09 November 2006

Gerard Kennedy at Ryerson

Gerard was at the shiny new Ryerson School of Business building today, and appropriately his comments centered on his vision for an 'enterprising' Canada.

As usual, the speech covered a wide range of topics. I really appreciate how Gerard tries to bring different threads together. Our society doesn't work in neat little compartments, and real leadership cannot be compartmentalized either.

Enterprise begins with recognizing a problem. We have become complacent, given a great country with many distinct advantages by our parents. But we have not increased that complement of advantages. We were able to succeed relative to many nations based on a manufacturing sector that rode a low dollar, and now on a resource sector buoyed by high world prices. We should not think that these temporary successes are to our credit. A number of pervasive gaps with our OECD competitors persist: in higher education, in productivity, in small business investment.

By contrast, other small nations (by which he means small in the OECD context, as we are) have been able to forge a consensus on a direction, and have been able to create real advantage in that direction. Ireland and Sweden are common examples.

But for Gerard, enterprise is not about business, and that's why it is not the same as entrepreneurialism. Entrepreneurship is about profit, whereas Enterprise involves government and the non-profit sector. Enterprise does share much in common with entrepreneurship, however, including a willingness to take risks, and the associated willingness to make mistakes.

This willingness to take risks must be fostered by strong leadership, leadership that strives to build a consensus on the direction that Canada should be taking. Gerard cited several top line goals for Canada: To push into the top 5 in productivity within 5 years; to halve the Canada/US gap in higher education; to sign bilateral trade deals with our five biggest trading partners. Some strategies for meeting these objectives include the national education strategy, tax credits for small business investments; attention to infrastructure (both of the bricks and social kinds); economic incentives to R+D; and clarification of IP rules governing public/private research.

Accordingly, Gerard thinks the role of the Federal Government is in identifying those areas where the economic and social interests of Canada are aligned, and driving towards a consensus in those areas to enable concerted action between government, non-profit, and industry. The immigrant success gap, for example, is a social problem with a healthy return on investment. The economic loss from their underutiliziation has been estimated at $6 billion a year. Solving the social problems associated with immigration is not simply a cost or a burden, it is an opportunity to better utilize our human capital and make Canada a wealthier place, from doctors driving cabs to Albertans who can't find employees.

Other particular areas Gerard mentioned included action on the environment (for example fuel cells or small-footprint oil sand extraction technologies, the implementation of a cap-and-trade system) and the opening protected industries to harness competitive energy (telcos and banks).

A key point, however, is that it is not the job of the PM to select these areas. A participative system involving a broad cross-section of Canadians has to identify these areas of censensus; they cannot be driven top down and so the plan is not about fuel cells and investment credits, but about breaking down the artificial conflict between our social good and our economic good, and thereby enabling their mutual support and improvement.

Finally, Gerard emphasized the cost of missed opportunity. Kyoto, for example, was an area where a lot of consensus was generated about the direction, but it was never translated to action on the ground. The longer we wait, the more the consensus falls apart and the more difficult it will be to make headway towards our objectives. This is not just about promises made - our failure will damage our competitive position as compared to many of our friends in the OECD.

I was really pleased with Gerard's speech and I'm excited about the prospect of co-operative enterprise. I have long been disappointed at the ability of certain stakeholders in industry to portray change as zero-sum (think record companies and oil companies), or to portray social ills as only drains on our purse, and not opportunities (as in environmental technologies and immigration). Gerard admits candidly that this kind of change is not easy, and there will be some dislocation. The result, however, will be a stronger and wealthier Canada, vigorous and competitive on the global stage, and not just a cork bobbing in a global ocean.

Get more details from the official press release here.


Anonymous Anonymous said...

This enterprise talk makes my eyes glaze over.

I have no idea what he is talking about.

November 09, 2006  
Blogger Height Impaired said...

Where and when was this??? I'm in the RBB half the time and didnt even get a word about it?

November 09, 2006  
Blogger Gavin Neil said...

Height Impaired - hahah nice name. I think communication could have been better - I only discovered it because yesterday other bloggers were speculating on the 'important announcement' (and by speculating I mean licking their chops like jakals). There were a couple of signs on the 7th floor that said "Press Conference - this room"

Anon 5:17 - Well, he also spoke about complacency. Maybe that's something you're more in touch with?

November 09, 2006  
Blogger Jason Cherniak said...

I think you check out Dion's detailed plan on R&D, you will see what I mean by "specifics". Kennedy is still at the broad idea stage.

November 09, 2006  
Blogger Gavin Neil said...

Jason - a link for our patient readers? And does Dion delve into all those details every time he speaks on the subject? And does he hold to the principle that he knows best how to accomplish all of Canada's aims, and has no need of input from industry and citizenry to determine the particulars of his plan? He sounds awfully clever!


November 09, 2006  
Anonymous Anonymous said...

