How We Can Win

Anthony Lacavera and Kate Fillion (2017).?How we can win: And what happens to us and our country if we don’t.?Random House Canada

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1?Many Canadians are deeply skeptical about business … But the entrepreneurs … want to make the world … a better place … successful entrepreneurs … volunteer their time at incubators and accelerators

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2-3?in Bell, Telus and Rogers, we have an oligopoly

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5-6?To ensure Canada’s future prosperity, we need to hang on to our most talented and innovative people … And we also need to attract immigrants of a similar calibre, as many as we can get

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7?From banking to broadcasting to oil and gas, our economy is dominated by oligopolies, but in telecommunications, power is unusually highly concentrated

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8?Michael Geist … “The Canadian wireless market is hopelessly behind the rest of the world with limited competition, higher prices, and less choice.”

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11?(While 3G is good enough for downloading web pages, 4G is what you need to watch videos and 5G is what will power the Internet of things.)

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14?when it comes to assessing risk in mining, oil and gas, and other natural resource plays; this is one of the best places in the world

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18?Early in my career I’d learned the hard way that preparation is everything … Failure is an excellent teacher.?I learned a lot from that experience about the value of studying for meetings … go in with a solid understanding of the other party’s background and needs

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23?Naguib [Sawiris] … taught me that the most important thing in business partnerships is to understand you’re partnering with people, not sources of capital; whether your personalities and strengths mesh or clash usually determines whether the partnership succeeds or fails

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25?One of the biggest advantages of a strategic partnership is that you don’t just get money, you also get mentorship from people who really know what they’re talking about?

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25?integrity, transparency and innovation

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38?in Canada … everyone pretended that what was happening was fair … [Naguib] likened Canada to China

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43?The real problem … is that the … Canadian economy is dominated by oligopolies … the companies that make up those oligopolies are unheard of outside our borders.?They aren’t industry leaders … To the rest of the world, they’re irrelevant?

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44?our economy is shrinking … We value our diversity and openness to newcomers, but our business culture is inward-looking and xenophobic … Canadian business is fundamentally unCanadian

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46-47?Experts predict that in the next ten to fifteen years, automation will wipe out as many as 7.5 million Canadian jobs – more than 40 percent

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47?Canada is routinely ranked one of the best places on the planet to live … But if we carry on with business as usual, the signs of trouble will be unmistakable within five to ten years

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48?“Across all OECD countries, it’s amazing how closely three characteristics correlate with growth: investment in innovation, trade with other countries and investment in worker training.?And it’s also amazing how few Canadian companies do those three things,” says Kevin Lynch

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48?most Canadians seem unaware of the danger we are in

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51?the chronic lack of ambition and confidence that characterizes our business sector is prima facie evidence of a national inferiority complex vis-à-vis the United States

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52?Canada’s problem is less that we are small than that we think small … Kevin Ruffolo … “… there are more constraints on entrepreneurial behaviour and fewer incentives to innovate.”?

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53?workplace … bad apples have to be rooted out immediately

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53?you can have a toxic culture and still post phenomenal results – look at Uber – but the costs … are very real

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53?When deciding whether or not to invest in a start-up, one of the key metrics I look at is the founder’s ability to campaign for and create a positive culture, because ultimately, it will determine whether they succeed in attracting, retaining and motivating a great team ?

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53?A country’s business culture has an equally profound influence on entrepreneurial aspirations and achievement

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56?For the nation to remain comfortable, paradoxically, the dominant business culture will need a major infusion of ambition, confidence and boldness

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56?Information communications technology is an internationally recognized area of strength for Canadian universities, and our ICT graduates are among the best in the world.?Some of the most significant developments in computer science, including the birth of machine learning … occurred on our campuses

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58?living next door to the world’s biggest braggart, Canadians learn early that American-style self-promotion is obnoxious … An abundance of modesty can be mistaken for a lack of vision, ambition or competence

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61?we have an abysmal track record on productivity growth … in the OECD, Canada is number 15 … productivity is the key determinant of our standard of living

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62?A lot of factors contribute to productivity, but the bottom line is that innovation is the key driver.?Innovation doesn’t require mind-blowing, world-changing technological advances … Any new or improved product or process that creates value qualifies as innovation

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62?every single year Canada either declines or fails to improve on nearly every measure of innovation, falling further and further behind OECD peers

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63?Why, when we’re so smart and well-educated, can’t we innovate?

