Supporting Entrepreneurship Across the Digital Media Ecosystem: MaRS Digital Economy Consultation Response
Submitted by ttang 2010-07-16 13:52:46 EDT
Theme(s): Canada's Digital Content, Growing the ICT Industry, Innovation Using Digital Technologies
- Our mission. Our vision
- Innovation Using Digital Technologies — Q1, Q2, Q3
- Canada's Digital Content — Q1, Q2
- Building Digital Skills — Q1-3, Q5
MaRS drives social and economic prosperity by leading Canada's innovation mission. We at MaRS envision Canadian communities that are prospering through enhanced employment prospects, the creation and retention of local wealth and an enriched cultural and social environment. To realize this vision, we foster and promote Canadian innovation.
MaRS helps create successful global businesses from Canada's science, technology and social innovation. MaRS provides resources — people, programs, physical facilities, funding and networks — to ensure that critical innovation happens. We stimulate, identify and harness great ideas, nurture their development and guide the transformation of those ideas into reality. We measure our success through the companies that emerge after receiving help from MaRS.
MaRS Information Communication Technology (ICT) Practice
The advisors in this practice work together to help our clients create successful global businesses in information and communication technologies — and to support their growth.
We offer a range of services. From mentoring and market intelligence to workshops and educational events. We connect emerging companies with potential partners, customers, investors and talent.
Nurturing the overall ICT industry is equally important. That's why we're also developing partnerships in Canada and around the world. Identifying financing opportunities. Creating market clusters. And producing both events and publications.
We focus on:
- Communications hardware and software
- Wireless technologies
- IT solutions
- Digital media
- Online businesses
- Healthcare IT
As a result of our work at MaRS, we are provided with a unique perspective on the types of innovative enterprises emerging in Canada and the unique opportunities and challenges they face. Our inputs to this consultation are specifically focused on this domain of the digital media landscape.
The ICT sector has changed profoundly in the last ten years. We believe that digital media, as a unique space within the ICT sector, will be a driving force for future competitiveness and economic growth in Canada, if a number of key strategic interventions are undertaken.
MaRS has identified four strategic areas that will create a catalytic foundation to strengthen the digital media economy:
- Develop a conducive environment (culture)
- Support globally significant content creation (content)
- Embrace the fusion of technology, content, user experiences and brand (the "new" IP)
- Provide sector specific financing
Significant value creation lies ahead in the digital media economy, specifically within the following areas:
- Cloud Computing
- Software as a Service (SaaS) — easily customized, low cost, on-demand business applications (i.e. Salesforce Website)
- Open standards and open source software
- Social Networking/Technologies
- Digital Content
- Digital Health
- Security and Privacy
Both private and public sectors must be actively involved in stimulating digital media innovation through new partnerships and collaborations that leverage resources and drive competitiveness. As an innovation community we will need to coordinate our efforts and resources — from knowledge creation, to talent development, to leveraged networks and capital — to create maximum economic impact from our assets in this fast moving market. We must foster an entrepreneurial culture and a leadership mindset. Collectively we must act boldly — this is a great opportunity for Canada.
Supporting Entrepreneurship Across the Digital Media Ecosystem
MaRS has identified relevant themes affecting the future success of the ICT sector in Canada, and in particular, examined the role and relationship digital media has in driving the future competitiveness and economic prosperity of technology-based industries and companies in Canada.
The ICT landscape looks very different today from the picture of five years ago, or even two years ago. From the late 1970s to the late 1990s, many innovators in the ICT sector were contributing critical IP to the information and communications infrastructures we all depend on today. Canada, at one point in this timeframe, led the world in communications innovation and spawned companies such as Newbridge, Nortel, JDS Uniphase and Mitel. However, as ICT and many other industries started to migrate from the "analog" to "digital" world, a new breed of technologies, companies, and industries started to emerge, creating what we call today the digital media economy.
Today, US companies such as Google, Apple and Amazon dominate this new economy and are, in turn, driving a broad range of innovation across all industries, globally. Despite the success of these first and second-generation information sector companies, significant value creation lies ahead in the digital media economy, specifically within the following areas:
- Cloud Computing
- Software as a Service (SaaS) — easily customized, low cost, on-demand business applications (i.e. Salesforce Website).
