Government stimulus for Tech

In advance of the budget on Tuesday my local MPP is having a community event to identify economic priorities. Here’s what I sent him:

  1. Ottawa is losing its tech industry. Changes in several areas of government regulation and approach could have a huge stimulative effect by leveraging personal and institutional investment.
    1. Investment in start-ups must be encouraged. This can be done by decreasing the capital gains that are taxed if these companies are successful and increasing the capital losses that can be claimed if they fail.
    2. Change the SRED and IRAP rules to allow individuals to claim sweat equity contributions at a rate determined by their last paid position – and paying grants only on profitably (this allows the accrual of offsetting grants that can either “sold” for capital on the risk market or saved to offset tax payments or directed to commercial promotion.
    3. Remove tax regulations that put Canadian tech businesses at an international disadvantage. Examples include the way CRA values options at the time of grant instead of the time of redemption. (Options are used to confer value to key employees while preserving the company’s immediate cash position for growth, promotion or research.) They are unusable to Canadian tech companies because the downside risk in the current rules means accepting options if the companies stock could falls can (and has) bankrupt employees. This puts Canadian companies at an international disadvantage.
    4. Develop an Eastern corridor (Quebec City to Windsor) Tech Economic development agency to bridge and connect local centers and encourage the flow of ideas and personnel. To compete globally we must increase the population base for tech incubation, research and professional development to match those of our key competitors.  This means connecting regions – and moving beyond the Toronto – Waterloo corridor that is currently in fashion.
  2. Examine and remove regulatory impediments to clean/green & tech industries, and develop legal frameworks to support alternative methods of service delivery.
    1. Regulatory obstacles or lack of legal frameworks hamper the conversion to many alternate technologies (hardware/software and process) and often serve only to protect entrenched companies and approaches. This issue applies to everything from green technologies to inner city granny flats that allow greater home care. Some years ago I spoke to an Ottawa manufacturer of solar water heaters. His biggest obstacle to expanding into the home market was that CMHC had not developed (and was not planning to develop) building code recommendations for roof mounted hot water systems of his type. Each sale required an engineers report to be filed with the building permit. Needless to say he is no longer in business – with the loss of an innovative Canadian technology and local employment. Similarly rules surrounding granny flats prevent them being usable in most cities where the need actually exists. More over there is no legal framework to allow temporary flats that is the desired solution to this problem for both care givers and entrepreneurs.
    2. Similarly CRTC inaction on SMS fees means that Canada is a development backwater for this rapidly growing alternative or augmentation to smart phone applications – limiting innovation, local company growth and methods of service delivery.
  3. Encourage government to trial / buy early versions of company’s technologies, or provide grants/tax relief to companies that trial and invest in new technologies.  Early customers are critical to perfecting products as customer knowledge is critical in understanding and generalizing the problem set. At the same time investment in technology has proven to be a key component to the success and international competitiveness of businesses that invest in them. Increasing the rate of adoption and moving the entry point to earlier in the curve would have a huge effect on Canadian businesses allowing them a broader competitive footing internationally while encouraging tech company growth.

What other structural changes could the government take that would help Canadian and Ottawa tech firms grow and compete?

A New Leader for OCRI

OCRI is looking for a new leader.

This may be the most important decision its members and funders make because it will set the direction for the organization during the coming critical years where Ottawa’s tech sector will either finally revive or fatally flounder.

It’s a time for vision, inclusion, activism and leadership.

So what should they look for?

First someone who thinks regionally. Ottawa is a mid-sized city for Canada but tiny globally. The reality is that we compete with areas that measure their economic hinterlands in tens of millions of people – and we need to approach that scale to compete. It is this economic and geographic connection between producers and consumers that ensures needs definition and fulfillment easily link, creates ready markets for initial test, insures a large pools of investors and management talent, and guarantees a rich education and employee pools for specialized skills as businesses grow. If Ottawa’s tech sector is going to thrive OCRI must make Ottawa a central part of an economic partnership that extends from Windsor to Quebec City.

Next the leader must be inclusive and strategic. A smaller tech community means smaller budgets – but the amount of work actually increases if “the current weakening trend” is to be reversed. OCRI must become an instigator when necessary and a coordinator where possible. It makes little difference to the strength of the community if The Code Factory mentors start-ups or whether OCRI does directly – except if the Code Factory handles it OCRI can focus on advocating public policy changes that few can address otherwise. Same goes for the Innovation Hub. Its fine in times of plenty to replicate MaRS in Ottawa but the budgets won’t be there for a number of years so let’s focus on delivering MaRS programs at University facilities’ using the telecom expertise Ottawa is famous for. Linking tech entrepreneurs within a university setting also provides (with some program support) a framework to bridge the commercialization gap that keeps so much Canadian funded research in the lab instead of the market.