I say out the with old guard (and Dion is part of that!) and in with the new! Time for some change. Kennedy is a breath of fresh air.

November 10, 2006  
Blogger Down & Out in L A said...

It does seem very vague.

I chair a significant business association, am actively involved with economic development and have no idea of what he istalking about or the strategies he intends to employ.

If the intent is that the various community partners should work together to resolve the issues that Mr. Kennedy has identified, we are already doing that.

Its the institutions and regulatory bodies that are the problem. Change requires lobbying, energy, time and effort.

Too much of each of these unfortunately.

There are thousands of bureaucrats in the various levels of government and in regulatory bodies that I would happily fire because the only purpose they serve is to obstruct innovation, initiative, real enterprise and self realization.

.... and I am a Liberal.

November 10, 2006  
Blogger Jason Bo Green said...

Well well well.

I've slowly come to think that government has little, if much, role to play in business enterprise - much to Jason Green 0.1's dismay.

But Kennedy here gives me a bit of hope that maybe I wasn't wrong back in the day, that government can contribute. Interesting.

I don't think it is too broad or vague for a speech. I don't have any evidence that Dion (or Harper or Clinton or Blair etc etc etc) go into a lot of specifics in speeches.

Top notch, Gavin, terrific post.

November 10, 2006  
Anonymous Anonymous said...

GK's enterprise idea is not only extremely boring, it is very vague. He has no specifics. He sets out a bunch of lofty goals without telling us how he intends to get there, that is except to say it is by his enterprise theory.

November 10, 2006  
Blogger Gavin Neil said...

Down and Out + Anon 9:20: How specific is a guy supposed to get? What details are you looking for??

-He identified prevasive social and economic problems, and metrics that show we are not performing well compared to our competition;

-He described top line goals for Canada in improving these positions;

-He described the kind of leadership and participative democracy required to make these changes;

-He gave at least three specific examples of industry sectors where he thinks concensus could be generated to make some serious change;

-He identified at least four different specific government policies that would be adopted to encourage enterprise; and

-He explained that he should not, as PM, dictate these terms but should lead a broad and participative decision making process to form the concensus. That is, he is restricted in providing tremendous details because he does not take the position that he knows best and can force the nitty gritty details of his personal view on how our economy should operate on Canadians.

It seems to me that identifying challenges, describing metrics, setting goals, identifying low-hanging fruit, and proposing specific policy initiatives for making required change is a pretty traditional Biz-school approved planning exercise.

Any more detail and he would be proposing a centrally controlled, planned economy. Is that what you want? Is that what Dion is suggesting? I hardly think so.

So, in what way did this lack sufficient detil to satisfy you? Was it the part where he left out that he was dropping out of the race and supporting your candidate?


November 10, 2006  
Blogger Gavin Neil said...

Down and Out (further) - I'm surprised that someone involved in business could listen to the speech or read the press release and have 'no idea what he is talking about'. I know a thing or two about business and I was impressed with his refusal to centrally plan, with his clear opposition to heavy handed,uncompetitive regulation, his attention to ROI as being key to the constructive involvement in industry, and his awareness of cashflow as being key to early success in small business (and therefore his preference for tax credits for investment, which can be claimed in the initial year, rather than capital gains protection, which are usful only in subsequent years or on sale/dissolution)

Particularly since you obviously don't like the bureaucracy interfering with getting business done, I thought the SPECIFIC suggestion of reducing protectionism and opening up the telco and banking sectors would appeal to you. I'm sorry that he didn't mention your sector and the individual bureaucrats that frustrate you by name.


November 10, 2006  
Blogger Down & Out in L A said...

Well bank mergers and telco megers will only reduce competition, increase costs for consumers, reduce employment and the incentive for the companies to be innovative and competitive. Good for shareholders though.

Doing the bidding of the banks and telcos isn't going to help those of us developing new products and implementing new technologies.

Philosophical proposals don't address the issues that those of us developing science based solutions incur.

If "R.O.I being the key" means maintenance of the existing system of paying high fees to chartered accountants repeatedly to validate work that has already being done, he's on the wrong track.

Governments role is to support and encourage the science first.

When the science has been established, the private sector will implement based on the ROI

It's the up front piece that needs support.

November 10, 2006  
Blogger Gavin Neil said...

Donw and Out - I confess I lost you on some of that commentary.

Reducing protectionism in banks and telcos does not only mean allowing mergers. It can also mean opening up the market to increased competition. I would hardly believe that the entry of Virgin into the cell market, for example, has done anythign but increase comeptition and lower rates, and they are pressuring the old-fashioned rgulator (CRTC) to end other barriers to entry/change, such as number portability. If you assume the ONLY element of deregulation is allowing mergers, then your conclusions are reasobale, but I don't think that is a safe assumption at all.

