Canada not competitive? Just look at K-W region
Globe and Mail
By David Ticoll
Last week Canadian business executives got taken to the woodshed for their slack competitive performance. At the very same time, thanks to a tour of Ontario’s Kitchener-Waterloo technology hub, I saw first hand that—and how—some have managed to get it right.
First, the woodshed. The World Economic Forum released its global competitiveness ratings, and Canada remained stuck in 15th place. Blame mainly business (not government), says a report from Roger Martin, dean of the Rotman School of Management at the University of Toronto.
Politely, Prof. Martin charges Canadian companies with taking the easy way out. They underinvest in innovation, new technologies, even capital equipment. They’ve grown fat and lazy thanks to cheap labour and energy. Government shields bankers, telecom companies, airlines and artists from the cold winds of global competition.
Result: Big companies are padded with investments that further insulate them from the realities of competition. Meanwhile, entrepreneurial startups often languish for lack of funds.
Except, that is, in places like Kitchener-Waterloo. Everybody knows of the region’s soaring success story, Research In Motion, source of the BlackBerry. But how about, say, Dalsa Corp.? This 800-person firm does stuff you’d hardly expect to find in Canada. It has customers around the world and sites in Tucson, Tokyo, and Eindhoven, the Netherlands. Its plant in Bromont, Que., employs 440 people.
Dalsa makes specialized chips for equipment such as ultra-high-resolution digital cameras. Its current high-end image sensor is 22 megapixels—nearly three times the power of today’s high-end consumer cameras. It makes cameras, too—industrial models that you can’t buy in Future Shop. Post offices use Dalsa cameras to sort mail at breakneck speeds. NCR integrates its chips into cheque sorters. Flat-panel TV manufacturers use its sensors to spot production flaws. And the 2003 Mars rover carried a Dalsa imaging chip.
Dalsa also makes “micro-electrical mechanical systems” (MEMS)—newfangled chips that combine mechanical elements, sensors, actuators, and electronics. If you have an Xbox game console or a ‘smart’ stove, chances are MEMS are in your life. The technology is also central to microbiological lab work and next-generation communications networks.
Dalsa’s 2003 revenue was $137-million. Savvas Chamberlain, its founder and chief executive officer, says he wants the company to grow 30.6 per cent this year and another 30.6 per cent in 2005.
“We’re a components company. We use the technology as a competitive resource, and then find applications for it—only in areas with which we’re familiar,” he says.
Next month the company tackles Hollywood with a risky first entry into the competitive digital cinematography market. Judging from its conservative, thoughtful management style, its chances of success seem good.
Kitchener-Waterloo is chockablock with Dalsas and RIMs of various shapes and sizes—about a thousand of them. It crawls with serial entrepreneurs, some successful and others not-so. What makes Kitchener-Waterloo tick, and what can the rest of us learn from it?
A cornerstone is the University of Waterloo, which boasts one of the best computer-science engineering schools in the world. UW is market-oriented, practical, focused, and competitive. It also has two special features that support technical entrepreneurship.
The first is a co-op education program that puts its students into career-relevant jobs every second term. These jobs are by no means necessarily in Waterloo, but thousands of them are. RIM alone engages 500 co-op students each year. Co-op gives local firms low-cost, engaged staff who are current in the latest technologies. It gives students the real life business learning that they don’t get in their technology-intense curriculums. And it creates social capital and job opportunities, so students often stay in the region after graduation.
A second feature is UW’s approach to technology transfer. In most universities, when a faculty member invents something the school expects to own a piece of the intellectual property, perhaps even a controlling share. UW takes the opposite approach. There, the ownership of an idea remains with its creator, who is free to turn it into a commercial venture.
UW plays a crucial role, but equally important is a business community that has long fostered entrepreneurialism. UW itself came out of a 1956 business-led initiative, and from the start it had a technology-focused co-op program. The key players—business, government, and academia—have gotten together to create several community organizations that encourage networking and offer support to entrepreneurs, pursue lobbying, and attract investment. After a couple of meetings with such groups, I came away with the feeling that these folks have an intense, personal sense of loyalty to the success of their community—and confidence in the knowledge that it’s all working.
Kitchener-Waterloo is crucially different from classic successful business clusters. Traditional management thinking says clusters work best when several competitors are cheek-by-jowl. In Detroit, General Motors, Ford and Chrysler tried to outdo one another for decades—to the benefit of the region’s auto manufacturing economy. Synergies result from shared labour pools, how-to knowledge, a local supplier base tailored to their industry, and the urge to do beat the rival across the street.
As a recent study from the U of T points out, hardly any of the high-tech firms in Kitchener-Waterloo area compete with one another. Dalsa and RIM, for example, do entirely different sorts of things. Their competitors are global, not local.
Suppliers are too. RIM touts its in-house manufacturing, but when I toured its plant I quickly realized that the company doesn’t really manufacture—it merely assembles its devices by combining parts sourced from hundreds of companies, few of which reside in the neighbourhood. And even though leading local firms treasure the benefits of across-the-corridor local employees, they depend deeply on global teams lashed together via communications networks.
As they tackle the challenges of underinvestment, Canada’s leaders should look under the skin at Kitchener-Waterloo, a case study for the world of tomorrow.
