When bureaucracy assassinates innovation

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“Innovate or die” is a motto that successful entrepreneurs of Ottawa’s heyday not only promoted – for a good reason – but also embraced, lived and eventually left behind as an inheritance to a new generation of wannabe innovators.

(Stock image)

By Maher Arar

Innovation is not restricted to developing disruptive technologies or products. A broader definition encompasses processes and culture. With that in mind, it is worth asking why Canada continually lags behind in innovation compared with other countries such as Finland and Switzerland. As mentioned in a 2013 Conference Board report on competitiveness, Canada fell four spots to 25th place in factors related to innovation and business sophistication.

The simple answer that many “traditional entrepreneurs” prefer to give is that the government is not investing enough money on nurturing innovation. This is partly true, but insufficient government funding for such initiatives is only a tiny part of the problem.

The main culprit is the widespread culture of rotten bureaucracy, as practised and promoted by mega-corporations and big government. Once learned and breathed, this culture is very hard, if not impossible, to eliminate.

Here’s an example, drawn from a personal experience. When I worked at SpaceBridge Network, a startup with a mission to invent the next-generation “universal” high-speed satellite modem, I had a leading role writing the specifications and simulating the key algorithms. Upper management gave us only one year to finish the task, an unrealistic deadline given that none of the team members had more than a few years of modem design experience.

Nevertheless, my team and I accepted the challenge but asked management to provide us with the required tools on time, which they did not. The company’s executives, mostly former Newbridge and Nortel managers, were the source of the problem: they wanted to run SpaceBridge like a startup, but with the culture they brought with them from the mega-corporations for which they had previously worked.

I vividly remember them gathering all of the firm’s employees in the basement to give inspirational speeches and to acknowledge how hard we were working. There would be nothing wrong with that if not for the fact that they rarely stayed past 5 p.m. or worked on weekends, a practice they constantly promoted in their instructions to employees.

Because of the risky nature of the project, my team proposed implementing a downsized version of the modem we were working on as we were targeting a dedicated chip, a much harder and riskier endeavour. Our instinct suggested it would be an excellent idea to have a working prototype that we could present to current and potential investors in case the chip project was derailed.

Our suggestion fell on deaf ears. Frustrated and dissatisfied with how the “startup” was being run, I left the company a few months later. I was told by a teammate I met two years later that the chip was eventually manufactured. However, it did not meet the ambitious specifications initially targeted, which in turn deprived SpaceBridge of any follow-up investment.

A more recent public example of attempting to assassinate innovation – this time by the Ontario government – is that of Bitmaker Labs, a Toronto-based startup launched in 2012 to provide specialized hands-on web development training.

Bitmaker strategically focused on teaching Ruby on Rails, a web design framework that’s becoming popular for its rapid development features. Capitalizing on the fact that our universities have simply become factories that are contributing to producing a generation of underemployed and debt-ridden young people, Bitmaker took an unconventional approach by focusing on immediate market needs in the field of web development.

In return for providing students with a nine-week intensive training service – which, according to Bitmaker, almost guarantees the trainee a job immediately after graduation – the young startup charges a high price tag to offset the cost of hiring sought-after web developers to teach the curriculum.

Right after the Globe and Mail published an interview in May with the founders, government officials contacted Bitmaker and accused the firm of violating the accreditation regulations set out in Ontario’s Private Career Colleges Act. Unfortunately, provincial bureaucrats rushed to judgment and neglected the positive contribution this young startup brought to the Canadian economy.

A loophole was eventually found that allowed Bitmaker to keep its doors open, but only after the onslaught of negative publicity forced the company to temporarily suspend its operations. This incident, primarily caused by bureaucratic and outdated rules, sent a chill down the spine of wannabe entrepreneurs and the whole technology community.

Politicians and civil servants seem to think the solution is to simply throw more money at accelerators and incubators – witness the $60 million earmarked for such programs in the 2013 federal budget. The government should realize that our economic future depends more and more on such small technology startups. Unless they are given the space to innovate, the country’s high youth unemployment rate will inevitably lead to catastrophic economic and social consequences.

The first step the provincial and federal governments should take is to hire young bureaucrats who themselves have been founders of startups at some point in their career. It may be hard for the government to attract such talent, but I’m confident there are some believers out there who are willing to jump on the bandwagon.

These people are in a much better position to understand the worries and aspirations of their generation.

