Tag Archives: RIM

Canada’s Innovation Gap (part 1)

While this post is targeted at the innovation, funding and technology issues in Canada, it may apply to other geographies as well, particularly if you don’t live/work in technology hot spot such as Silicon Valley or Boston or Banglalore etc. This is a topic that is very dear to me, given that I currently live and work in Canada, but spent 6 years earlier this decade living and working in the San Francisco Bay Area.

A couple of weeks ago, there was an great article in The Globe and Mail newspaper (one of Canada’s leading daily papers) entitled Canada’s innovation gap. The article, by Konrad Yakabuski, outlined what I think is both an accurate and troubling picture of the state of R&D and innovation in Canada. Here are some highlights from the article.

  • Innovation in Canada is in deep trouble. Productivity is stagnating; the manufacturing sector in imploding, and the government policy makers seem asleep at the wheel.
  • Once the flagship of Canadian high tech, Nortel is being dismantled and it’s best assets are being sold to foreign companies.
  • While Blackberry maker Research in Motion is a true global leader, and often cited as an example of what is possible in Canada, there are few if any other Canadian companies that can be held in the same light.
  • Canada’s economy is heavily resource based, and those companies spend very little of their revenues on R&D, even though they made enormous profits before the recession due to high commodity prices.
  • While Canada was moderately successful at moving from a provider of raw resources to foreign countries to a more modern economy, the last 10 years have reversed that process.
  • Historically, the  small group of elites that got rich on these resources controlled the political levers to ensure nothing changed. [Note: I personally think this still applies although not as much as it once was]
  • Innovation is the only sure way for Canada to be more productive.

I could go on. It’s a great article, and it should be a wake up call to every politician and business leader with any sense of commitment to the future and well-being of this country.

Change is a process

Change is needed on a lot of fronts. While many politicians are quick to highlight that the Canadian economy has faired better than other industrialized economies in the current economic crisis, it doesn’t change the fact that there has been a huge disruption in the Canadian economy, widespread layoffs, plant closures and bankruptcies.

Keep in mind that billions were spent to help manufacturing companies, particularly automakers with vociferous unions, but little if any was spent or allocated to help technology companies or create environments to make investment in high-tech much easier. A quote from the article:

“Canada is not being productive because it’s not being innovative,” said Robert Brown, chief executive officer of Montreal-based CAE Inc., the world leader in aircraft flight simulators and training. “A lot of innovation occurs at the interface with the customer. But when you look at the make-up of Canada’s economy, with so much dependence on resources, there is less contact between [our biggest] companies and end users.”

I think this is a polite way of saying that there are a lot of companies that are more than happy to cut down trees or dig minerals  or pump oil out of the ground and then ship it off to some other country to be processed and have value added to it.

Aside from being innovative, Canada needs to look to add significant value to whatever industries it has. We have great R&D minds in this country, but there are problems in productizing the research and funding and scaling businesses.

My personal experience

I moved to California back in 2000 to seek better opportunity – i.e. professional and financial gain — than I could find here in Canada. One of my best friends from high school — a brilliant guy who did his undergrad at Harvard and his Ph.D at Princeton, is now a research professor at another Ivy League school, even though he really wanted to come back and live and work in Canada. He told me back in the early 90s that the opportunities just weren’t here for him. He’s a great example of the brain drain this country faces on a regular basis.

I moved back to Canada a few years ago for personal reasons and I have to say it wasn’t easy coming back. Aside from the nicer weather in California, I knew that my career opportunities would be more limited than they were there.

And trust me, there is a huge difference in the technology industry here in Toronto and that of Boston or San Francisco. Everything from the amount and quality of investment funding, to the networks of people with connections into technology giants to the breadth of skill sets of individuals, and even to the aspirations of company founders are very different.

We’ve got brilliant people

I’m not slagging anyone here. There are very bright, dedicated and passionate people here. I’m proud to know a number of them. But when it comes to goals, too often a Canadian VC or company founder sees a $50 million exit as a big win, whereas in the US, that’s on the low end of their success scale.

And that exit often means jobs moving to the US or offshore. In many cases the key people in the acquired company (the bright, dedicated and passionate ones) move down to the US to work “at corporate”, and the brain drain continues.

I don’t want to paint a completely bleak picture of the situation here. As I said earlier, there are very bright, talented and passionate people here. In fact, after I moved down to Silicon Valley in 2000, one thing I realized was that the people down there are not smarter than the people here.

But the level of investment financing, the personal networks of skilled people, the institutions like Stanford and Berkeley all provide a critical mass of infrastructure that enable risk taking and innovation on a scale we don’t really have in Canada. The infrastructure and culture there pull bright people from other parts of the country and other parts of the world.

The issue is not the people here in Canada, it never has been. It’s all the other business levers that innovators need to “nail and scale” their businesses to be world leaders. I personally think the co-founders of RIM (Mike Lazaridis and Jim Balsillie) should be viewed as national heroes, on the same scale as Wayne Gretzky or Gordie Howe (famous hockey players for those of you who didn’t grow up on hockey!).

I’m sure Mike and Jim had numerous incredibly lucrative offers to sell their company over the years. But they didn’t. They held on, grew the company, fought off lawsuits, challenged rivals and continued to innovate and create a global leader based in Waterloo Ontario. And just recently RIM was named the fastest growing company in the world by Fortune magazine.

So what can be done to close the innovation gap? Konrad offers some solutions in his article. I’ll get more into that in part 2.  But in the mean time, I’d like to hear what you think, particularly if you are here in Canada, or are Canadian and are living/working outside of Canada.

