The federal government needs to provide a strong and visible commitment that it will continue to build on the achievements of the GOL initiative and carry through its longer-term goal of service transformation across departments and jurisdictions.

To continue its role, the federal government should capitalise on its ability to disseminate knowledge and information throughout Canada. It must enhance its communications strategy and engage Canadians directly on the advantages of technology adoption. Communications efforts must be more concerted and visible, and these efforts must inform SMEs of government programs and services, and continue to facilitate accessibility. In addition, this work points to the importance of partnerships. To best address different sectors, government can look to build coalitions with sector associations to better address firms in those sectors that are not adopting e-business, with industry leaders to better disseminate knowledge to SMEs, and with the education sector to better address the "e-talent" gap.

6.2 Health and Educational Sector

In addition to the challenges Canadian governments face in transforming their overall operations, the public sector faces special and particularly acute challenges in transforming the delivery of two key services—education and healthcare—which together account for some 15 percent of the Gross Domestic Product (GDP) and the largest share of provincial government expenditures. Healthcare faces major, long-term funding pressures. As such, this system needs to use available resources more efficiently and effectively. In addition, these sectors face significant shortages of qualified professional personnel, such as nurses, teachers and professors.

In both of these areas, Canada faces a rising demand for services and increasing costs. An aging population increases demand for healthcare services, while requirements of the e-economy increase demands for education, skillsdevelopment and lifelong-learning services. As well as increasing demand and costs, these trends reduce our ability to pay for these services. Both the aging population and the requirement to attain higher levels of education and skills development mean that relatively fewer Canadians will be active in the work force. Contributions to government revenues through the income tax system, therefore, will tend to decline in relation to rising expenditure requirements.

There is a consensus that ICTs can be applied to improve service and contain costs in our healthcare, education and skills-development systems, as well as deliver these services quickly and effectively to rural and remote regions. Healthcare expenditures in Canada were $106 billion in 2001 or 9.6 percent of GDP; for 2003, they were estimated at $121.4 billion or 10 percent of GDP.⁵⁰ If, for example, healthcare expenditures could be reduced by one percent through the intelligent application of ICTs, annual costs would fall by more than $1 billion.

ICTs and Internet-based services are already being used to assist in delivering healthcare and education services. However, these applications have just begun to scratch the surface of what is possible, particularly with the use of broadband networks. Much more needs to be done, both in urban areas and in rural and northern communities.

In the area of healthcare, the federal government has devoted considerable resources to the development of health information systems. Both the Kirby and Romanow Commissions recommended that the federal government should invest in development of tele-health and tele-medicine services. The Canada Health Infoway,⁵¹ a public- and privatesector partnership, has received significant federal and provincial government funding to lead in the development of portable Electronic Health Record systems that can be used across the whole range of healthcare providers and for essential outcomes-based research to improve therapies. A recent report,⁵² prepared for the U.S. Department of Health and Human Services by the National Coordinator for Health Information Technology, describes in some detail the efficiencies and savings that could be made possible by a nationwide system of electronic health records.

The role of ICTs and the Internet in education has also been the subject of considerable discussion and debate over the past decade. Competitiveness in the global economy necessitates a well-educated workforce, which, in the environment of today, is made up of individuals who can understand and use e-business technology in their daily lives. The educational sector makes important contributions to raising the level of technological literacy of Canadians. This literacy, in turn, enhances Canada's national competitiveness by offering the ability to enhance the Canadian environment and attract and retain both investment and people.

Canada was the first country in the world to connect all of its public schools and libraries to the Internet. A logical next step might be to upgrade these connections to full broadband capability, as is being done in Alberta via the SuperNet, and to develop educational services and applications that take full advantage of broadband communications. This upgrade would give all children equal opportunities to learn. In the university sector, the challenge remains to continue to focus on technology training as a core education competency for students in all programs.

There is a consensus that ICTs can be applied to improve services and contain costs in our healthcare, education and skills-development systems. Beyond making incremental improvements of these kinds, the real challenge facing providers of healthcare, education and other public services is to re-think their service models in light of the possibilities that are opened up by ICTs and the Internet, and to re-design their delivery systems and organizational structures to fit these new service models.

6.3 Private Sector

In Canada, sound market principles have resulted in the private sector being the main creator of new technology and main builder of infrastructure. To continue promoting SME adoption of ICT, large users of e-business within the private sector must play a greater role in addressing their SME partners on this issue. In today's highly competitive, fast-paced market, the strength of small businesses lies often in their ability to react and adapt quickly to market trends and competitive pressures. In a recent CeBI focus group, respondents indicated that emulating successful competitors, as well as the need to respond to industry-wide use of e-business technology, were two important considerations that drove their adoption decision.⁵³ SMEs indicated that gathering knowledge about e-business solutions was challenging; despite a wide range of available information, SMEs believed that governments, large institutions, consultants and service providers might not be credible sources of information.⁵⁴ Rather, SMEs looked first to their immediate colleagues and competitors. Word of mouth and personal references from other small businesses in their sector, as well as trade publications, were the best ways to communicate with them; and keeping up with competitors was an important motivation for e-business adoption.⁵⁵

As sectoral initiatives such as ECCNet (see section 4.1) show, large businesses can drive adoption by focusing more on mentorship or leaseholder-type agreements with their SME suppliers and distributors. This type of adoption can occur in partnership with associations, which can aid the industry in identifying how and where the businesses can associate to become successfully e-enabled. The private sector must also continue to build such coalitions, whether with governments at all levels or other partners, to provide education and information for SMEs and to facilitate adoption.