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63?Canada is twenty-fourth on the OECD’s Business Expenditure on Research and Development (BERD) index … Canadian executives don’t invest in R&D because they are not very good at their jobs … Kevin Lynch … short-termism … Canadian businesses … don’t think long-term, “and there’s nothing more long term than R&D.”

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64?The private sector’s record on investment in machinery and equipment (M&E) is particularly underwhelming

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64?instead of investing in future growth, the Canadian mantra is all about the short term: Don’t worry, keep shareholders happy.?Pay out big dividends

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65?the aerospace industry and auto parts manufacturers, do invest in innovation

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65?Only 30 percent of Canadian firms consider any form of innovation to be extremely or very important … there’s not much rivalry

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66?in the US, companies spend a lot more on R&D than their Canadian counterparts do

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66?culture: Americans worship competition and lionize winners

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68?If the government simply aggressively enforced its own pro-competition policies … that would be an excellent start

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69?Canada is at a critical moment … we need to pull together and demand more and better from our businesses, our government, our educational institutions and, most of all, ourselves

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71?How do we kick start innovation and productivity? … by diversifying away from our dependence on natural resources

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71?the federal government has been … promoting entrepreneurship via a tantalizing smorgasbord of federal and provincial grants, loans and tax incentives for start-ups – one of the richest sets of subsidies in the OECD

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72?Canada is now the second-easiest place in the world to start a company … we trail New Zealand … Sixty-five percent of us believe entrepreneurship is a good career choice … most Canadian start-ups never amount to much … The majority of Canadian companies that start out small stay small … of the 1,170,000 businesses in Canada, 98 percent have fewer than a hundred employees … More than three-quarters employ ten or fewer people

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73?Only about two of every hundred businesses in Canada are so-called gazelles … companies that have been around for at least four or five years, have at least ten employees, and have had, for three or more years, an annualized growth rate of 20 percent or better … High-growth firms (HGFs)

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74?almost all HGFs are similar in two ways: they tend to be export oriented and to invest far more heavily in R&D than most Canadian companies do … Between 1993 and 2002, the 5.5 percent of Canadian companies that were in continuous operation and exported anything, anywhere, created 47 percent of the country’s jobs

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74?“The first, and arguably most significant, obstacle to growth is the apparent dearth of business owners with an appetite for strong development in the first place,” according to a 2013 report by the Centre for Digital Entrepreneurship and Economic Performance (DEEP)

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75?the days when Canadian businesses could be highly profitable without exporting and attempting to innovate are drawing to an end … Artisanal enterprises are not going to save the Canadian economy … Ambition, as it turns out, really matters when it comes to the creation of high-growth firms … Ambition is a key determinant of performance

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75-76?Business Development Bank of Canada (BDC) … 2015 … “… the mindset of the executive team is a critical factor for competitiveness …” … Risk tolerance was key

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77?the word ambition … reframing it in terms that are aligned with Canadian cultural values … What’s truly unCanadian is our lack of ambition when it comes to trade

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78?Unless new businesses are disruptive … they are usually less productive than older firms

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79?“The typical entrepreneur is very bad at picking industries,” [Scott] Shane observes

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80?“All entrepreneurs are not created equal,” is how Shane sums up the situation, advising governments to “stop subsidizing the formation of the typical start-up and focus on the subset of business with growth potential … It is about encouraging high-quality, high-growth companies to be founded.”

