Scar Tissue

The ICT industry is a tricky one from an economic development perspective.  Because the industry is a perfect example of Joseph Schumpeter’s process of ‘creative destruction’ you get a lot of failure.  In fact, I read once that most VCs won’t touch an ICT entrepreneur until they have failed at least once.

In New Brunswick, we have witnessed a lot of ICT firms going down over the years – basically 90% of the eLearning industry but there have been many more.  And some of these firms – most in fact – did receive some government assistance. 

Gerry Pond says our ICT industry needs more of this ‘scar tissue’.  More trying and failing.  More creative destruction.

The issue is what is the role of government?

The government doesn’t handle failure very good and the media doesn’t handle government money going into failure any better.

I refuse to believe those who say there is no role for government.  There is a public interest in New Brunswick having a a strong and successful IT industry.  It creates good jobs, attracts workers from across Canada and beyond into exciting careers.  It offers above average wages translating into more tax revenue for government.

But looking at the ICT industry in the same way as, say, the call centre industry doesn’t make much sense.  The government needs to look at ways to grow the industry that are tailored to the industry.

Help with organizing, trade, attracting R&D funds, etc. would be good roles for government. Expanding the NBIF’s early stage funding program might be one way to provide access to ICT startups without the risk aversion challenge.  In that program, the NBIF lends small amounts of money for an equity stake.  Many will fail – a few will prosper and over time if it is set up properly the program should yield a good ROI on government investment.

The bottom line is that New Brunswick has a whole department working on the ‘fish’ sector. A laundry list of programs and services, regulation, legislation, inter-provincial cooperation, international development, resource management, etc.   The ICT industry is rapidly becoming as important to the New Brunswick economy as the fish industry and it gets very little government focus.

The raw material of the ICT industry is not fish stocks – it is human capital.  But the thinking behind managing the fishery has parallels in the ICT industry.  You need to understand your talent pool, you need to track its growth/decline and you need to promote it to ICT firms here and abroad. 

I’m not saying we need a whole new government department but we do need to understand where the private sector growth is coming from (and could continue to in the future) and have good public policy to foster it.

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15 Responses to Scar Tissue

  1. richard says:

    “Help with organizing, trade, attracting R&D funds, etc. would be good roles for government”

    Perhaps BNB could learn from some of the research universities in this country on that point. The larger ones at least have some pretty aggressive tech transfer groups that do a good job of seeking out partnerships, funds, etc, for their intellectual property. The job is a bit different, but the approaches have some things in common.

  2. Anonymous says:

    http://dailygleaner.canadaeast.com/front/article/article/577510

    Here we have what to me appears to be a consumer joke.The Potato Research Center developing colors? When all you can find in our so progressive stores are GREEN.
    Could they not spend the huge amount of money,by just supplying potatoes that people have been asking for years, potatoes that taste like they used to and not GREEN?
    I saw the survey last week that said the consumer wanted , small medium,etc, the same middle man survey that they been touting for years, meanwhile why are the potatoes in the Maine stores nice big , real gems and best of all not green?
    But I did find out,one day talking to a former agency head, he had certainly traveled to a lot of countries!! If you get my drift!

  3. Anonymous says:

    Any suggestion that New Brunswick “needs” more failures is complete crap. We need more successes.

    Yes innovation involves risk and will have a failure rate but we should kill these ideas of “celebrating failure” and idolizing people who have cost taxpayers,investors, suppliers and employees. If we want to overcome the culture of defeat label, we better focus on the wins. Yes, there will be failures along the way but suggesting NB advocate more failures is ludicrous.

  4. I think ‘advocating’ is a strong word. No one is advocating a deliberate policy of failure (at least not me). But encouraging a culture of risk taking in the context of ICT is germane to that industry’s success. Now I agree that the the intersection of that thinking and government policy and tax payer money is a far trickier issue to think about.