The next bit of inclusion is that OCRI must reach out and address the needs of the thousands of small tech companies that are not currently it members or risk seeing its public funding attacked as this group develops an independent voice and representation.

The new leader must also be an activist. The problem of start-up investment or talent pools is not just a function of our size. We need substantial changes in out tax structures if we are gong to compete with the rest of the world. I’m not talking about lower corporate rates but of correcting the putative options regulations that mean start-up can’t attract world class talent with promises of future gain, and the write-off rules that reward people for keeping money out of high risk/reward investments like tech. We also need to look at federal and provincial programs that are sometimes so rule bound as to be meaningless. Lets make sure that if other levels of government understand the problem that their programs address it effectively. It is in developing the expertise here, and using our proximity to the federal government – that OCRi cements its leadership role to eastern Canada’s tech community.

This is a defining moment for OCRI. I hope they will consider these issues as they evaluate candidates.

Skating to where the puck will be

It was great to see the comments from people in Ottawa, Toronto and Waterloo discussing the strength of, and differences between each community. It’s a testament to the connection between the Ontario’s tech centers. What’s missing – beside Montreal – is this same discussion on core problems that affect all Canadian tech companies – like funding (tax treatment and education I’d say) and discussion of intercity methods of sharing knowledge and supporting innovation (camps and communication infastructure).

What’s happening is that the world (I’ve heard similar things from the London, Leeds, and Manchester) is beginning to recognize that if we are ever going to upset the dominance of Silicon Valley – an area that treats the world is as its innovation hinterland – we have to build on the strength and diversity of our regional communities – rather than surrendering the best to American investors
 
What I mean by regional is a strategy based on communities co-operating and upper levels of governments enhancing that co-operation with connectivity and funding.  Why for instance should Entrepreneurship 101 not be broadcast throughout Ontario using funding to enable web casting and a local partner to provide local instructional support and facilitate inter and intra community interaction? This builds local and regional community, entrepreneur’s knowledge while at the same time building a network of organizational relationships at the regional level. The same thing could be done with OCRI and Communitech programs – as well as DemoCamps and other industry events. The alternative is to spend $500.M of public money duplicating MaRS in Ottawa – an idea that lies at the heart of Innovation HUB proposal

We need to develop a sense of extended community that allows people and businesses to identify partners and opportunities outside their geographic area. This is important because economic benefit occurs is where problem knowledge, technology application and business insight intersect. At one time it could have been argued that this was the domain of cities – because of the density of interactions – however the emergence of community around blogs/forums/video has shown that technology can serve as an intermediary for connection instead of geography. At the same time the scale of competition has increased dramatically. Countries like China and India have massive population advantages that statistically increase the probability that it will be them, not us, who discover and exploit new opportunities. A single city is no longer big enough to form a global competitive advantage.

As I see it we these trends will guide many new business models.

– cheap and rich communication
– the adoption of networked business models  (outsourcing being but one example)
– a decrease of vertically integrated companies
– more innovation occurring at the intersection of fields of knowledge
– globalization (competition for customers & innovation) reaching into smaller and smaller market niche
– rising energy and carbon offset fees increasing the costs for physical travel and shipping  

They also provide a framework for regional economic development that can rival the world’s mega cities in terms of the diversity and connection – while being economically efficient, providing program excellence and diversity, and serving every company type – even if the threshold in a local are doesn’t warrant local provision of that service.

Of course the devils’ in the details, but the place to start is to explore how pervasive broadcast of local events through the broader region builds community and connections that wouldn’t occur otherwise.

No ‘sour grapes’ for OCRI

I admire the Toronto tech community because they’ve shown us what committed organizers, working at the grass roots, can to do. They look at cities like Ottawa, with its powerful economic development agency, wistfully – sometimes to the point that those of us who have questions about it are characterized as having sour grapes.

I’d be the first to admit that OCRI does many good things – but it has core structural problems that prevent it from being what either the city/province or itself want it to be – which is THE ONLY funded representative of tech business economic development initiatives in the Ottawa.