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81?Canada is the most decentralized country in the OECD in terms of public spending, with provincial, territorial and local governments managing almost 80 percent of the total spend, and one result is that the feds live in fear of being accused of favouritism

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81?“Canada lags behind most international peers in its capacity to nurture firms with high-growth potential,” according to the DEEP report

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82?Canada is a great place to start a mediocre business because, thanks to a lack of competition, it will probably survive longer here

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82?to start a growth-oriented business … the government often erects roadblocks … Interprovincial trade barriers make it much more difficult to build businesses that are truly national in scope … internal trade barriers … reduce Canadian productivity by between three and seven percent … And … interprovincial trade barriers drive up the cost of goods and services, to the tune of $7,500 per Canadian household.?Every year

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82?Regulatory hassles, combined with protection of incumbents – which, per the OECD, “is high by international standards and arises primarily from an above-average use of antitrust exemptions” – do not make Canada an easy place to build a high-growth firm

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83?total corporate tax costs in Canada are the lowest in the G7 … R&D tax incentives are insanely generous … there’s a highly educated talent pool here … our cities are safe, our education and health care systems are strong, our political system is stable, and our quality of life is extraordinarily high

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83?foreign direct investment … is vitally important to Canada’s future … Foreign investment also strengthens trading ties with other countries and helps build new export markets … Foreign investors are turned off by Canada’s regulatory environment; we rank thirty-third out of forty countries on the OECD’s index of restrictiveness in terms of foreign direct investment

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84?French labelling on the bag … metric measurements

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86?the US government will do back flips to attract and hold on to entrepreneurs like Lorne Abony.?The Canadian government, however, doesn’t seem to bat an eyelash when they leave

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87?in Canada “music is a culturally protected industry …” … Canada’s securities regulations … “You have to file your financials in French and English or you can’t distribute securities in Quebec … Then you have to file with ten securities regulators … ten provinces.”

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88?Up-and-comers lose role models

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89?according to the World Bank, Canada ranks twenty-second in the world in terms of ease of doing business

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89?The bigger a Canadian company gets, the less growth capital is available

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91?Scientific and Experimental Research and Development (SR&ED) tax credit

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92?income tax … Growth is not rewarded.?Staying small is

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94?SR&ED is a massive boondoggle for big businesses … SR&ED may have made big companies less competitive

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94-95?What’s being incentivized is undertaking research, which Canadians are already good at, not commercializing it, which Canadians are bad at – and commercialization is the essence of innovation

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96?SR&ED is doing a less than stellar job of stimulating innovation, and the government should rebalance its approach by simplifying SR&ED, spending less on these kinds of indirect measures, and channelling a lot more towards direct cash infusions and grants for new businesses with high-growth potential

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98?Attracting sufficient capital is an especially big problem for entrepreneurs whose ideas have the disruptive potential to upend whole industries

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98?the University of Toronto … machine learning (ML) was invented there

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99?Computation is exponentially faster than physical experimentation

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101?In Canada, the risk is that you back a company that fails; in the US, the risk is that you fail to back a company that succeeds and makes your competitor wealthy

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103?When Canadians start disruptive companies that have the potential to shake up whole industries, they need American-sized funding

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103?elite athletes: the Own the Podium (OTP) programme allocates funding … based on their chances of winning

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105?High-growth tech companies such as Shopify and Hootsuite … [are] winning because they’re more innovative and productive and they’re not afraid to go toe to toe with the best companies in the world.?They’re winning because they actually compete

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106?Small businesses need what Olympians need – the best and most advanced training, as well as funding that targets and rewards excellence

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107?the Jenkins panel report … key recommendation: consolidate the sprawling mess of innovation programmes into a single, streamlined Industrial Research and Innovation Council (IRIC)

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110?In order to protect the environment, preserve the social safety net, and promote education, immigration, health, human rights and everything else we believe in, we need to help good, small companies become great, growing ones.?That means scrapping incentives that aren’t working and doubling down on the programmes and institutions that deliver results – which we should be tracking and quantifying, by measuring not just inputs but actual outcomes in terms of jobs and revenue

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111?It’s probably easier to determine which entrepreneurs have the greatest likelihood of success than it is to figure out which athletes are most likely to win medals

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113?Canada’s most important natural resources.?Talent

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113?OECD … seventy-two countries.?Canada’s teens rank 2nd in the world in reading, 7th in science and 10th in math – miles ahead of Americans, who place 24th, 25th and 35th, respectively.?Also important: poor kids here do much better on these tests than poor kids just about anywhere else in the world, posting results closer to those of rich kids.?Our school system is obviously very good.

