Where does Canada fit in a global economy?
As a country we have not been successful in building companies that have been successful in a global marketplace. We have also been concerned about our inability to grow companies into strong mid or large market competitors. There is a relationship between these two issues. Canada is not a large market that is capabable of sustaining larger companies with a few execptions in protected industries. We need to be able to build success in international markets if we are to create the kinds of companies that become long term success stories.
There is a constant complaint that there is not enough risk capital or follow on funding to build large companies in this country. But I think we have this backward. Capital follows opportunities and if we had the kinds of enterprises with growth potential then we would find the capital was there. So we should start with the opportunity side of the equation.
If we try to mimic the Americans by competing in all market segments we will find ourselves spread too thin to match up to them. We don’t have the population, management depth or financial resources to do this. We have to look for areas where we have natural strengths and start focussing there.
We have vast natural resources which is what has been sustaining a large part of our economy in recent years. We have huge expanses of farmland and one of the worlds largest supply of fresh water that can make us a power in food production. But despite these two obvious advantages we still fail to fully capitalize on them. That brings me to the next step which is finding the right opportunities within these areas of strength that will have a global impact.
We can sell raw materials such as oil and mineral or wheat to international companies that in turn process these into finished goods or we can find a way to do some of the processing ourselves. If the world needs food and resources then they have to come to us. All of the low cost labour in the world can’t make up for a shortage of water or arable land. We will need to understand what products the world needs in these areas and start finding a way to produce the finished products ourselves using innovative techniques to keep our cost structure low. This process will take some time to fully develop but we need to get started.
We want to make sure we participate in technology innovation as well but here we also need to determine which technologies we have the best chance of success at. We can try to compete against the world in digital media and computer technology and we will have some successes. However, we may also find these markets much more competitive than ones where we have a natural advantage. Competing in these markets is a numbers game. The more participants we have the more successes we will have but the percentage will be small and it will be difficult for us to build sustained global market leaders. There may be better ways to spend our money.
Turning again to food and natural resources there are many technology development opportunities. With a capitve market sector we have a built in lab to test out and develop new technologies. These technologies can be used by our producers to build competitive business models and to sell into international markets. Right now we do not have strength in these markets and it will take time to build them. But done with focus, we should be able to build some world leaders more cost effectively than competing in other areas of technology.
We can expand our advantages further by looking at agriculture not just as food production but as a health and nutrition market. This expanded perspective will enable us to develop broader knowledge around health and nutrition that we can use to build stronger competitors in our own country but also to inform and consult to global food and health product producers. We can do the same by looking beyond oil and gas to energy and environmental management. We can use this wider scope to become world leaders in alternative energy and environmental technology. We should also be able to provide expertise to other countries in natural resource management in mining and oil and gas.
If we could teach our telecom companies and banks how to compete globally, without the market protections they have enjoyed at home, we might be able to offer additional services to the world. They will need to grow autonomous units that have low cost models before this opportunity becomes available but they have the resources to launch these ventures.
Building strong global leaders in key markets will also build strong domestic companies especially in services. We will need professional and financial services to support the companies with Canadian head offices. Other support sectors in retail, hospitality, entertainment education and healthcare will thrive with a strong base of global competitors. Without the ability to compete globally we will be just providers of natural resources and we will see our support economy continually hollowed out.
We obviously can’t solve all of the challenges preventing Canada from competing globally in one post. There are other factors we will cover in future posts such as the need for private companies and owners that want to grow businesses and not just flip them at the first opportunity. But the point I wanted to make here is that we need to work with the natural advantages we have in this country that will become increasingly larger in the future. We have to focus and start now to build on them. We have to push aside the notion that innovation only means IT and social media or that anything to do with natural resources or agriculture is old school. We also have to avoid thinking we have to be smaller version of the US. The same way we can lead the world when we focus on certain sports in the Olympics where we have an advantage we can do in business.