As for accountants, generally accountants don't validate science. I dont' know what goes on in your particular organization, but those seem completely unrelated to me.

The part about ROI is ending (as I mentioned near the end of my original post) the idea that change is zero-sum, and that sovling social problems is a drain on our collective purse. Fundamentally business is in the game of solving problems and offering those solutions on the market for profit. We need to see social problems like the immigrant gap, participation of women, and evironmental challenges as opportunities to carve out unique solutions that will be marketable at home and abroad and be profitable for Canadians. Identifying those opportunities and solutions is at the heart of enterprise. It has nothing to do with accountants.

Finally, philosophical proposal do not help you scientists. Does increased R+D spending? Increased availability of tax credits? Clarification of IP rules governing public/private partnerships? How about encouraging small businesses, who will likely be the ones you need to bring your good science to market and make it profitable? Those aren't philosophical proposals, those are concrete policy alternatives meant to help people who are ddeveloping science based solutions.

November 10, 2006  
Blogger Down & Out in L A said...

Well my experience is with the existing process, which is R O I based.

The call it validating the "business case" and require that chartered accountants perform this function.

And you wouldn't believe how much money is wasted duplicating this function.

Developing ethanol technology in Canada, for example, means developing business cases to duplicate the same types of projects across the country using technology that has been developed and proven in other countries.

The lion's share of the money goes to the accountants.

That is not the model we want to perpetuate.

Its unlikely that small business will implement the technologies that I am involved in.

We recruit investors and private sector partners and the level of total investment usually exceeds $100 Million.

If Canada wants to be competitive on a world scale, R & D must be supported much more pro-actively than it is now.

Countries as small as New Zealand have models that support and encourage science based solutions much more effectively than we do.

Needless to say, the science reaches the market place much more quickly and the ROI is realized a lot sooner.

On the other topic . . .

I'm all for anything that will increase competition in the banking and telco industries and opposed to policies that would reduce it.

November 10, 2006  
Blogger Gavin Neil said...

Ahh, now I understand. I'm still not sure for whom the accountants are preparing reports (for government grants? Or investors? or loans?) but it sounds like a big waste of time.

The ROI I was referring to was not in the details of specific projects (I would assume, for example, that businesses themselves woudl worry about whether the ROI was sufficient to attract their investment). Rather, the ROI that I was referring to (and that gerard was referring to) was a return on social investment. So, rather than seeing immigration as a problem that costs money, see it as a human resource that is underutilized, and see programs for increasing that utility as investments - not costs - that can generate a return.

Similarly (although more loosely) I see environmental problems in the same way - you can see them simply as costs, or you can see it as an industry in and of itself, which will require expert design, manufacture, and knowledge services, and in which industry Canada can be a leader. This is the difference between seeing environmental compliance as a cost (as most dirty businesses wouldhave us believe) or seeing environtmental compliance as being a growth industry for the 21st century in which candian business can take a profitable leadership role.

The "Enterprise" Kennedy speaks of first involves recognizing these areas of mutual advantage between the social good and the economic interest. He doesn't believe he knows them all, but believes this kind of leadership and thinking will help us realize that the conflict between social goods (expense) and economic goods (profit) is more apparent than real. The overall return on these social investments is the ROI I speak of.

Incidentally, any supposedly 'return' based system that obligates participants to throw substnatial sums away on duplicated overhead is obviously not really focussed on returns. I agree it sounds like a shitshow, but it's not my area of expertise.


November 10, 2006  
Blogger Gavin Neil said...

PS thanks for your participation!


November 10, 2006  
Blogger Down & Out in L A said...

Hopefully, all the discussion helps promote understanding.

There are huge under-developed opportunities that bear need for scientific investigation. R & D support needs to be doubled at minimum to investigate opportunities in biotechology related to alternative energy sources. (Stage 1)

The accountants are required to be considered for funding support when new technology is being implemented. It is a government requirement (stage 2.)

In simple terms, too much money is currently being spent on stage 2 and not enough on stage 1.

We need to develop and perfect our own science, encouraging the R & D component.

Business cases need to be validated once per unique process.

Once proven, investors will take over and governments need only assist when projects have societal benefits but risky paybacks.

November 10, 2006  
Anonymous Anonymous said...

Gavin - do you know if Kennedy is planning to release anything more specific on his bank merger ideas?

November 12, 2006  
Blogger Gavin Neil said...

Rob - I don't. This speech was the first I had heard of it, and he focused on reducing protectionism generally rather than directly supporting mergers - I understand in comments afterwards to media he said that's what he was heading at.

Our banking sector is already an oligopoly so i'm uncomfortable with the idea of mergers, but that having been said the real competition is coming from foreign banks anyway, so perhaps mergers of canadian banks combined with substantial opening of the market to foreign players would have a desirable overall effect on competitiveness.

November 13, 2006  

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