????So are our post-secondary institutions

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114?Canadian universities are still among the very best in the world

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114?Canadian polytechnics, which are industry-facing colleges focused on advanced technical and technological education, also punch far above their weight, with impressive outputs in terms of applied research.?Every year, students and faculty crank out hundreds of prototypes and conduct thousands of R&D projects for small and medium-sized businesses

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114?Canadian kids with good educations … don’t have enough role models or networking opportunities, says Reza Satchu

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115?N36 … Next 36

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117?“There’s a whole culture built around fear of failure in Canada, and it prevents people from even trying to do something ambitious because they’re so worried it won’t work out,” explains Satchu … “… The system is structured to discourage creativity, entrepreneurship and leadership, and to penalize risk-taking really harshly.”

????One consequence is that Canadian kids don’t learn how to fail: how to pick yourself up, apply what you’ve learned and try again

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118?To get from invention to actual value-added innovation, the kind that drives productivity and boosts GDP, requires both a willingness to risk falling flat on your face and a preternatural determination to succeed

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118?Satchu’s preferred definition of entrepreneurship is “the relentless pursuit of opportunity without regard to resources currently controlled.”

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121?“So arrogant.?He’d pull a whole team down.”

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126?they were hell-bent on doing something meaningful.?Trying to reduce the amount of time elderly people were forced to endure discomfort

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127?One thing that’s striking about Next 36 alumni is their maturity

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129-130?it turned out that no one really wanted to pay for these kind of improvements … [Sameer] Dhar … the funding system for long-term care in Canada … “is not conducive to innovation … the only thing you want to pay for when it comes to innovation is direct cost savings …”

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130?lack of competition in long-term care in Canada

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134?NEXT Canada

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135-136?Industrial Research Assistance Program (IRAP)

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144?Dhar … “By the time I leave this earth, it should be uncommon for a twenty-year-old not to have seventy-year-old friends.”

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145?We should celebrate entrepreneurs who build innovative companies such as Sensassure that exemplify Canadian values: decency, kindness and tolerance.?And we should get behind them in aggressively unCanadian fashion, to help them become global leaders

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147?innovation is usually not particularly dazzling: you spot a problem, come up with a solution and persuade people to pay for it

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151?Bridgit … their business could easily have been started by any number of people working in the construction business … the secret to their success … They were outsiders who learned to think like insiders … they believed they could do something about the problem

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151?we also need more insiders who think like outsiders

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152?good news: highly skilled help is available, and it’s cheap … Polytechnics are a subset of community colleges … the focus is on experiential, hands-on learning

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153?Applied research projects … are essential to helping businesses become more profitable and productive … polytechnics can really help, and it’s a win-win: small and medium-sized businesses get R&D services that help them become more productive, and students get the kinds of real-world experience that will make them more productive employees

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153?Entrepreneurs can also get help from polytechnics with the nitty-gritty aspects of product development, such as creating prototypes and conducting beta testing

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155?In Canadian companies that actually perform in-house R&D … Only about 18 percent of R&D employees have PhDs.?Fifty-two percent are technicians and technologists – college and polytechnic graduates

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155?snobbery … and ignorance … the federal government allocates the $3.1 billion it spends on higher-education R&D each year.?More than 98 percent of that money is earmarked for university projects … this creates a core imbalance, whereby university faculty are paid to conduct research – as they should be – but college faculty are not.?Though they should be

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155?Nobina Robinson … “Innovation is … a team sport … Innovation is not research.?It’s not invention.?It’s commercializing new products and processes and creating value … people who want to research for a living … people who want to innovate for a living.?And you need both …”

