Scaleup woes stunting Canadian tech sector's growth, leading academic says

Canada is falling behind in the global innovation race because its tech sector too often fails to scale startups into sustainable companies, the head of one of Ontario’s leading business schools said Thursday night.

“When I look back over the years, my fundamental observation about Canadian innovation policy is that we have become world-class at talking about it,” Micheal Kelly, the dean of Wilfrid Laurier University’s Lazaridis School of Business and Economics, said in a speech at Carleton University.

“Unfortunately, by international measures, our innovation performance has continued to be pretty mediocre at best. From my perspective, the ultimate goal of our innovation policy should be to build globally competitive technology companies in Canada. We have not paid sufficient attention to what it takes to scale and grow our most promising startups and help them to compete in global markets.”

Canada placed just 22nd in the World Economic Forum’s latest innovation rankings, Mr. Kelly told the crowd at the Canadian Advanced Technology Alliance’s annual innovation leadership gala.

The Conference Board of Canada was similarly unimpressed with the country’s innovation performance, he added, recently awarding it a grade of C in that category.

“We’ve had a lot of these wakeup calls over the past several decades,” he said. “Our continued middling performance would seem to indicate that we prefer to hit the snooze button rather than confront the harsh reality of our lagging performance. We can’t afford to go back to sleep.”

World-class incubators and accelerators are graduating a multitude of new companies every year in tech hubs such as Ottawa, Waterloo, Toronto and Vancouver, Mr. Kelly said, noting the Global Entrepreneurship Monitor ranks Canada virtually tied with the United States in per-capita production of startups.

But most of those fledgling companies never develop into globally competitive enterprises, he added, with fewer than five per cent of Canada’s 36,000 tech firms falling into the “high-growth” category.  

The former dean of the University of Ottawa’s Telfer School of Management pulled no punches in his address, telling an audience of some of the country’s leading tech executives the sector is in danger of becoming “a farm team for Silicon Valley” if it doesn’t step up its game.

“Is this what we want from our innovation policy – vibrant tech startup clusters that don’t scale their companies?” he said.

“While we may match the U.S. in startup activity, we have had very little success in turning startups into larger firms relative to our American counterparts. Unless something changes, we will continue to struggle to produce the type of sustainable high-growth firms that policy makers tell us are crucial to the country’s economic future.”

Mr. Kelly said he fears the federal Liberals' “innovation agenda” will put too much emphasis on familiar themes such as procurement policies and research and development funding at the expense of more pressing issues.

“To be successful in scaling our technology companies, we need to focus our energies on ensuring that we build the management talent and knowledge to support their growth and their ability to compete at a global level from Canada,” he said.

“We’re in a global competition for the best talent, and we can’t solely rely on imported talent to solve our problems. We need to develop the necessary skills in the current generation of technology executives and we need to start preparing the next generation of technology executives for industry leadership.”

This fall, Wilfrid Laurier University is opening the Lazaridis Institute for the Management of Technology Enterprises. Backed by $20 million in funding from BlackBerry founder Mike Lazaridis and $15 million from the provincial government, the institute aims to create a global network of experts and mentors who will offer expertise on how to nascent tech firms into world-leading companies.

The institute is already working with partners such as Waterloo’s Communitech innovation hub and is looking to forge links with other business schools across the country, Mr. Kelly said.

“It will not be a typical academic institution,” he explained. “It will be a place where industry leaders, leading practitioners and academics come together to address some of the key management issues facing Canadian tech enterprises as they seek to grow.”

The sector has to make up ground as quickly as possible, Mr. Kelly said.

“This is going to take time,” he said. “But unless we start now to develop a deeper pool of executives who understand and can confront the challenges involved in scaling and growing their companies, we will be lamenting our innovation performance for decades to come.”