Canada's Digital Economy Strategy: Fast and Flexible Startups Can Help, But They Need Support

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Submitted by IDC Canada 2010–06–24 09:33:41 EDT
Theme(s): Innovation Using Digital Technologies

Summary

The digital economy is not new — it's been over 10 years now since the dot com era (1995–2000), with companies like Nortel and more recently, RIM, playing an important role in driving our digital economy forward. In order to position Canada for success now and in the future, a connected and integrated digital economy is needed that enables greater two–way communication and transactions. Fast and flexible startups can play a key role in helping the country get there quickly by providing leading edge technology to enable this connectivity, and become engines of growth and job creation themselves. However, they need support — and ideally, that's part of what Canada's digital strategy will provide.

Take one of the key initiatives on the list — "Capacity to Innovate" — which speaks directly to Canada's startup community and its ability to support and enable entrepreneurs to innovate with digital technology. An effective digital economy strategy, and in particular, one that provides entrepreneurs the "capacity to innovate using digital technologies" will need to be targeted and aggressive enough to elicit meaningful change, followed by swift action, because the digital revolution won't wait for Canada.

Targeted
For the strategy to be effective, and resources to have an impact, the scope of the strategy will need to be focused and targeted. Hopefully, that's what the national consultation will lead to. However, digital is a broad all–encompassing term. According to the government, the digital economy is "the use of information and communications technologies for product and process innovation across all sectors of the economy". That's a wide scope to say the least, which threatens to become trite and meaningless unless focus is introduced. Attention needs to be placed on key areas where the most impact can be made, and on both the supply side (providing the infrastructure, resources, and funding to support innovation) and the demand side (helping to drive end user awareness and adoption of these tools). Startups need help on both fronts — getting the resources to innovate (capital, talent), and the marketing support to help drive awareness and adoption. Organizations such as MaRS are helping to facilitate this by providing startups with access to partners, analysts and key thought leaders to help strengthen their message and drive commercialization. Continued government support for marketing related activities and not just R&D will be key to driving the adoption and awareness of these innovations.

Aggressive
A few tweaks, tweets, and text messages won't do. Canada is already lagging behind in innovation. In The Conference Board of Canada's 2009 report entitled How Canada Performs — A Report Card on Canada, the country received a "D" grade for the second year in a row with regard to innovation, ranking 14th out of 17 countries. The Canadian economy remains a below–average innovator given its current technology spending and the policies in place that at times inhibit the capacity to innovate, especially among startups. Big change needs to happen to move Canada from a "D" toward an "A" grade. As Roger Martin, Dean of the Rotman School of Management at the University of Toronto, recently wrote in a blog post, "[Canada's] innovation policy is actually an invention policy and that is why it is doing so little for the economy. The key is to move from a producer–driven perspective to a consumer–driven perspective — from invention to innovation." Innovation policy of this sort would help ensure that startups have the capacity to both innovate and commercialize their technologies.

Swift
Canada does not have time on its side — there are 13 other countries that are excelling ahead of us, and even more eagerly investing and moving up the conference board's ladder below us. Canada must take action quickly to reverse this trend, including changes to the following areas to improve our capacity to innovate:

  • Talent: Canada needs to attract, better educate and cultivate highly skilled people to drive innovation forward. Research by the Canadian Bureau for International Education (CBIE) has found that about half of all foreign students in Canada are interested in working or remaining in the country after graduation, up from just 25% five years ago, but immigration policies have restricted their ability to do so. Ontario has recently announced that students who earn their PhDs will no longer need a job offer to be fast–tracked for permanent residence status. Still, this varies by province, emphasizing the importance of a national strategy to ensure companies in Canada, including startups, have access to the talent and developers they need to continue to innovate.
  • Infrastructure: Broadband and mobile access in remote areas as well as Net Neutrality need to be addressed to provide the foundations for innovation, while affordable network access costs that are on par with worldwide rates will be key to drive adoption of many of the services and products that will enable a connected digital economy.
  • Access to Funding/Support: The Canadian VC environment is in rough shape; deal activity continued to slow in 2009 to reach its lowest levels since the mid–1990s, according to the Canadian Venture Capital Association. And while changes were made to Section 116 to ease foreign investment in Canadian companies, this won't be enough to fuel the many deserving startups in Canada that have promising new innovations. In this funding climate, responsibility is on entrepreneurs to build profitable businesses, but to do so, they need a favorable entrepreneurial ecosystem with a culture that supports innovation. Government plays an important role in fostering that culture. For example, Scientific Research and Experimental Development (SR&ED) tax credits are heavily relied on by startups, to help fund their development efforts, but government has been called upon to further nurture innovation through universal access to all Canadian businesses to the SR&ED tax credits and improve decision consistency.

Canada has a lot of talent and expertise already in the digital market. Strengthening and formalizing our approach through a digital economy strategy is certainly a valuable initiative, especially if it makes it easier for entrepreneurs to innovate and commercialize their technologies to benefit society and the growing digital economy. But a sense of urgency is needed. The digital revolution is already happening. Fast and flexible startups can definitely help Canada shorten the time to reach its goals, but they need support to help make a thriving connected digital economy in Canada a reality.

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To position Canada for success now and in the future, a connected and integrated digital economy is needed that enables greater two–way communication and transactions. Fast and flexible startups can play a key role in helping Canada achieve that quickly by providing leading edge technology to enable this connectivity, and become engines of growth and job creation themselves. However, they need support — and ideally, that's part of what Canada's digital strategy will provide.

Notice

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