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156?to become more innovative, small and medium businesses need exactly the kind of help that polytechnics excel at providing – and could provide more of, if they were better funded

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156?“SR&ED is not an innovation tax credit,” Robinson

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157?Technology Access Centres (TACs), whose explicit purpose is to help smaller companies become more productive and innovative … there’s no new funding to support their research

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159?Entomo Farms, helping them develop insects into food

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160?Polytechnics and Tech Access Centres could and should be a key piece of the solution to help small businesses become more productive … If innovation is the goal, it makes no sense that a major chuck of our post-secondary education system, one specifically dedicated to technology and commercialization, is treated as a bit player

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160?If Canadians are embracing innovation, they’re not telling pollsters … Canadian respondents were significantly less enthusiastic than Americans were

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161?about half of all small and medium-sized business owners in this country are over the age of fifty

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161?Impact Centre of the University of Toronto … “attitudes to innovation are one of the precursors to a successful innovation economy.”

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161?Demystification is crucial to persuading Canadians they have the capacity to be innovative

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161?a mildly innovative approach that ramps up productivity by a few percentage points is preferable to a wildly innovative approach that achieves the same gain, says Ajay Agrawal … “… It’s not innovation that we want more of.?It’s productivity.”

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161?“Mildly innovative” is an attainable goal even for entrepreneurs who aren’t brimming with ambition

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165?meteorological experts predict that global warming will devastate large swaths of farmland in the southern United States – while lengthening the growing season in parts of Canada and making it possible to grow different, more valuable, crops here

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171-172?Creating an innovation nation starts with a very clear understanding of what innovation is … It’s about people.?People who recognize a problem or an opportunity and do something about it

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172?“Innovation is best understood as a mindset.?It involves the fundamentally human quest for better ways to do and create things that are valued by others …” … David Naylor

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173?innovation is not the sole responsibility of any one group or elite.?It’s a team sport.?And to win, more Canadians need to play

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175?visit a Canadian university … the quality of the faculty is extremely high … Canada is solidly in the top ten in the world, though well behind the United States and China … In … ICT, physics and astronomy, clinical medicine – we are ranked in the top five in the world

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176?Insulin, stem cells, canola, machine learning – Canadian academic research has changed the world

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177?artificial intelligence … Three of the world’s most influential pioneers in AI have taught or still teach at Canadian universities.?Geoffrey Hinton … Yoshua Bengio … and Richard Sutton … each played a crucial role in developing neural-inspired computing

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181?Kristen Fortney … In Toronto, academics are incentivized and rewarded for publishing papers; in California, it’s all about founding start-ups

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182?in Canada, many top scientists seem to spend their days scrambling to find funding rather than carrying out the kind of groundbreaking research that is at the core of health science start-ups … Molly Shoichet

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186?In the United States, unintentional overdoses from prescription pain relievers such as OxyContin and fentanyl … since 1999 … are responsible for more fatalities than either car crashes or guns

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187?Ilse Treurnicht … “… Canadian health-related technologies … I can’t think of a recent substantial deal that was funded by a Canadian investor.”

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189?Ajay Agrawal … although Canadian scientists have about as many inventions per capita as their American counterparts, our faculty and graduate students get many fewer patents and generate much less licensing income for their institutions

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189?Creative Destruction Lab (CDL) at the University of Toronto’s Rotman School of Management.?“Creative destruction” … Joseph Schumpeter … economic destruction is a necessary aspect of economic creation, and vice versa

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189?Agrawal … was of the mind that one determined person could make a big difference, even disrupt the status quo

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191?Agrawal … Start-ups in the Valley are more successful primarily because they have the benefit of their investors’ expert judgment

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192?One of the biggest challenges first-time entrepreneurs face is simply trying to figure out what to do first

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192?Tech entrepreneurs “desperately need judgment,” … Agrawal … In Canada, the people who have judgment don’t often transact with the people who need it.?“In economics, we call that a market failure,”

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193?CDL … Every two months, a panel of seasoned entrepreneurs would convene for a full day to review each start-up’s progress in detail, then offer founders specific advice on what to do next, spelling out three clear and measurable objectives to be achieved before the next meeting

