The Innovation Imperative: Fostering Local and Building Ecosystems are Critical for Growth
By Anusuya Datta Governments that foster domestic innovation in technology are helping lead job growth, and nurture local talent. Research shows that high-tech businesses have the largest multiplier effect on the economy, with each new high-skill job leading to an average of 2.5 new jobs.
The pandemic has accelerated technology innovation faster than ever before. More than ever, there is a critical need for governments to invest in technology and business innovation. There is also a greater necessity for flowing this innovation down to local businesses, too.
Fostering local innovation
“The pandemic didn’t structurally change anything. It only accelerated existing trends in the adoption of digital technologies,” says Vendasta CEO Brendan King.
The ongoing digital revolution had already made borders irrelevant in many ways. Today people can work from anywhere or do businesses from anyplace in the world. The pandemic pushed the trend even further.
"Businesses now see that they can recruit talent from anywhere, and governments around the world now need to update policies and create conducive environments by investing in home-grown businesses and technologies. Countries that are doing that have an advantage. Because people can work from anywhere in the world now, the best people are going to work for the best companies – wherever they happen to be."
“What’s changed is that businesses now see that they can recruit talent from anywhere, and governments around the world now need to update policies and create conducive environments by investing in home-grown businesses and technologies. Countries that are doing that have an advantage. Because people can work from anywhere in the world now, the best people are going to work for the best companies – wherever they happen to be,” says King.
While fostering local innovation will create jobs and perhaps solve the issue of talent drain, it will also create stronger and more diverse businesses, and add to the real economy of a country.
As Ben Bergen, executive director for the Council of Canadian Innovators (CCI), puts it: “When the government purchases domestic innovation and technology, not only does it lead to better services – whether that be in the healthcare or education and such – but it also creates an opportunity for these businesses to go and sell products globally.”
Therefore, fostering local innovation also creates wealth within domestic companies which can then be used to create domestic jobs, innovate further, and expand production.
CCI has floated a letter signed by Canadian tech leaders appealing to federal party leaders in the country to plan for clean economic growth, powered by Canadian-owned ideas for creating a competitive, technology-powered, data-driven global economy.
“When the government purchases domestic innovation and technology, not only does it lead to better services – whether that be in the healthcare or education and such – but it also creates an opportunity for these businesses to go and sell products globally.”
“The letter is an opportunity for the tech ecosystem to speak with one voice – to all political leaders – and this is really a sign that innovators realize how important it is to speak collectively and with one voice in order to advance economic interests in the tech ecosystem,” Bergen says, explaining the rationale behind the letter.
“When you look at some of the largest companies in the world right now, what they own are portfolios of data and IP (intellectual property). They can seek rents and build capacity through that.”
He explains that a key question that needs to be considered is whether Canada has successful technology companies that own large IP and data portfolios that can generate hundreds of billions of dollars. If Canada doesn't have or support these successful firms – similar to how it’s done in other parts of the world – then the country could find itself facing severe economic challenges, Bergen concludes.
He points out that many of the companies that signed the letter are creating high-skill jobs.
Creation of high-skilled jobs raises income levels, and creates more jobs through the “multiplier effect.” This applies not to only Canada, but across every nation.
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Flowing the innovation down
There is a close link between local businesses and sustainable development. Because in the end, small and medium businesses (SMBs) are by far the largest job creators in any economy.
SMBs account for 90 percent of businesses and 50 percent of jobs worldwide, according to World Bank estimates. SMBs are essential to powering economic recovery from the COVID-19 pandemic due to their innovative and opportunity-seeking nature, but they need more support, says the United Nations Conference on Trade and Development (UNCTAD).
For instance, in the United States, small businesses account for 44 percent of economic activity, they create two-thirds of new jobs and deliver 43.5 percent of the national gross domestic product (GDP). In Canada, SMBs represent 97.9 percent of all Canadian businesses, contributing almost half of the GDP generated by the private sector, and are by far the largest employer, providing jobs to more than 8.4 million people.
“Local businesses are the backbone to the economy. As we become more of an information and technology society, there’s more opportunity for local businesses to be part of the larger growth story. Therefore, it’s more important than ever that we help local businesses to survive,” says King.
SMB definitions vary from country to country and from industry to industry. But typically small businesses are defined as those having between one and 100 employees, and includes a wide-ranging business categories such as retail, food and hospitality, travel and tourism, healthcare and other professional services.