- Open standards and open source software
- Social Networking/Technologies
- Digital Content
- Digital Health
- Security and Privacy
The MaRS window on digital media innovation
Since the launch of MaRS Advisory Services in January 2006, our team has worked with more than 600 young Canadian companies in the ICT sector. The 35 Senior Advisors, Entrepreneurs-in-Residence, and Volunteer Mentors that work in our ICT Practice today are all either successful entrepreneurs or experienced C-suite executives from Canada's ICT industry with extensive international experience. We support our client companies through a hands-on model by providing market intelligence, entrepreneurship education, business mentoring, and access to critical talent, customer and capital networks.
This deep sector concentration provides a unique window on the organic innovation capacity in Canada — including a new generation of innovative enterprises emerging from both academe and the entrepreneurial community: the technologies that differentiate them, their clustering in micro-segments of competitive advantage, the rapidly shifting market trends they must keep pace with and the challenges and opportunities they face in scaling to become global market leaders. It also provides an inspiring perspective on the energy and drive of first-time, student or new Canadian entrepreneurs and the way they view the Digital Economy — global, with social relevance, ubiquitous, mobile, fun. We have recently renamed our ICT Practice to ICE — Information technology, Communications and Entertainment — to better reflect the client concentration and specialization in the portfolio. We also have a strong focus on convergence domains such as digital health, social technology and green IT, which are managed in close partnership with our life sciences, social innovation and cleantech practices respectively.
This proposal for action concerns both public and private sectors as both stakeholder communities have an important role to play in fostering a favourable environment for innovation. Stimulating meaningful interactions and new models of collaboration between all key constituents in the new ICT innovation ecosystem are critical to generating meaningful economic impact. We need both public and private institutions to step up to the challenge facing Canada, and align their resources to drive competitiveness on a global scale.
Factors impacting pace of innovation
After analyzing and reflecting upon the main issues at stake, MaRS has prioritized and identified four influential factors impacting the pace of innovation and success of the ICT — and more specifically digital media — sector in Canada:
- Conducive environment (culture)
- Globally significant content creation (content)
- Fusion of technology, content, user experiences and brand (the "new" IP)
- Access to capital / financing (funding)
We believe that the recommendations put forth will strengthen Canada's competitive position in the digital economy and have an important impact on fostering entrepreneurship and business creation in this country and build on our strong history of innovation leadership in both the creative and ICT sectors. We believe these recommendations form a catalytic foundation which will stimulate the creation of a robust digital economy.
1. Culture — Fostering a conducive environment
Key challenges: Leading innovation jurisdictions around the world recognize the catalytic effect of entrepreneurs on job growth in the economy. Seasoned entrepreneurs, working in a fertile science and technology environment, and with access to talent and capital, build the high growth gazelle enterprises in which highly differentiated product or service offerings are aligned with significant and growing global markets. Gazelles create jobs faster than other businesses and often become the flagship companies that anchor prosperous communities and spur further innovation in the next generation of business leaders and start-ups in the region. As a result, sound innovation policy requires a focus on strengthening the entrepreneurial community and the ecosystem in which it flourishes, with targeted initiatives to support the scaling of the most promising ventures that emerge.
With this understanding, governments, universities and community based organizations around the world are continuing to implement a range of policies and incentive systems to stimulate entrepreneurship and support the growth of entrepreneurial ventures. Although these initiatives have many elements in common, the results are more mixed — pointing to the deep and intricate root system of entrepreneurship in a broader innovation culture. Building that culture, in which innovation is embedded in all aspects of life and entrepreneurship is a common and celebrated career path, takes time and cannot be achieved with simplistic tactical initiatives. A holistic innovation framework is required in which research and education, business, capital and public policy work synergistically to achieve a common goal.
Although entrepreneurship was instrumental in building this country, and continues to drive job and wealth creation in our resource sector, the ecosystem is relatively nascent in the knowledge economy sectors. As a result, a number of thoughtful, strategic interventions are required to maximize the impact of our innovation assets.