Saeed

Related Article:

Canada’s Innovation Gap (part 2)

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The New Rules of (almost) Everything?

economiccollapseEvery day there seems to be a new story about the economy that spells doom and gloom. Words like “meltdown”, “depression” and “collapse” are spoken with a frequency I don’t recall from previous downturns.

Like many others, I was living in the heart of Silicon Valley during the last downturn. I was laid off from my job just days after 9/11. Talk about a tough environment to find work.

While the last downturn was focused very much on the technology industry (hardware, software, semiconductors etc.) – I still remember how much emptier Hwy 101 was in the spring of 2002 vs. a year earlier – I’m wondering if this one won’t be equally difficult for us “techies”.

Consumers and Business are hard hit

Both consumers and corporations are in financial trouble. Consumers in the US in particular because of the housing meltdown (there’s that word again), but in general because consumers have a much higher debt load (even outside of housing) than say a decade ago.

And I don’t have to tell you about the issues in business. Finance is a mess and will take time to unravel. The interconnectedness of the worldwide financial system was laid bare these last few months. Aside from the collapse of firms like Bear Stearns, nations such as Iceland, Peru, Turkey and others, who had nothing to do with the root cause of the financial problems are being held hostage because of international investment portfolios and an international credit squeeze. Iceland’s currency has dropped almost 40% against the US dollars over the last 6 months.

When entire nations are impacted so quickly and severely by, what was originally, a financial problem in the United States, it’s clear that other industries will follow.

In Canada and the US, the automotive sector is in deep trouble. In Canada, the resource and forestry industries are lining up behind the auto companies, looking for help. The housing industry is hurting, and so is manufacturing. I don’t have data on other industries, but likely they’re not immune.

Impact on Technology Companies

One interesting thing I noticed is that not yet in this downturn, and I don’t believe in the last one, did the High Tech industry go in front of government bodies and ask for bailouts or financial assistance of any kind. Someone please correct me if I’m wrong, but I don’t recall any of Cisco, HP, IBM, Yahoo, RIM,  Microsoft, Google, Oracle, Siebel etc. doing what the bankers, auto manufacturers or even in recent years, the airlines companies have done and ask for money to “save” them from collapse. Yes, most tech companies had layoffs and many failed in the last downturn, but there were no cries of the industry disappearing or industry segments disappearing.

So why is that? First, let me say that my view is somewhat biased as I work in technology and thus have a deeper insight into how the technology industry functions. I don’t have that same insight into other industries. But as a somewhat educated outsider looking in, I will say that the North American auto industry let foreign car companies (primarily Toyota and Honda) take away their marketshare.

North American (i.e Ford, GM, Chrylser) vehicles are far less reliable than those made by Honda and Toyota. Toyota has out innovated other companies with the introduction of hybrid vehicles as well. The Toyota Prius has market share numbers amongst hybrid cars that are the envy of any market sector leader.

And while it can be said that American banks have lead the world in creating new kinds of financial instruments and have “innovated”, it’s also clear that they did so in many cases for short term gain. When I moved back to Canada from the US, I once again was faced with the much more restrictive financial market here as compared to the US. On one level, the lack of variety of financial instruments makes getting a mortgage much simpler, and removes risk from the system, but I’d say this same restrictiveness makes the capital markets in Canada, and particularly the venture capital markets much less open to risk and investment.

With respect to technology companies, I see one big difference. Technology companies are built on innovation and don’t have a history of government reliance (at least in North America) to get through hard times. No one ever said anything like “What’s good for <insert large technology company name> is good for America (or Canada).”

Research in Motion (RIM) is an example of an amazing company. They’ve built great products/services that have wide adoption and have fought off competitive threats from many other companies. Over the last 5 years, their stock price has been as low as about $1.50 and as high as $140. Yes, that’s almost a 100X spread. [Wish I’d bought some stock in 2003!]. And through that I don’t recall them once going to the Feds and asking for financial help.  They ran their business, made decisions to cut staff or expenses, to invest in key areas for the future and have continued to expand their business globally.

We all can take a lesson from companies like RIM. They succeed because they deliver lasting value, not because the price of the commodity they sell goes up 100% because of market speculators or temporary demand from other nations.

So what does the future hold? I have no magic crystal ball. But similar to the period after the dot-com bubble burst, there was little talk about “the New Economy” and more talk about business focus and fundamentals. I’m certain that looking forward, the same will happen yet again.

Hey, Twitter now wants to hire a PM to figure out how to monetize their service! Perhaps this is a sign of things to come. As more companies realize that eyeballs and users and downloads and hits and PPC advertising aren’t sufficient, they’ll realize they need to understand their true value to customers and users, and hire bright people, in particular Product Managers to turn their technology company into a business.

The New Rules? Same as the Old Old Rules.

  • Solve a problem that really causes problems for people.  Simply being cool isn’t enough.
  • Figure out how to make people do what they need to do easier or quicker or cheaper.
  • Help them do something new that they couldn’t do before, but always wanted to do.
  • Understand the value you deliver and communicate it to them clearly and simply.
  • Charge a fair price for the innovation and build a scalable business around it.
  • Hire smart people to help you because you don’t have all the answers.
  • Teams of smart people have the best chance of finding creative solutions to new problems.
  • Don’t forget that the next economic downturn will come way sooner than you expect so prepare for it when times are good.

BTW, as an example of really cool, but not necessarily valuable technology, watch this video. Hopefully these guys figure out how to monetize this.

Saeed