On one hand, the phenomenal rise in online delivery of products and services or ecommerce during the pandemic has opened new opportunities for local businesses – and indications are this trend will continue in a post-COVID world. On the other hand, ecommerce growth creates a more competitive landscape. “People are going to buy products or services they want from all over the world. And you might as well have local businesses to meet that demand,” King emphasizes.
Because they are such a heterogeneous bunch, SMBs usually exhibit a diverse approach to tech deployment. They are typically the last to have access to and take advantage of business and technology innovation. SMBs have different IT requirements, face different IT challenges, and their IT resources (usually budget and staff) are often highly constrained, says Gartner.
But again, because they are the bedrock of the private sector in most economies, the success and effectiveness by which they implement technology is an important factor, not only to the local businesses themselves but also to many of the tech service providers (including hardware, software, services, and solutions) seeking to sell in a particular market.
Now more than ever, governments need to support and sponsor innovation for SMBs to sustain and grow economies. Digital transformation is disrupting traditional industries. “Governments need to figure out how to support smaller businesses that are maybe in spaces that traditionally didn’t use innovation and technology to the same extent. Having policies in place that can allow these businesses to digitally transform – be it restaurants or clothing shops or other firms that traditionally don't fall within that tech space – will be critical. This is crucial not only for their success but also for the economic success of the country,” Bergen says.
King is cautious: “I don’t want to overblow it. Not every business needs the latest cutting-edge tech.” He gives the example of a restaurant that makes great food and attracts a big crowd, but do they really need a curbside pickup, for example? “Some might say no. But I think in order to survive long term, they need to make sure they can do business online,” he says.
For instance, they need to make sure they can accept payments the way people want to pay. They need to serve customers the way they want to be served. “So in the long term, they won’t make it unless they can serve and remain competitive in the business they are in,” he says.
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Building an ecosystem of innovators
Innovation is not only about individuals or standalone companies. “What matters most in creating and sustaining innovation is building and strengthening interdependent links amongst ecosystem players, or building an ecosystem,” writes Walter Van Dyck, partner and associate professor of Innovation Management at Vlerick Leuven Gent Management School.
An innovative ecosystem needs people with the same vision, speaking the same language. “That’s how places like Silicon Valley or any of the tech hubs started, and they exist because there are more and more people thinking and understanding the same language and working on the same things. If you have businesses that are technologically advanced there are more conversations happening around innovation and more opportunities are created for people to build those technologies,” King says.
When you don’t have that ecosystem, those conversations won't happen and the innovators tend to go to other places. For a community to thrive, it needs to build an ecosystem of innovators at all levels – governments, industry, society, as well as companies.
King says Vendasta has been building an ecosystem of innovators in the small business space to address an opportunity and demand from the market. “The world is increasingly more complex. To be a small business owner 20 or 30 years ago, you just needed to have a business, hang out a sign, print some flyers, advertise in the local magazine and phone book; and that was the standard approach,” he says.
Running a small business today is more complex. They need many tools to schedule staff, service customers, bill, invoice and accept payments the way their customers want, manage delivery and inventory, and shipping. It also means that small businesses need experts to guide and help them.
Vendasta partners with digital agencies and managed service providers (MSP) to provide SMB innovation that drives business growth and competitiveness. Agencies and MSPs play a vital role in the delivery of that innovation to SMBs.
ALSO READ: Why Small Businesses Need a Well-Defined Ecommerce Strategy
“We have seen that small businesses increasingly turn to people they trust to help them deliver those services,” King says. “As the world gets more complex, we don’t see small businesses buying tools they need from different vendors and different service providers. What they want is someone who can be that general contractor.
“That’s what we are doing at Vendasta. We empower local experts to help those local businesses survive, and provide the technology they need. It doesn’t matter where the businesses or the experts are located. People will turn to an expert they trust, and we are going to deliver innovation and support to those people who deliver those services.”
The Vendasta platforms help local experts by helping them be the experts. “We are really trying to build that ecosystem where not only the tools, but also the service providers are vetted, safe, and secure. So that small businesses can choose service providers with whom they can have a long-term relationship with for serving their end customers and grow their businesses. We are trying to make that ecosystem vibrant, safe and effective,” King adds.
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