Over the last few months, I’ve been approached to participate in a number of panels and interviews on what Alberta needs to move its economy forward. With a recently announced $24.2 billion provincial budget shortfall, this question couldn’t be more urgent. However, while we may be experiencing severe challenges from the COVID-19 crisis, after a 7+ year oil slump many of them are the same issues we’ve been collectively struggling with for a long time.
Overdependence on our energy sector, difficulties in diversifying and attracting new industries, and an exodus to the USA, Europe and Asia of our home-grown success stories all feature prominently. Most fundamental problems remain the same, and it seems like there must be some (maybe yet to be identified) ingredients Alberta is missing. After all, the push towards diversification started in earnest years ago, and it’s clear that we haven’t figured it out yet.
As a clean technology entrepreneur, I’ve been at the frontlines of both the oil crash and the pandemic’s collapse of the aviation industry, and had to make agonizingly difficult choices about whether to keep valued employees, support important R&D projects and maintain infrastructure and office spaces. I know that each decision I make during this time impacts so many other people, both in direct and indirect ways, and the weight of that responsibility is always with me.
Thousands of other companies across the province are in the same position, and if Alberta can’t find the way forward, the decisions we have to make as business owners are going to get even harder. So, let’s get back to the urgent question of what Alberta needs – what we all need. According to our newly appointed provincial Innovation Minister, Doug Schweitzer, the answer is pretty simple – capital and talent to support what he calls a ‘tech-focused’ recovery.
On the surface, it’s hard to disagree – technology is the driver of economic growth in literally every other part of the world, which would make it the obvious focus for our recovery. Alberta has been in an extended capital drought for a long time, and a continuous brain drain has caused many of our most innovative technology companies to flee for more prosperous shores. All three points check out.
It’s the execution where I think we’ll run into some big roadblocks, because Alberta is missing something that no strong technology economy can survive without. What is this mysterious quality? Trent Johnsen, an active participant in technology organizations like Innovate Calgary and the Creative Destruction Lab, and the founder and chief executive of Liveweb.io, was quoted in April as saying this:
This is a painful, visceral statement on what our province looks like to the industry we’re counting on saving us. He’s not just contemplating leaving a sinking ship but helping other technology companies into lifeboats of their own – to “technology ecosystem, future-friendly” places. Places like Houston, NY, the Valley, Asia, and most major European cities – places with something we’re missing.
Ecosystem is the key word. Thriving networks of organizations, investors, people, initiatives and projects underlie the success of every world-class technology economy, from Berlin and London to Singapore and Sydney. Out of these ecosystems comes a culture of innovation that shapes new ideas and products and encourages industry and investors to take risks on ambitious visions that might not be fully realized for a decade or more. Globally, tech ecosystems are the fabric the future is built on – but not in Alberta. We don’t value them or support them, and this is a mistake that will keep holding us back.
Why doesn’t Alberta have anything close to the kind of ecosystem that can support a tech-focused recovery? As someone who runs a major digital ecosystem organization, the Canadian Blockchain Consortium, and has spent a lot of time engaging in our various clean technology initiatives, I think I can offer some insight.
First of all, every other successful tech ecosystem has significant government support. With a few exceptions, most of the non-governmental organizations here, including mine, are bootstrapped or funded through corporate sponsors, and there is very low support for R&D and market development. While we have some government-run innovation organizations and conferences, these simply don’t create a culture – people in the technology industry build that from the ground up, and then extend to connect across the globe with the shared culture of other ecosystems.
Ecosystems also encourage true collaboration within and between industries, which is essential to the growth of many emerging technologies that require the participation of multiple parties, like supply chain management or financial transaction systems. A key reason why strong technology cultures are thriving while our companies are fleeing is that in places like Sydney and Singapore, industries are actively engaged in these ecosystems and supported by governments to do so, which helps build market-ready products, distributes the risk of technology adoption and incentivizes participation.
Even with government funding, ecosystems, unlike public innovation agencies, operate more like free markets. Through constant exposure to peers, industry end-users and competitors, companies build reputations, invent new products and processes, and refine their pitches. Local and international investors pay close attention, watching for the next unicorn to emerge, and betting on billion-dollar futures, the top pre-revenue companies receive far higher valuations and R&D runway than an Albertan company could ever dream of. Additionally, these ecosystems draw in major technology firms looking for new markets, acquisitions and investments.
Culture Is Everything
The most high-impact technologies require lengthy periods of trial and error, major R&D funding and strong government support – all with completely uncertain timelines and ROIs. Building the future requires a culture that is open to taking enormous risks on disruptive ideas or pre-revenue companies and accepts the possibility of complete failure. This doesn’t sit well in Alberta, where the economics of resource development are based on firm calculations and decades of historical data. But if this outdated culture doesn’t change, we have little hope – because it will eat our strategy for breakfast.
”Culture eats strategy for breakfastPeter Drucker
In my opinion, if Alberta truly wants a ‘tech-focused’ recovery, these realities need to be understood and embraced, even if they aren’t intuitive to us. We won’t have a strong technology sector without thriving and government-supported ecosystems, because whether we think they’re important or not, that’s how it works in the successful tech hubs we’re trying to emulate. Industry needs to be heavily engaged and incentivized to participate, and our ecosystems need to seed, promote and stress-test our emerging companies to attract the private capital and larger tech firms Alberta desperately needs.
And while on the surface, it might seem logical to focus on short-term revenue and clear and quantifiable business values, such as with last year’s devastating reduction in R&D tax credits, our culture of fiscal conservatism is our biggest hurdle to a more prosperous future. Technology development and resource extraction are completely alien business models, and if we continue to treat them the same way, our tech talent and companies will continue to leave Alberta.
We simply must be willing to take some large risks with unpredictable rewards, as frightening as it sounds right now, because it’s the only way forward. This doesn’t mean blindly throwing money into early-stage companies and hoping that one becomes the next Shopify. Ecosystems act as incubators and vetting systems, and with their diverse participants and global connections, are likely to be far better judges of the market-worthiness of start-ups than our government innovation agencies have been.
Our record budget shortfall is a unignorable sign that the time for platitudes and promises is over. If as a province, we truly believe that a tech-focused recovery is our path towards prosperity, we need to do it right and go all-in. We can use the guiderails offered by places around the world that have succeeded where we’ve feared to tread, learning from their evolution and building a tech ecosystem that is uniquely, beautifully ours. Let’s be brave, Alberta. The future is waiting for us.