6.4 Moving From E-Commerce to e-Economy

The Canadian economy started 2004 on a strong note, with a stronger dollar, recognition of our competitive advantages and relatively low business costs. However, building a strong economy necessitates a focus on growth and productivity, as well as the policy momentum to enable Canadians to use and capitalize on the significant productivity-enhancing potential of e-business technologies. This goal necessitates a strategic focus that brings the disparate strengths of our current e-economy together under a concerted long-term economic strategy. Governments and businesses have worked well together to date, building the necessary infrastructure to enable businesses and Canadians to use all manner of technology. Today, both face the challenge to extend these networks to new programs, such as healthcare and education, and the imperative to involve new partners, specifically SME suppliers and distributors, to make the e-economy a greater part of the overall economy.

Canada's technological infrastructure is strong. Canadian consumers have access and are increasingly connected to Internet technology, which enables their participation in electronic transactions. Yet, consumers continue to cite concerns about the privacy and security of their online information as deterrents to engaging in online transactions. Large businesses, meanwhile, with the implementation of federal and provincial privacy legislation, are increasingly recognising the importance of planning in this important area. However, small businesses with limited resources will continue to require assistance in interpreting and implementing legislative requirements. In addition, new and increasingly complex security threats, such as spam and identity theft, require collaborative action and flexible solutions.

SMEs have made significant progress in basic technology use, with 74 percent using email and 78 percent with Internet connections. While small businesses lead in customer-focused applications, they are reticent about adopting many of the more advanced e-business solutions. Although these solutions, such as e-procurement, supply-chain management and human-resource management, offer substantial potential for cost savings and profit enhancement, the majority of small firms do not utilize them. Factors such as cost, an inability to connect with the necessary skilled professionals, and questions regarding where and how to find good impartial information continue to be identified as stumbling blocks. SMEs also identify their needs as very specific to their sector, sub-sector and even the firm. Yet, firms report that they adopt technology based on the technology use of their competitors and large partners, indicating potential for the use of sector-specific approaches to build awareness and adoption of e-business.

While the overall business environment has improved, specifically with announcements and implementation of commitments made in the last federal budget, continued work to build the right environment is necessary. Governments should strive to ensure the commitment to "smart regulation" made in the Innovation Agenda is maintained. Smart regulation will help build a marketplace with clear and uniform rules that facilitate commerce through e-business channels. At the same time, we cannot neglect to trumpet our strengths, using international opportunities to tell our partners and investors about the Canadian technology story.

To move from considering electronic commerce as distinct to incorporating it in the overall economy, CeBI believes Canada can achieve its potential with a commitment from all partners to work together to reach the next level. By putting our success in infrastructure to use, by building the trust, and with it the demand, among both businesses and consumers to use electronic commerce, we offer the following imperatives for action:

1. The Government of Canada needs to pursue a strategic plan to build an innovative 21^st century economy based on the recognition of the role and importance of ICTs in that economy. This plan must include efforts to clarify and review, as appropriate, marketplace rules to facilitate long-term economic growth. We must also take all opportunities to support and communicate our technological strength to key investors and trading partners.
2. Given the potential for sectoral approaches to build e-business adoption, the private sector, especially large businesses, must do more to create an imperative, with appropriate support, to drive e-business use among their SME partners, suppliers and distributors.
3. All stakeholders should work to address security concerns in the online environment, maintain consumer and business trust and confidence, and facilitate use of Internet transactions and purchasing.

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⁴⁴ Paul Martin, Making History, the Politics of Achievement, November 2003.

⁴⁵ Stronger Communities for a Stronger Canada: The Promise of Broadband, Report of the BRAND National Selection Committee, March 2004.

⁴⁶ Across the Great Divide: The Alberta SuperNet is a model for the broadband future-everywhere, IEEE Spectrum, January 1, 2004.

⁴⁷ Accenture, eGovernment Leadership: Engaging the Customer, The Government Executive Series, April 2004.

⁴⁸ Connecting with Canadians: Pursuing Service Transformation, Final Report of the Government On-Line Advisory Panel, December 2003.

⁴⁹ Auditor General of Canada, 2003 Report of the Auditor General of Canada to the House of Commons, November 2003.

⁵⁰ Canadian Institute for Health Information, National Health Expenditure Trends, 1975-2003.

⁵¹ Canada Health Infoway, Tele-health Program, www.infoway-inforoute.ca.

⁵² U.S. Department of Health and Human Services, The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care, July 21, 2004.

⁵³ CeBI, Net Impact II, October 2003.

⁵⁴ Ibid.

⁵⁵ Ibid.