All levels of government have allowed OCRI to blur the lines between its member’s interests and those of broader tech community it receives funding to serve. That’s where I have a problem – the approx. $1.3 M of city money and potentially the equivalent in provincial funding that this “member based organization” spends in the name of businesses that are not members. This is a fundamental conflict. In OCRI we have an organization that must serve members interests first, deciding how public money should be spent to support all local businesses. To me this is no more right that the partial franchise (vote) was right it its day. It can’t work because it is not representative by its very nature.

And take a look at its membership. Of Ottawa’s approx 1819 ‘knowledge based’ companies only 35% are OCRI members. A closer look at OCRI’s membership shows that something like 42% are service providers (lawyers & consultants) and a further 21% are government agencies. Remove them and only 13% of what most of us consider ‘knowledge companies’ are OCRI members. And one has to ask how services designed for Ottawa’s largest taxi company, the British High Commission and Taipei Economic and Cultural Office, numerous Ottawa hotels or the Greater Peterborough Regional DNA Center (all members) jell with the needs of the far more numerous small tech firms that are not members but are expected by public funders to be served by it. It makes no sense.

This wouldn’t be so bad if other groups were getting funding – but if you’ve approached funders (which I have) the answer is always the same ‘have you spoken to OCRI?’ It’s the strangle hold on funding and program delivery that’s the biggest problem because it stifles program innovation and stops underserved groups getting an organized voice to offset the ear of funders OCRI’s members have. I would argue that it’s this funding stranglehold that led to the death of the Ottawa Life Science Council and its eventual decision to merge with OCRI. I’d be interested if any Life Science companies reading this think are they better or worse served since the merger.

Lets take a look at how OCRI supports the community. Sure there are a lot of events – but the preponderance of them are fee based, and fees for non-members are typically 80% higher than for members. This could be to encourage membership, or alternatively to discourage the participation of non-members. Either is a logical stance for an organization interested in serving its members, but I would argue neither meets the community serving objectives implied by the large public subsidy OCRI receives. 

It’s gets complex too. OCRI is a major advertiser, particularly to the two local tech focused papers. Whether this affects coverage is anybodies guess but I don’t believe the discrepancy between OCRI’s stated size of the Ottawa tech community (81,900) and the Conference Board of Canada’s numbers (46,000) got the coverage it deserved – especially because the size of Ottawa’s tech community gets to the core of the effectiveness of OCRI as the delivery and strategy vehicle for Ottawa’s tech economic development. It’s time we understood why these numbers are so different – and considered what that means for our economic development funding. 

Finally the notion that only a few people with ‘sour grapes’ have these concerns is simply wrong. I didn’t make the above list of issues up – I heard them from OCRI Partners, obliquely from previous and current OCRI managers, and from not a few small tech businesses. The issues are a lot more substantive than sour grapes.

If there were no public money involved these criticisms would be moot. As there is and it’s both fair and right to ask if we are getting the best value and the outcomes from the public investment we put in.

The Social Base of Competition

We are at a tipping point – technology has enabled us to shift our focus to organizational processes as the source of improvements for our corporate, regional and national competitive goals.

What’s happening is that online tools from social networks, to blogs, wikis and presence tools like Skype and IM are erasing geographic and temporal boundaries. At the same time these tools are enabling physical events like BarCamp to be easily and cheaply organized, making it possible for people to meet and discover shared interests and opportunities.

Inevitably what happens is new visions of what is possible takes hold. Look no further than the Leeds UK tech sector that is being redefined from the ground up. Here’s what Imran Ali had to say after their latest camp:

We had people from as far as Dundee and Brighton, but the greatest concentration came from Leeds, Manchester, Sheffield and the North East; right along the M62 corridor, home to 15m Brits, a quarter of our country. Could we make this Supercity the next Highway 101…the Pennine Parallel? … We think we can …

That’s a pretty bold claim – except that it’s entirely possible – because vision, connection, and self-interest all combine to provide a powerful incentive and platform that encourages experimentation and growth.

Here in Canada we could use these tools as a basis for international competition, because our geography won’t allow tight physical connection that Leeds can, with 15M people within 2 hour of each other. The inklings of that are already with us as Alec Saunders points out when he contrasts US and Canadian adoption of FaceBook.

As individuals we are quick to jump on these tools and as Alec’s post shows that adoption is leading to organizational adoption in places like CATA. We need accelerate this – because these tools will alter the way organizations are structured and how information flows within and between them.

