February 15th, 2002
“She said "I'll take you some place where
I know it will change"
There's no rockets flaring, there's no loud
If you walk with me we'll get there someway
On that Victory Day, on that Victory Day” – Tom
Cochrane – Victory Day
Oh God, another sports metaphor. With the Winter Olympic Games on now, I think it is
appropriate for me to make the column interesting by
making as many references, puns and double entendres as
hope that it doesn’t go all downhill from here.
A whole bunch of very important events are happening right
now that could alter the future success of the BC
Some of these will play out in the coming weeks,
most will take months to implement and many of these
events will take years to have a profound impact.
Even though medals will not be handed out for
these events, we should all judge the performance and
make our votes loud and clear.
Trading votes with the Russians for future
consideration is unlikely to help however.
The winter 2002 events that we need to watch are as
Innovation Policy Ice Dance: Did you see the federal Industry Minister Allan
Rock and Minister of Human Resources Jane Stewart trot
out a much anticipated and much choreographed report on
making Canada more competitive? Their performance may be
overshadowed by the favourite to win any policy
competition in Ottawa, the veteran dance team of Martin
and Chretien. Guess
what folks? The
main reason that the US has gained in productivity on
Canada by 20% in the last decade is better adoption and
use of technology. So how do we catch up?
BC Budget Biathlon: Gary Collins and Gordon Campbell compete with big
labour bosses in a marathon through all of the province
of BC. Periodically,
Gary and Gordon stop to shoot targets like union
leaders, special interest groups and government workers.
On Feb 19th the final stage of this
event will be played out.
Seems that the taxpayers will be about 4.4
billion behind in this race.
What will be in this budget that gives us hope in
the tech sector?
IT and Communications Market Bobsled: This dangerous and unpredictable
course leaves the fragile tech worker, nervous venture
capitalist and bedwetting tech CEO hanging on for dear
life. Most armchair analysts predict that this course is
about to improve and that the volatility will go away.
But there is a dark cloud on the horizon that may
postpone the running of this race for another year.
The Innovation policy report was quite a mea culpa for the
They actually admit that there was, is and will
be a brain drain problem to the US if we do not improve
opportunities to work in the best, most progressive jobs
and companies. Then,
they backtracked on the issue of productivity.
Chretien has been fond of the low Canadian dollar
as an excuse for ignoring productivity gaps with the US.
The National Post must be feeling some measure of
pride in the report as they have been harping on this
issue of lost productivity since they became a national
paper while other media has largely ignored the issue.
But the most important thing to emerge from this report is
the fact that most of the productivity lost has been
because the US companies and public sector have embraced
technology to make them more competitive.
With the strongest currency in the world, even in
a downturn in the economy, US companies must find a way
to make exports attractive and profitable.
They use innovation in business processes,
organizational management and clever off balance sheet
accounting (oops, sorry that last one slipped in.
I’ll take the 5th and just say that
Enron sure screwed us up a lot).
In any case, the driven, clever US entrepreneur
is looking at making a leaner, meaner operation that can
turn a profit in the toughest of times.
Where does that leave Canada if our dollar actually gains
on the US? Are
we using the best possible practices and the latest
technology solutions to be lean and mean?
Or are we getting fat and lazy watching our
dropping dollar make us a profit?
So now the hard part for the Innovation report:
actually implementing recommendations that make us more
Think IT for business and investment in innovation and
The throne speech from the Liberal government in BC showed
us what to expect from the budget for our province. The main issues affecting technology are changes to the
Employee Standards Act, changes to the tax treatment of
stock options and loosening of rules, red tape and back
room deals that will make more investment dollars flow
into BC for early stage and later stage companies.
What I fear the most is the sheer magnitude of problems
that the government faces, relegating technology to a
back seat. Shutting
down TechBC and then allowing all other universities to
set their own tuition seems counterintuitive.
But it also slows the flow of technology trained
need to “double the pipeline” of engineering
graduates, just like Gordon promised.
We need to incent more capital to flow to BC
companies before they starve on the mediocre amount
around today. We
need to attract top research talent with world class
could really use a top technology company expanding its
operations here. All
of these things cost money and I don’t expect we will
get much action this year or next from a cost-cutting
don’t blame them.
I drive by the rusting fast ferry hulks of the
$500M NDP union job creation debacle everyday. That could have been one hell of a research park, spinning
out the technology, jobs and tax payers of the future. But we reap what we sow…
If you read the papers these days, it seems as though the
recession has been averted and the soft landing will now
turn into a growth period for the overall economy.
In technology, the sentiment is that the worst is
over, the companies have efficiently right-sized and
that the IPO market is showing signs of a return.
This, the pundits are saying, is a classic U
shaped downturn after the ridiculous heyday of 1999 and
I really do hope so.
But I think we have ourselves a W.
I sense that there may be a sucker rally going on in the
economy (not the stock market which has already pulled
back). As I
have mentioned before, I prefer to monitor IT and
Communication spending by the enterprise as a gauge of
the health and/or changing fortunes of the industry.
Other than in security, we are not seeing a
bullish return to spending.
Caution is the word of the day.
There is still overcapacity in the market from
optical fiber to components to devices.
Enterprises have not seen a reason to spend
aggressively on the new, new thing because the 2000
version works fine.
And they can buy it in the secondary market for
10 cents on the dollar if they need it.
There is no compelling reason to spend money on something
bigger, brighter and faster these days.
Everyone is focused on efficiency and cost
and outsourcing companies are doing well in this market.
Companies that sell hardware will suck wind for a
while longer. I don’t see the major demand for the new, new thing
happening for a while.
If we settle back for another dip in optimism and
spending, early stage companies and big tech companies
alike must manage their business plans accordingly. Stretch the cash, love your existing customers and spend what
you can on innovation and productivity enhancement so
that you hit the ground running when we finally do
And try to enjoy the ride.
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
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