In the context of this consultation, those interventions need to be influenced by the specific needs and dynamics of global digital media markets. These markets are moving rapidly with tremendous mobility of ideas, talent and capital. The Internet has leveled the innovation playing field, with breakthrough ideas coming from anywhere, and faster access to global customers as the pace of change is continuing to accelerate. Some of the elements of our culture — caution about investing early or adopting technologies first, aversion to failure, deliberate approach to company building — in combination with relatively stable employment and strong regulatory frameworks (all of which have served us well in challenging economic conditions), may work against our desire to be a leader in the digital economy. However, a number of interventions that specifically target the unique features and needs of this rapidly evolving market place could have profound implications for the economic future of Canadians.
- Raise the profile of Canadian entrepreneurship with political decision makers, as well as civic and industry leaders. Make entrepreneurship a central focus of the national digital media strategy. Identify and promote "role models" of successful Canadian entrepreneurs in order to demonstrate the benefits of entrepreneurial endeavours with specific emphasis on entrepreneurs working across the broad sweep of the digital media landscape (including the content and social media arenas). Make these entrepreneurs visible and accessible to our youth.
- Promote actions and programs to foster entrepreneurship at all levels in the education system, starting as young as possible. Showcase entrepreneurs in schools and throughout the post-secondary system to ensure that students view entrepreneurship as a viable and attractive career path. This can be achieved directly through entrepreneurship educational programs in formal educational settings, or more indirectly through continuing education, community based learning and targeted programs delivered by innovation agencies. Ensure that the curriculum is both inspiring and practical with specific educational modules focused on the unique challenges of different types of digital media businesses. This type of experience-based learning — by entrepreneurs for entrepreneurs — is often best delivered in non-academic settings. Leverage multi-media online learning tools and strategies for alignment with the sector's personality and to ensure the availability of high caliber resources to all parts of the country.
- Strengthen innovation centres across Canada that are focused on providing business support to ICT entrepreneurial ventures, to promote sharing of resources and best practices and to leverage talent and capital networks. Specifically support initiatives that go beyond technology push models to involve multi-stakeholder efforts to deliver market pull, develop solutions rather than technologies, and build value. These types of initiatives are the most complex and challenging, but have the highest potential for value creation and building a sustainable industry. Support the exchange of personnel through secondments and internships.
- Support learning (potentially through exchange programs) from international institutions to bring global best practices to Canada. Support the participation of Canadian innovation institutions and their entrepreneurial clients in global networks, to learn from and showcase Canadian assets. Create a focused strategy within this envelope of activities to ensure that we partner with the best-in-class international digital media regions — make the focus of those partnerships the growth of our emerging companies in global markets.
2. Content — Creating globally competitive content
Key challenges: Historically, Canada has been a net importer rather than a net exporter of content. Until recently, we have been satisfied with this status, with content creation for the domestic market funded through Canadian content regulations on radio and television. This model will no longer work as distribution models move outside of these easily regulated mediums. Market dynamics are demanding a rethink of all aspects of content creation, development and distribution.
The Canadian market is not large enough to support a healthy digital content industry on its own. The growth of Canadian digital content companies will be limited by the audience size if their content is narrowly focused on the Canadian cultural narrative.
At the same time, Canadians are increasingly consuming global digital content, creating more competition at home. This is particularly true as distribution models shift from traditional media to social media and other Internet channels and is particularly true for younger audiences. However, as geographic borders become more porous, Canada — through its highly diverse creative sector — has a unique opportunity to develop digital content that has cultural relevance to a global audience. This enables Canadian players to become more competitive globally thereby strengthening the digital content industry and its impact on the Canadian economy.
While Canadians have created some high quality content that has been successfully exported, more emphasis must be placed on developing and promoting high caliber content with a broader appeal, which will drive economic benefits to both the industry at home and to the Canadian economy as a result of penetrating global markets. A healthy industry will in turn support the retention of the creative talent that Canada has always spawned, but often lost to other countries because our industry cannot properly support their aspirations.
"Canadian" culture content will always have its place and must meet the needs of Canadians as citizens and consumers. However, this content must also reflect the increasingly diverse mosaic of Canada. The broad range of cultures and experiences of Canadians enable us to create content that can appeal to many nations and cultures. In doing so, it will better align with the broader objective of stimulating and supporting content that meets both our own needs and those of a global citizenry. This broader objective will make it possible for Canada to become a globally relevant content player.