  5. Tristan says:

    Even with the high risk of failure, I think that the ICT industry has more potential than the fishing industry in the long term. While fish populations continue to decline (thanks, darn seals), the need for this sort of technology is only going to grow. Other than aquaculture, there aren’t going to be too many new jobs created by the fishes, but every year this technology becomes more ingrained in our society.
    David, you mentioned that report concerning what they are doing in Europe to foster the ICT industry. Is there anything similar for North America? Maybe when that conference center is done in Fredericton, we can hold our own inovation forum…

  6. Tristan says:

    Even with the high risk of failure, I think that the ICT industry has more potential than the fishing industry in the long term. While fish populations continue to decline (thanks, darn seals), the need for this sort of technology is only going to grow. Other than aquaculture, there aren’t going to be too many new jobs created by the fishes, but every year this technology becomes more ingrained in our society.
    David, you mentioned that report concerning what they are doing in Europe to foster the ICT industry. Is there anything similar for North America? Maybe when that conference center is done in Fredericton, we can hold our own inovation forum…
    And sorry, potatoes?

  7. I think that more focus on ICT makes sense. I hope that PropelICT or some other entity emerges as a voice for the provincial industry.

  8. Anonymous says:

    Well David, I am with you if you advocate that what we need is more trying and succeeding but the suggestion we need more trying and failing is a dangerous path. I understand that in taking risks there will be failures but there needs to be an understanding that failure is serious; they consume resources, leave suppliers and employees unpaid, leave investors with losses and cause personal hardship. We need to focus on success, not failure.

  9. Rob says:

    @Anonymous

    I don’t think anyone is advocating failure. I think David is saying that we need to get over our fear of failure. We’re not going to succeed in this province if we don’t try some new things. If the culture in the area breeds complacency and fear of innovation “because we might fail”, we’ll never be more than we are now.

  10. Bill says:

    The biggest problem with failure is the endless carping about it. It’s fruitless and even harmful. Few people, teams, companies, industries succeed without failures initially and along the road. The point of talking about failure is to learn from the experience and determine what needs to be done to succeed. It’s also not an either/or thing. I think you need to study success and study failure to determine what to do and what not to do.

    Most failures, however, end up in a lot of finger-pointing followed by flight. There is risk in everything but probably the biggest risk is in trying to play safe.

    No one wants failure and certainly no one needs it. But not to try because there is a risk of failure is a kind of slow death through inaction. As the saying goes, you cannot win if you do not play. I think NB is full of potential but suffers from timidity and lack of creative risk (and follow-through).

  11. richard says:

    I guess there are different kinds of failure. One is to invest funds in industries that probably did not have much of a future; another would be to invest in innovation that has a reasonable chance of success, but, in the end, is not successful. We need to put our dollars into the innovations that might be successful rather than dollars into bailouts of outfits that seem to be doomed. Unfortunately, there is more pressure on governments to bail out existing jobs than there is to spend money on innovation.

    I don’t know much about ICT and so can’t really rate the potential there. On the other hand, I see a lot of potential in spin-offs from R&D investments in natural resources. Even potatoes.

  12. anonymoose says:

    re: failure, people are still carping about Bricklin 30 years later.

    Fear of risk is part of the culture here in NB, anyone who likes taking risks has long since gone West.

  13. Anonymous says:

    Richard is absolutely right. Innovation involves risk and the potential for failure.

    There is such a thing as risk management; upfront when ideas are being vetted and during projects to prevent good money from being thrown after bad. That is the most frustrating thing; when a risk is taken and is not successful then becomes a black hole for government money trying to prop up a bad idea (e.g. a yarn factory). No one is perfect; there will be bad ideas but it is not wise to keep the funding flowing in a feable attempt to avoid the recognition of failure. Fess up early and move on.

  14. Let’s make sure we are agree that propping up bad business models with government money is not the way to go. If we have more of an R&D perspective – it is helpful as R&D by nature has risk tolerance embedded in it.

  15. richard says:

    “anyone who likes taking risks has long since gone West.”

    Oh, I dunno. I took a risk in moving back here. Every generation produces a certain proportion of risk-takers (in useful and destructive categories), so there is always hope. With something to jumpstart growth in place, risk-takers will stay or be attracted here.

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