As it stands today, the solutions the government has proposed, or already offered, will fail to address the market needs of the future economy. And the main culprit is the bureaucratic culture, and that’s where the government should point its arrows.

Maher Arar is a technology consultant and an adjunct professor at the University of Ottawa. Follow him on Twitter at @MaherArarBlog.

Organizations: SpaceBridge Network, Newbridge, Nortel Bitmaker Labs Globe and Mail University of Ottawa

Geographic location: Canada, Finland, Switzerland Ontario

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  • artard
    November 14, 2013 - 16:43

    Not sure why the author gives such importance to bureaucracy. The bigger problem with innovation is: a) There is not enough smart capital. Nobody here really understands mobile. Investors are still stuck in the Newbridge/Nortel telco mindset. b) The concentration of brilliant hackers is too low. Most people here are into web apps and ruby. Who is solving the hard problems? c) Risk averse/failure averse culture. These three things keep Ottawa (Canada in general) from creating the kinds of 'shoot for the moon' innovation that result in world beating companies.

  • Chad English
    November 08, 2013 - 10:03

    With all due respect, this article sounds like a mix of sour grapes combined with ideologically snide remarks with no facts or reasoned arguments, and certainly no reasoning carried through to the end. Let's take the SpaceBridge example. Perhaps those requests were denied for a good reason. Just because you thought these were good ideas does not mean everyone did. If everybody was allowed to carry out all developments the way they wanted, companies would go bankrupt very quickly. You offer nothing in the way of recommendations for good, lean, efficient processes to recognize the bad from the good nor when to cut off failing projects and put resources on other options. Innovation isn't about letting people just do what they want; it's about being wise with finite resources to maximize probability of success. I see nothing there about bureaucracy either, just denial of requests. On the Bitmaker example, perhaps it was a great training organization. But imagine if anybody was allowed to create a private college like that without regulation. You'd have snakeoil salesmen galore robbing the naive blind. In fact, that is very likely why there are regulations in the first place. You did nothing to address how to deal with that. This isn't to say bureaucracy isn't ever a problem in innovation. It also isn't limited to large companies or government; I performed and directed R&D at an SME and regularly had internal processes and organization get in my way. So I worked at changing them to be wiser. Not absent, as a "free for all" is not a good innovation environment either when resources are finite. In fact, I would say this is the problem with innovation in Canada. Yes, there is insufficient capital; both venture capital and government funding are lower per GDP than those countries higher on the innovation list. But spending the government money wisely is the problem. That means putting it where the biggest risks and roadblocks are, which is often at the commercialization stage but depends on the industry. Government has been more stuck in the thinking that investing in education of graduate students and investing in innovation are the same thing, aiming at funding mostly at up-front research in universities. Training and innovation are not the same thing; the same students are far more productive at innovation inside companies 5 years later. This is a mistake made clear in the Industry Canada white paper leading the Review of R&D in Canada that led to the Jenkins report, which did a better job of addressing that particular problem. Bureaucracy isn't a bad word. Done right it helps weed out the unwise and reduces risk. Poorly designed bureaucratic processes are indeed harmful, but so are no processes at all. I'm more interested to hear what processes you think are good ones, not ones that got in the way of your own pet projects, which may or may not have been a good thing. We readers can't know.

  • Kevin
    November 06, 2013 - 13:00

    While I, for the most part, agree, lets not forget that the financing climate today is very different from 15 years ago. At that time I kept hearing stories of people getting financing with no business plan or one written out on a napkin; no doing that today... the investors are looking for a return on the investment and are more risk averse. This means reducing costs and one way to do that is to cut R&D, training, personnel and tool budgets (or in some cases all four). Bureaucracy can come from the outside or the inside of a company. One company I used to work for ended up increasing the bureaucracy as a result of a marketing decision; a number of the company's customers were starting to demand that bidders to them have minimum levels of "quality" certifications such as CMMI. In order to continue to bid into these organizations the company implemented a very heavy process (as recommended by the contractors that they hired). That, along with some of the personalities involved, tended to stifle the creativity of the employees.

  • Rajiv Muradia
    November 06, 2013 - 09:24

    I completely agree with Maher, having built two startups in the healthcare space, we had ongoing discussions with CCACs, LHINs, HTX, e-health Ontario to no avail. At the end of the day, we really don't have many progressive thinkers willing to lead us away from the healthcare fiscal cliff we are about to encounter shortly...