It is important to continue funding and supporting the creation of all content, including all forms of digital content, that reflect unique Canadian culture and values that would not otherwise receive support; however, this cannot be the only focus of digital content in this country.
- Review all funding programs for content creation to ensure their relevance in the context of global shifts in content creation and distribution as well as potential economic contribution in Canada. Relevance needs to include the shift towards international audiences, towards content creation with wider appeal and towards new models of development and distribution.
- Content regulations need to encourage the creation of content that can appeal to a wider global audience in addition to being competitive with international content that exists in the Canadian market. This incentive to create content with a broader appeal involves loosening the Canadian content regulations or creating adjacent support systems.
- Existing programs, like the Canadian Media Fund, need to create a new category of projects that embrace online and mobile content to better reflect market dynamics.
- Canada needs to maintain net neutrality and not attempt to regulate the Internet.
3. The "new IP" — The fusion of technology, content, great user experiences and brand
Key challenges: Fundamental changes are taking place in the creative industries globally and a national digital media strategy for Canada must reflect the shifting foundations of this sector to be meaningful. Innovations in digital platforms & technologies, new business models and the inclusion of 'amateurs' as producers (versus observers) in the content industry, as well as rapid shifts in market adoption driven by globalization, are leading to the collapse of traditional definitions and categories within the ICT sector. New demands in content creation, content management, content storage, content consumption and content security are driving innovation in all areas of the sector, from the technology foundations to the business processes and distribution models.
Innovation in the digital media industry is driven by a new mindset, one based on relevance, dialogue and influence and supported by rich, robust technology platforms. How consumers engage and interact with content, how businesses engage with their employees and customers are much more fluid and focused around an entire experience. In addition to content, context is becoming increasingly important. As distribution channels and methods evolve and Internet and mobile platforms become pervasive, audiences and businesses want to consume and create content differently.
These changing expectations have informed and created the building blocks of what is known today as digital media. To succeed in this rapidly evolving market, existing players and new entrants must excel across the entire digital supply chain (see below) and innovation must be directed, embedded and coordinated across all aspects of the digital media landscape, reaching beyond a focus on just technology or just content:
- The Digital Experience: applications of digital platforms and enabling technologies to create engaging experiences for both the consumer and businesses.
- Digital Monetization: applying innovative thinking to traditional business models in a way that creates new revenue streams (SaaS, cloud computing, freemium).
- Digital Content: successfully migrating from analog to digital capabilities in the areas of content creation and acquisition to content packaging and distribution.
In Canada, only a select few digital media players have emerged well positioned from a competitive perspective (Open Text, Desire to Learn, Electronic Arts). Many companies have succeeded in creating great digital content and/or engaging users in a meaningful way, but have struggled for example to develop meaningful monetization models.
Innovation needs to be encouraged and supported across all levels of the digital supply chain. Without an integrated approach, innovation will produce only sporadic, incremental creativity, not disruptive innovation capable of driving significant wealth and job creation and affirming Canada as a leader.
- Review public and private sector programs to ensure support for the entire digital supply chain — to help foster growth and innovation in delivery platforms and digital applications — an area in which Canada has the opportunity to lead internationally. Support needs to include:
- The infusion of talent into the programs that are specifically tailored to this sector.
- Program design and development that align with the speed at which innovations are developed in this arena (measured in months not years).
- Expansion of the programs that support agile development and rapid prototyping required for success.
- Develop exchange experiences in the education and cultural sectors to help raise awareness of the requisite needs for creating successful digital media businesses and stimulate diffusion of available 'know-how'. It is not just about creating the best technology, but also acknowledging the wide range of non-technical activities, such as user experience and design, market and business development, management / leadership skills development, partnerships and alliances, business model development etc. that are required to succeed.
4. Funding — Providing access to capital at the early stages of business formation and through the life cycle
Key challenges: Canada lacks the history (and therefore cumulative experience and range of funding options) for successfully investing in early-stage digital media start-ups, particularly when compared to leading regions such as the east and west coasts of the United States. Traditional ICT investors struggle to assess the risk-reward trade-offs of digital media businesses through the lens of a typical technology investment strategy.