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194?I am never more proud to be Canadian than when I am sitting in the stuffy room at the Rotman School of Management where CDL meetings are held

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195?Agrawal understood that a great programme had to be internationally oriented … Canadian-style collegiality dominates … the spirit of decency and generosity, the niceness Canadians are known for worldwide … ambition and competitiveness

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195-196?the whole point of the exercise is competitiveness: to build companies that can compete internationally

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199?“… what’s the value proposition?” … Lisa Shields … “Who’s going to pay for this?”

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202?“… machine learning … we have the greatest concentration of ML start-ups in the world … Toronto …”

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204?[Benjamin] Alarie … “… algorithms and data are going to transform the legal profession…”

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205?Stephen Lake … Canadian VCs don’t yet have what it takes to help a company achieve global ambitions

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206?venture is “one of the worst-performing asset classes” in Canada … Jim Balsillie

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207?“Canada has never had an innovation strategy,” says [Dan] Breznitz … “… a true innovation policy focuses on the agents of innovation: entrepreneurs and companies …”

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208?innovation is regionally specific

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210?Every Canadian needs to understand that we are playing in a global game with extraordinarily high stakes.?We are our own most dangerous opponents if we don’t recognize our strengths or admit to our weaknesses, and if we don’t have the will to win … innovation can’t be something that just government and businesses are responsible for.?All Canadians have a responsibility

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213-214?the light bulb … was invented by Thomas Edison.?Only it wasn’t … Henry Woodward … and Mathew Evans … Thomas Edison … offered Woodward and Evans five thousand dollars … and the rest, as they say, is history … 1879

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214-215?Canadians do not get credit for innovation – even from other Canadians

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215?Canada has the best reputation on the planet, according to the Reputation Institute … We’ve been ranked number one in the world four times in the six years since the institute started rating countries, including in 2017, and in the other years, we were number two … however … When it comes to business and innovation, we don’t have much of a reputation at all

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216?Very few of us could … come up with a list of a dozen names of internationally famous scientists, entrepreneurs and business people who are Canadian … Elon Musk (a Canadian!)

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217?we need to be aware of our history as well as our present-day strengths … we need role models … we must eliminate the barriers to domestic competition … smash the regulatory firewall that protects the oligopolies from having to innovate and become more productive – and from having to care about consumers … ensure that innovative entrepreneurs really can thrive here

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218?Canada needs entrepreneurs with global ambition

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221?Alex Barrotti … TouchBistro … has become the number one iPad-based point-of-sale system in thirty-seven countries

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222?we need to build companies that are rooted in our values and reflective of strengths the world doesn’t even know we have.?We need to start leveraging our incredible international reputation in order to create incredible, internationally viable companies

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223?Uber (co-founded by a Canadian!)

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223?Businesses that are aligned with our cultural values will resonate internationally because they will reinforce our reputation, which is superlative … Multiculturalism and tolerance

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224?Toronto … Half the city’s population was born outside Canada … [Allan] Lau … “People who grew up elsewhere are able to see things from two perspectives, and that’s important …”

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224?Another Toronto advantage: ready access to skilled technical talent … Toronto-Waterloo corridor

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225?leveraging one of Canada’s signature cultural strengths – diversity

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226?[David] Alston … Change, he believed, had to come from the outside in … “… if you start to create positive change, the government will come on board,”

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227?“maker carts” filled with things such as miniature 3D printers and sewing machines … robotics … help teachers figure out how to coach kids to create with, rather than simply consume, technology

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227?Sometimes, being small means you can think bigger because it’s easier to get things done … Being small should make Canada more nimble .. and speed … is a significant competitive advantage

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229?the world isn’t standing around waiting for us.?The race to the future has already begun, and we’re late getting off the mark.?We have the talent, but we can’t win without a game plan – one that clears away the obstacles we’ve put in our own path so that we can go hard and compete as though our future depends on the outcome.

????Because it does?