Our opportunity is to discover the organizational processes that let people develop a sense of group identity at distance and make them part of our legal and cultural framework. Initially this enables our companies and innovators to find, and work, with the local people, partners and technologies to create competitive technologies. Over time it enables more of our companies to do this throughout the world. A powerful strategic tool for a multi-cultural country as technology is making the world very flat.

In the mean time the opportunity is for BarCamp’s to connect and create opportunities that give participating companies a competitive advantage – because they already understand the social base of competition.

International DemoCamp & the value of virtual connections

One of the tenents of social media is that it fills an unmet need – the desire of people to connect in communities and explore common interests.

It’s no surprise then that the BarCamp community – an international movement of tech enthusiasts who connect locally discuss to technology and trends – would want to use collaborative platforms to connect multiple BarCamps together into one big event.

That’s what’s happening this weekend Ottawa and Leeds UK BarCamps are going to connect for a couple of hours of demo and discussion.

It was great fun working with Jim Courtney of Skype Journal and Dominic Hodgson of Leeds UK putting this together. Jim was instrumental in introducing us to Convenos a conferencing platform that lets us share desktops and applications.  Jim also connected us with HighSpeed Conferencing, a professional conference service that supports Skype calls – meaning even if the demos require a lot of processor cycles the audio quality will still be great. Thanks Jim!

It will be exciting to see  this in practice – and to see how people connect during and after the event.

If it’s successful I hope that we see more of it locally – given the strong Camp communities in Montreal, Ottawa and Toronto and the huge advantages of connecting these communities into a single entity – from a talent, funding and company partnership perspective.

In fact Mars seems to have this idea already, web broadcasting their multi-month entrepreneurship program Entrepreneurship 101 throughout the province (has anyone from Ottawa signed up?) and linking it to a FaceBook page for connecting far flung students. 

We could take this further though. Toronto is on their sixteenth DemoCamp, Montreal on their fifth. These are great events because they make it easy to identify companies doing interesting things – that may augment your own work.

Extend this through Canada’s central corridor, and link more events, and gradually we’ll develop into a single tech community of international scale.

Update: Things didn’t work as planned, but that hasn’t detered us. We learned wired connections help, we really liked the Leeds audio and the HighSpeed conferencing – which made both the speaker and audience clear.  After some testing locally and in Leeds, where we hope to try it again.

Ottawa – Branch Plant City or New Model Time

Back in the days of strut and bluster Ottawa called its self Silicon Valley North. That seems a little hollow now, as one more Ottawa tech company, its largest – Cognos – surrenders control of its destiny to IBM.

What this latest sale makes clear is just how little depth the Ottawa tech sector has. Unlike our perceived rivals we lack diversity in company size which provide the customers, partners and mentors that grow small companies into large ones. We also lack the head offices which train mangers into visionaries and leaders.

Scratch below the surface and something else become clear – the cities current OCRI focused economic development model isn’t working. 

Whether that is due to fuzzy vision at OCRI,  who’s mission statement is all things to all people, or equally fuzzy vision from the city which sole sources most of its economic development dollars to a “member-based … corporation” somehow believing that the memberships interest is synonymous  with civic interest. 

What ever the reason it’s time to try something else – because what we’ve been doing seem to be leading us to an economic destiny as a branch plant city – churning out code and research and shipping that, and value it creates, out of town.

The answer I believe is not more funding – but more diverse funding. What’s needed is more organizations vying with each other to develop more and better programs.

This democratization of economic development does several things – First it encourages groups to have clearly defined targets and measurable outcomes. But is it does more – buy spreading funding among a multitude of groups the city benefits by being able to test multiple approaches simultaneously – a tremendous competitive advantage during times of change such as is happening both in Ottawa and globally.

Unlike the current central planning approach diversity works best at discovering new models and approaches – in part because it organizes and leverages more relationships to build on broader strengths and connections within the community– and those very connections also spread to knowledge that helps everyone become slightly more competitive.

One needs to look no further than the tremendous resurgence in small software companies whose needs are largely met by volunteers – first through Venture Creation Group and latter through an evolving network of BarCamps and Meet-ups. These groups could be significantly more valuable as engines of economic development if they were able to implement more ambitious programs, using the same technology and enthusiasm that connects them to address systemic issue they face as companies and economic contributors to this city. 

My vote is for a new model.