Ubiquitous connectivity and cheap (often commoditized) infrastructure technology have begun to upset large markets such as media and entertainment. Historically, the "defensibility" of ICT companies has been based on patents and copyrights. Because these companies required significant R&D investments and their products contributed to key aspects of IT infrastructures, solid IP strategies were required to protect the value of the businesses.
As a result of these shifts, many of today's digital media companies lack deep intellectual property foundations (unless they are platform opportunities), or conversely, need to develop new models of managing IP to protect combinations of technology innovation, content and new business models to maximize revenue. For digital media companies "defensibility" is achieved by integrating a great brand and engaging content delivered via leading edge technologies that provide a superior user experience — not IP. In addition, they rely heavily on market dynamics and the ability of management teams to execute in a fluid, fast moving environment. These challenges are amplified in the convergence areas of digital health, or social technology.
On the positive side, digital media companies do not need as much capital as required by the ICT companies venture capitalists backed five to ten years ago in areas such as enterprise software or communications infrastructure. The majority of digital media companies leverage the installed base of IT technologies and can reach their customers and consumers through more cost effective channels i.e. the Internet, and as such they are often more capital efficient during the market validation phase. The subset of companies that gain strong market traction will need larger funding rounds as they scale globally — but they can typically get to first revenues with less investment.
However, because the characteristics and attributes of promising digital media companies differ from traditional ICT businesses, a fundamentally different market understanding, as well as investment mindset and approach is required.
- Catalyze and support the creation of a dedicated sector-specific fund or family of regional funds tailored to the needs of digital media startups and not tied to traditional IP requirements. These funds could involve public and private funding partners and should leverage instruments and incentives already deployed in related fields (OMDC in the gaming sector, for example).
- Extend support programs to finance "downstream" development activities: R&D is already supported through a variety of funding programs; however, funding for initial product design and prototyping to introduce products to market is lacking and desperately needed in the digital media sector (IRAP is one of the few programs available, and even within IRAP, digital media businesses are not a major focus). Very few digital media companies emerge from traditional academic settings and are therefore not eligible for proof-of-concept funding programs that exist in many regions.
- The process of applying for and deploying public funds or seed capital must be efficient and fast to keep pace with change in this market (i.e. digital media companies need to move rapidly to remain competitive and cannot be bogged down in lengthy capital deployment processes). Funding programs and investment funds need to be staffed with people who understand the emerging business models and can provide relevant industry expertise to fledgling enterprises. Relatively modest investment commitments focused on early stage digital media companies will make a big difference, drive company formation and growth — with rapid job creation (particularly for young people). The resulting momentum will reinforce our growing reputation as a go to destination for digital media creative talent.
- Funding programs and entrepreneurial support programs must be connected to the international digital media market place. We can do much more, working through Canada's network of embassies and consulates, as well as our rich expat and diaspora communities, to broaden our reach and deepen our relationships with international investors, partners and customers to grow global businesses.
Canada's success in building and investing in digital media businesses will depend profoundly on our understanding of markets. Job and wealth creation will result from focused participation and strategic exploitation of the fundamental changes taking place in this already global, fluid market. This will require us to move outside of our comfort zone — at the earlier end of the innovation spectrum — and deeply immerse ourselves in understanding the market forces in play.
Capacity to Innovate using Digital Technologies
Q1: Should Canada focus on increasing innovation in some key sectors or focus on providing the foundation for innovation across the economy?
A1: This reminds me of the age old debate of nature or nurture. I want to look at it from a sports analogy. Consider the Olympics. Canada had never won a gold medal in the first two Olympic Games that she hosted. Determined not to let it happen for the third time at the 2010 Vancouver games, the Canadian Olympic Committee (COC) pledged to make Canada a top medal winning contender.
After 16 days of competition, Canada made history by winning the most gold medals of any host country at a Winter Game with 14 gold medals. COC's "Own the Podium" program not only unified Canadians and achieved a level of excellence the world had never seen at a Winter Game. How did we do it? Did we focus on "key sectors" or did we focus on providing the "foundation" across all programs?
First of all, did all "sectors" receive equal funding? No, Canada's hockey teams received the most funding with $1.3M and netted two medals. Speed skating, on the other hand, received the 4th most funding, but netted 10 medals. What does this mean? It means not all medals are created equally: $250K for a speed skating medal and $1M for a hockey medal. Does a hockey medal equal 4 speed skating medals? The answer really depends on preference. For instance, 13 of South Korea's 14 medals were in one category: speed skating.
