GROWING THE INFRATECHNOLOGY

Ottawa. December 8, 1992

This subject is obviously of keen interest to me – not only in my role as Chairman and CEO of Rogers Cantel, but also because I will soon take the reins of the Information Technology Association of Canada (ITAC). Needless to say, the best wishes of both organizations are with you today.

I have been invited to describe some initiatives which will help “Strengthen The Infrastructure”. In order to do that, I’d like to step back for a moment and tell you why I think we need to do something completely different.

We must do something different, because “Strengthening the Infrastructure” is wrong on two counts. It sets the stage for some misconceptions. We’re not out to “Strengthen” something. “Strengthen” is too mechanical a description ~ something you do with concrete or steel. Instead, we’re out to “Grow” something ~ an organic process.

And most important, we’re not here to talk about “Infrastructure”. That’s yesterday’s economic paradigm. Today we’re talking today about an “Infratechnology”. By “Infratechnology”, I mean the underlying, enabling technologies of the Twenty-first Century – computers and telecommunications. If there is one thought I’d like to leave you with today, it is that we are going to have to GROW OUR INFRATECHNOLOGIES.

There’s a world of difference between initiatives to “Strengthen the Infrastructure” and those to “Grow the Infratechnology”. It’s the difference between our past and our future. And it has immense implications for our “planning” process.

The biggest implication is that you can plan an infrastructure, but you have to encourage an infratechnology. The recent federal government plan for roads and bridges, for example, is exactly what is required for that kind of economy. It is exact; it is precise. You can’t encourage a road to grow. But you can create a growth environment for infratechnologies.

Let me dwell for a few minutes on these ideas: organic growth, the role of government, and why our spending has to be so different. Five years ago, a prophet named Stuart Smith had a quiet “Blue Sky” dinner meeting with a group of ITAC executives. He was asked for his view on the meaning and impact of information technology. I was not there, but I am reliably informed of his response (it was reported in the ITAC newsletter!)

Stuart said that information technology – infotech –was empowering individuals. It was a process which was eroding the size of large organizations. His view on this is reinforced, by the way, by industry guru George Gilder, who calls this the “Law of the Microcosm”.

The microcosm is the computer chip, and Gilder says that you can cram computing power much more easily onto mass-produced chips than you can into a mainframe. So computing power enhances the low-end user’s power faster than it does the organization’s controlling ability.

The result, continued Mr. Smith, is that infotech is a tool which creates diversity. Individuals doing more things, in smaller and more networked organizations. Public policy has a hard time supporting diversification, since the voters are all occupied in existing industries. I recall one of Stuart’s favourite phrases: “The future has no vote”.

He predicted, in 1988, that centrally planned economies like those in Eastern Europe would fail. They were only possible when the means of production were huge industrial enterprises. They are impossible to operate in an era when information technology allows small units and even individuals to exercise power. This new information power, said Mr. Smith, must be cultivated.

ITAC finds Stuart’s view to be refreshing, and very organic. We would extend it even further. The new “public knowledge thoroughfares” are, by and large, not being built directly by government. They are being built by many different companies and organizations. Private data networks, for example, are springing up to serve universities, factories, companies and housing cooperatives. This new infratechnology has an living, mushrooming complexity. It has many different creative minds striving for optimum solutions to a diverse range of problems. Most of today’s best infrastructure networks are made up of these organic, patchwork structures. Internet, for example, is the world’s biggest computer network. The original heart of Internet was paid for by government — and that is a perfectly fitting role for governments to play. Around this seed, a network of some 900,000 host computers has mushroomed.

The lack of centralized management is so complete that nobody really knows how many host computers there are in the Internet!

Another organic example is United Parcel Service in the U.S. UPSNET is a patchwork system linking distribution warehouses in almost 50 countries. When complete, however, UPSNET will be America’s first national mobile data network.

An even looser arrangement is USENET. USENET is an international network linking millions of people without any central guidance at all!

The central lesson about these networks is that they grow from the bottom up. They are grass-roots answers to immediate consumer problems — and that is their strength. Cantel itself started because of a “grassroots” conversation I had with a the owner of a small Vancouver paging company.

Before my talk with King Margolese, my only exposure to the telephone was as a user. I confess that I couldn’t even use most of the features on my office phone!

But King Margolese had an idea. He thought that a cable company could use its cables to back-haul signals from the cell sites to the switch. He wanted to bid for the new cellular license for Vancouver. I thought that it could be applied nationally, and called Ted Rogers. The rest, as they say, is history. Government, in its role as adjudicator, awarded us a contract for the National Cellular Radio Licenses. Cantel is now Canada’s only nationally licensed cellular service provider.

