In the know
One of the biggest trends I’ve seen in my career is “knowing it all.” Pre-Internet access to information was limited. Today, “knowing it all” is virtually impossible–there’s a glut of information. Having a network of “know it all experts” in their field is more important than ever before. I’m fortunate enough to meet with many experts, such as Jim Milway of the Institute for Competitiveness & Prosperity (a not for profit organization that examines Ontario’s competitiveness, productivity and capacity for innovation).
I spoke to him last year and picked his brain on innovation and the challenges for businesses competing in a global market. Recently I caught up with Jim to get his perspective on what progress−if any−has been made since we last spoke.
“Innovation and entrepreneurship have continued to be emphasized by government. At the federal level, in the last budget and the budget before, they continue to talk about innovation. But in my opinion, they have a flawed approach to innovation, i.e., ‘innovation is the result of scientists in labs creating new things.‘ As a business person will tell you, innovation can be something totally unscientific or non-engineering related. It can be about finding a new way to serve a customer, getting costs down by having leaner processes, finding ways to draw on information to redesign a product or service. So there’s a lot of management capability needed to improve our innovation game and I think our governments continue to put too much emphasis on engineering and science.
Now, I’m not saying don’t do any innovation in those areas, I just think we need to dial up management capabilities. That means greater investment in business schools. It’s still very difficult for our kids to get into business schools like Queens or Toronto or Western, and that’s not because of the difficulty of the subject matter. It’s not like brain surgery−it’s good solid subject matter. The problem is we just don’t have the spaces. The universities haven’t invested in the spaces, and that’s partially due to government funding policies and partially university choices. There’s a big demand out there from kids for commerce and business programs, and we haven’t responded. The reason I can say that there’s more demand is that it’s more difficult to get into business school programs when you compare it to engineering or science programs. We need to up the skill level of our business people. Not just scientists and engineers, it’s everybody. We have a tendency to focus on the sexy stuff around a new molecule, or some breakthrough in gene therapy or bio tech. While all of these are tremendously important, the value you get from the improvement of a service or product or operations are innovations that drive our economy forward as well.
On the tax front, I think we’re in pretty good shape, although the investment numbers are trailing. It’s not that I am out there every single day talking to businesses, but the information we are getting indicates there’s a lag between improved tax policy and increased business investment. I applaud federal and provincial tax policy that has lowered the costs of investment. Businesses, however, are not grabbing those opportunities and making the investment in their businesses. This has been part of the federal election campaign. People are saying, “We’ve lowered the taxes and businesses are not investing.” To me it’s an unfair attack, but it’s there. I think there are a lot more complicating factors that affect how much businesses invest in any given year. And it’s not exactly accurate or a good analysis to look at tax reduction and the HST here in Ontario over the course of a year to see what has happened with investment, without looking at other factors. Businesses are still a little skittish and haven’t absorbed the impact of the rise in the dollar. So much of our best businesses, or the ones that we are rooting for, are the ones that export. It’s hard for them to overlook or ignore the dollar. On one hand, they have had tax reductions on their investment spending. On the other hand, they have had the impact of the dollar, which makes it harder to compete in the U.S. It’s one of those things that you won’t really know until a few years later, unfortunately, when full analysis of all of the numbers is done.
We continue to believe that we need to push or prod businesses’ investment along by raising the pressure they face. And that’s why, to me, things like trade are so important. If we conclude the deal with the EU, I think it will have some good long term effects on our businesses. What will happen is that the ones that seize the benefits of exports will have better benefits to seize and a bigger market in the EU. I hasten to add, let’s not hype our expectations, since we already have pretty low tariffs with the EU. The more we reduce the tariffs, the more they open their market up to our businesses, the better it is.
But there’s a flip side, which is also positive. Our businesses will be exposed to greater competition from European businesses. I believe it will bring out the best in our businesses. Of course, it will make it unpleasant for some. As the experience of opening Canada-U.S. free trade showed, it will put some out of business: the walking wounded as it were, the ones that are not as competitive. It will expose that weakness one more level. There’s been talk about reducing our trade barriers with China, India – the BRIC countries. Again, I haven’t met a trade deal I didn’t like. Any increase in trade is positive.
In summary, on the issue of entrepreneurship in Ontario, the major contribution that governments can make is the kind of environment they create. I think they have done a lot on the tax front. And they’re on the right track with more trade agreements, but they just need to keep pushing those trade agreements. And they need to ensure our educational institutions are developing management capabilities for our businesses.”
Thanks Jim, for the update, you’ve provided interesting insights to help all of us be “in the know”.