The question is then how does one maximise return on investment? Not all categories are equal just as not all ICT sectors have the same potential. No matter how much funding hockey receives, there is only one gold medal to win in that category — unlike speed skating with 12 gold medals for contention. There is diminishing return on investment at some point.
At the 2010 Winter Games, Canada "owned the podium" by achieving excellence across the board. No single category contributed more than 20% to Canada's total medal count. On the other hand, speed skating contributed over 90% for South Korea. Did South Korea get lucky when they decided to focus on a single category? Or, was it the hard work and perseverance?
If South Korea wishes to match Canada's 14 gold medals, how could they do it? First, they would cast a larger net by expanding into other categories. Even if South Korea placed first in all their speed skating events, they would still be two gold medals short of Canada's 14. Should hockey be one of their programs to expand since South Korea already has some of the fastest skaters in the world? The South Korean government could finance the same $1.3M that the Canadian national hockey teams received, but that would not replicate the attitudes and rounded skills that some Canadians developed toward the sport as kids playing outdoor in sub-zero weather.
SUMMARY: Asking Canada if one should focus on key sectors or provide a foundation is similar to asking Canada if one prefers two hockey medals or 10 speed skating medals? Just as medal favourites could miss the mark when it counts the most, some ICT sectors will take longer to ripen than others. The best way to predict the future is to create it, but leading ICT companies are not share their technology roadmaps. This is why it would be prudent for Canada to provide the foundation for innovation across the economy. Although one could focus on "key sectors" such as manufacturing of consumer electronics, in the end, a firm or nation is more competitive when its attitude is biased toward excellence across the economy — not emphasizing individual sectors when there is no foretell how any market will evolve over time in an uncertain economy. Market inertia will be dampened by debt, but the long-term vision should be Canadian businesses "owning the digital economy network". That includes a world-class Canadian search engine, a Canadian online media service destination, a Canadian-controlled global advertising network, etc. Canadian digital technologies can be as much an international brand as Belgium chocolate. Right now, however, we have few assets to leverage.
Q2: Which conditions best incent and promote adoption of ICT by Canadian businesses and public sectors?
A2: In order words, how will small business owners and CFOs in large enterprises approach spending in the future economy with higher consumer taxes and less foreign consumption?
One way to promote the adoption of ICT in a responsible, sustainable way is to demonstrate real, tangible productivity gains. What does that mean? It means having a track record with a list of exuberant customers. Why? Businesses don't build brands by advertising; businesses build brands customer by customer. Only through recognisable brands and warm referrals would technology go beyond early adopters.
What does this mean for the government? It means market forces determine adoption, not ingenuity in tax reform and subsidies, which are only short-term fixes as they do not drive market demand intrinsically. Happy customers drives adoption.
What small and mid size business need to learn first is not where to raise the next round of capital, but how to make decisions on a day-to-day basis. The runway for many ICT companies is getting shorter and shorter. Innovative companies that bring successful, disruptive products to the marketplace every 2 years have flat organisational structures that empower the actual doers with simple, transparent decision-making processes. For instance, Google has 40 employees for every manager while GE has 10 employees for a manager.
SUMMARY: The conditions that incent and promote the adoption of ICT are warm referrals from happy customers who drive market demand intrinsically. Incubating programs like the ones at MaRSDD and the Accelerator Centre have the opportunity to instill these attitudes through mentorship and new hires. The vision of the Canadian Digital Media Network (CDMN) to map out Canadian assets could translate to earlier business connections. All stakeholders should work toward building customer lists for warm referrals so that new products and services could go beyond early adopters.
Q3: What would a successful digital strategy look like for your firm or sector? What are the barriers to implementation?
A3: All digital strategies are comprised of 3 basic elements: software, hardware, and services. One way to visualise this is a cube where Canadian businesses are benchmarked along three axis. However, firms are actually competing in 4D space because there is also a time component when introducing a product to the marketplace. If a firm is too early, the product suffers from usability and performance. If a firm is too late, a competitor's dominant design is adopted.
What does it mean to compete in 4D space? It means firms need to start thinking beyond the world they know. They need to compete on more than one dimension of a digital strategy. Tactically, this translates to contingency plans and long-term product roadmaps. In industries like cleantech or life science, competing on fewer dimensions such as energy efficiency and energy output is sufficient because success hinges on cost and scientific breakthrough. The ICT industry, on the other hand, is more difficult to differentiate due to easy imitation and low barrier to entry. This is why a successful digital strategy for any firm of any sector need to include more than one element.
For instance, although 95% of Apple's revenue came from hardware, which is differentiated by proprietary software, they are just breaking even in selling digital media despite having sold more than 10 billion songs and other media.
The barrier to implementation is breadth. The news industry, for instance, has thrived on an advertising network that they built. In recent years, their advertising and subscription-based revenue are declining not because of the Internet, but because the emerging advertising network is not the one they built. Now, it's the 1940s all over again when media companies are building new advertising networks in the midst of changing consumer habits and accessibility options.
However, the real question the Canadian government should ask is which firms capture the most value in a global value chain and why. There are several studies by the Personal Computing Industry Center of UC Irvine. As it turns out, system integrators are near the top of the food chain. They are few, but they create the most wealth across the board in multiple countries and capture the most value for themselves in return. The problems they solve are targeted, but sometimes they need to build a new platform in order to break free from old business models and bridge the divides.
SUMMARY: Due to the low barrier of entry and the cost of imitation, the inter-dependent nature of the 21st century digital economy will favour system integrators who are more likely to offer differentiated solutions that combine hardware, software, and services.
Q1: What does creating Canada's digital content advantage mean to you?
A1: Creating Canada's digital content advantage means being the most cost-effective destination to create world-class digital content.
First, the qualification for world-class digital content has changed. For instance, a video segment by the talent show, Britains Got Talent, has propelled unlikely singer Susan Boyle to international stardom — literally overnight. More than 150M views have been recorded on YouTube alone. Put another way, more people have seen Susan Boyle's debut than the movie trailer for Avatar — the highest-grossing movie of all time.
On the other end of the same spectrum, we have high production projects like Planet Earth by the BBC Natural History Unit. Five years in the making as the most expensive nature documentary commissioned by the BBC, Planet Earth is an 11-part television series shown in more than 100 countries. It was aired on the Discovery Channel in the United States. More than 100 million viewers saw it on cable. It was the most watched cable event of all time — more viewers than the manned moon landing in 1969.
This is what it means to create world-class digital content. Times are changing and these are the best practices from which to draw inspiration. Yet, being cost-effective is not equivalent to cheap labour or low quality output. In fact, it would be very expensive. To be the most cost-effective means we have more experience, a longer track record, and make fewer mistakes. The secret to Canada's success will not be capital-based (especially in this economy); it would be our unified ability to arrange and coordinate ourselves nationally. The Canadian Digital Media Network will play an important role.
SUMMARY: For inspiration, we can look to previous industrial milestones like concepts of interchangeable parts and assembly lines. As a note from history, with productivity gains and improved efficiency, Henry Ford doubled the salary of his workers and improved the quality of life across the board. Perhaps, one of the greatest display of organising national resources to achieve something of global significance is placing a man on the moon.
Q2: What are the core elements in Canada's marketplace framework for digital media and content? What elements do you believe are necessary to encourage the creation of digital media and content in both official languages and to reflect our Aboriginal and ethnocultural communities?
After infrastructure for ubiquitous access, the next fundamental enabling component is micropayment. Current business models are binary: paid or free (with advertising). Micropayment will enable more options. This will also be critical to Ontario's smart grid initiatives. Depending on how the market evolves and how adoption spreads (e.g. spoke-and-hub or mesh model), distributed power generation on the massive scale may require individuals to facilitate their billing in order to reduce centralised bureaucracy and cost — imagine Wikipedia without a reliable revision history tracking tool.
Technology could only play a small role to encourage the creation of content in both official languages that reflect our heritage since the fundamental issues have more to do with market forces and consumption habits. The Internet is reducing the cost of content discovery and natural language translate is improving. International film festivals like TIFF are showcasing that foreign films are just as good and quality content is only limited to original storytelling and presentation.
Q1: What do you see as the most critical challenges in skills development for a digital economy?
A1: In his latest book, best-selling author, Malcolm Gladwell, explains how preconceived cultural beliefs play a role in creating competitive advantage and determining individual potentials. Yet, society continues to believe that students are better served if they simply have access to the latest technology. The most critical challenge facing Canadian education is a missing link between academic skills and practical skills.
However, it daunts on me that we immediately think it's a skill that we need first to compete. This reminds me of a boxing story. A coach goes through hours of Muhammad Ali's footage only to count which hand lands the last punch. He then goes back to the gym and tell his trainees to only work on that hand — skipping the footwork, the ropes, the crunches. What the coach should have done first is go through Ali's television interviews. It starts with the right attitude.
Q2-3: What is the best way to address these challenges? What can we do to ensure that labour market entrants have digital skills?
A2-3: Establishing a feedback channel from the industry to educators would bridge that gap. Educators need to know how their graduates are using digital tools in the workplace. It is not enough that students know only the careers of those within their immediate social circle. How are healthcare providers accessing patient records? How are engineers improving product designs? How are journalists using the Internet to check facts?
The feedback need to be very specific at the task-by-task level — as if giving a live demo online. The feedback exchanges should be archived and accessible to all parents, educators and administrators. Its success depends on a collaborative effort.
Q5: How will the digital economy impact the learning system in Canada? How we teach? How we learn?
A5: There is no shortage of iPad reviews. A number of them highlight how it could and could not fit into the educational curriculums. With so many moving issues and points of view, how should parents and teachers interpret the role of new devices like iPad in the classroom?
First, we must ask ourselves what are we trying to accomplish and why? In the workplace and at home, we are trying to solve problems and make decisions. That much is clear, so what are the challenges? In the era of pushed-email and Wikipedia, we are bombarded with information from different people with different interests. Learning how to organise conflicting views, verify sources of information, and defend in a debate will determine the best course of action for an individual or the collective whole.
Users can access content on a level of quality and interactivity not found on other devices. This is the appeal of the iPad. The programming tools from Apple empower software developers to design customised applications for a targeted audience. Beyond the sophisticated sensors integrated into a mobile device, Apple is cultivating a culture that encourages software developers to design applications with purpose. This culture is developed through its annual developer conference in California — since 1983. Google and Research In Motion did not host a developer conference until after Apple revealed its mobile software roadmap. Further, Apple's user-centric culture is reinforced by its retail presence.
In the 2010 conference, Apple revealed developer tools that would empower not only individuals but also publishers and broadcasters. News and magazine publishers are experimental with interactive content. Broadcasters are experimenting with online streaming and data overlay. Game developers are experimenting with social apps that connect all iPads for real-time interaction in a classroom. With kid-safe measures and iTunes U, the iPad continue to lead as the simplest and most centralised destination for rich educational content.
All technologies have limits. For digital technologies, the limitations result from design trade-offs. Parents and educators should understand the inherent accessibility issues before integrating technologies into a classroom.
For instance, universities use online course management systems to provide a virtual classroom where learning could continue after class. University of Waterloo's online system, UW-ACE, does not support the Safari web browser on Apple devices like iPad and iPhone. Microsoft Internet Explorer and Firefox web browsers, which are supported by UW-ACE, are unavailable in the App Store. The iPad has other trade-offs. This is not a netbook vs. iPad debate. Safari web browser is also preinstalled on MacBook laptops and iMac desktops. The decision is not whether the iPad could do everything, but if it does everything that existing learning demands.
For instance, the life skill needed in the workplace today and in the foreseeable future is making decisions from large dataset in databases and spreadsheets. The iPad is not the right learning tool if we want labour market entrants to have these digital skills. Spreadsheet apps in the App Store today do not have functions that automate the process of manipulating large dataset such as pivot tables and macro programming — typical digital skills expected from Business Analysts.
These are the design trade-offs discussed earlier. Mobile apps are designed to do very specific tasks. They are not designed to replace general purpose desktop computer. Memories on mobile devices are limited and intensive local computing drains battery life.
We learn by doing. As competition in the industry demand shorter turnaround time from employees, students who understand how to leverage technologies for the right tasks will finish faster. Businesses that do more will reduce their cost through economic of scale in the digital economy and etch a cost-advantage over their competitors.
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