These are examples of successes. If you’re looking for ways to “Grow the Infratechnology”, I say that we base our policies on what works. The main policy-setting lessons here, it seems to me, are clear. Government’s role is two-fold. It can seed projects, like Internet. And it can act as the rule-setter, ensuring that we don’t have total chaos. In a sense, government should set the environment, and then let the flowers grow. Any attempt to do something more formal, or rigid, would run against the organic nature of this mushrooming growth called infratechnology.

This complements ITAC’s notion that our whole economy has changed, fundamentally. We are moving to a “post-mechanistic” world. ITAC asked Canadian economist Nuala Beck to help us define and describe today’s economic growth. She confirmed that we are in a rapid transition to an information economy. Our current “structure-oriented” measures of economic growth –housing starts, auto sales and so on – no longer reflect the true picture of our economic strength. Information technology, for example, contributes more to Canada’s GDP than pulp and paper and transportation combined. More Canadians work in infotech than in banking, mining, forestry or auto assembly.

Infotech accounts for more than one-third of Canada’s industrial R&D. In the U.S., more Americans make computers than make cars.

In fact, Nuala said, we are dealing with two economies. The older, mass-manufacturing structural economy ended in about 1981. The new “information economy” has an entirely different set of leading sectors. The infotech economy has four “engines of growth”: computer production; instrumentation sales; communications; and health care. They in turn are all based on ways to gather, store and analyze information. Information is the new currency of the new economy. And more than 97 per cent of all of the jobs being created in Canada today, are being created in this new information economy. So it has immense practical importance for working Canadians. In fact, when we talk about “Growing the Infratechnology”, we are talking about the number one national priority. And we’re not just doing this because the Canadian economy has changed. The entire world economy is driving into the information age.

Consider the evidence:

• world trade is growing two- to five-times faster in knowledge intensive goods and services than in resource intensive goods and services.

• the fastest-growing area of all is infotechnology. Twenty years ago, there were 50,000 computers installed world-wide. Now, we install 50,000 computers every day! In the U.S. alone, 50 million are in use. And the flow of information is now a flood.

• in the same 20-year period, the volume of phone traffic in North America has increased 30 times. Infotech is now a trillion dollar industry, and it will double again within ten years.

• this isn’t just something that is “nice to do”. This is an imperative if we are to grow. Some experts say that in the next ten to fifteen years, all employment growth will occur in knowledge economy areas.

• this matters to Canada, because there is no place to hide. Trade barriers are falling all over the world. the evidence so far indicates that Canada is not responding to this challenge very well Last year the World Competitiveness Report dropped us to 11th place, from 5th in 1990. The recent report by the Prosperity Steering Group says we are not investing enough in innovative processes and human resources.

Certainly, our outlays for research and development are inadequate — only 1.32 per cent of GDP, well behind the U.S., Japan and Germany.

Faced with these universal new trends, ITAC came up with a total economic vision for a new Canada. We wanted to alert Canadians to the depth of the change around them. We came together as an industry, to make our “Prosperity Initiative” recommendations. We call for nothing less than a “New National Dream”. We need a total new vision, because we are struggling to survive in a brand-new global economic climate.

We want a strategy that creates growth opportunities for Canadians. We believe that the key is the creation of a knowledge-based Canada. We want a country founded on the creation and movement of information and human knowledge. We want “megaprojects for the mind”. Our Prosperity Report says: ‘The investments once made in capital projects must now be turned towards human capital, in the form of lifelong learning. We must make every industry a knowledge-based industry.”

I will not attempt to detail all our recommendations. But it is important to know that we have a comprehensive framework for action. There are five basic Goals we have set out action agendas to achieve:

• We need to start by transforming the workplace. We can no longer think of employees as production workers or units of labour in the traditional sense. Businesses must empower their employees. Governments’ role here is as environment-setter: create a sound education and training system that ensures that students at all levels are receiving relevant skills. There is a complementary role for industry. Our industry-education linkage has to give students the strategic skills necessary for competing in the global economy.

We have to work with schools and provincial governments to encourage enrolment in science and engineering programs.

Our second major Goal is to create a commitment to innovation in Research and Development. We need an R&D infrastructure. Within ten years, Canada must be the leading country for the performance of R&D in all sectors, but particularly in software. In the goods-producing IT sectors, R&D intensity currently runs at more than ten times the industry average. Software development alone makes up one-quarter of all Canadian industrial R&D. We have to encourage the expansion of strong points like software development. Government should also enhance current levels of research funding, and compare personal tax burdens to with those of our competitors to see if Canada is an attractive place for knowledge work.

Our third major Goal concentrates on translating this new innovative talent into concrete commercial products. Aimed at the venture capital sector, we say that within five years, Canada must have a critical mass of investors knowledgeable in information technology, and it must have an adequate pool of capital available for technology investments.

We are facing an uphill battle. The amount of private sector investment in Canadian technology firms has declined between 1986 and 1990. These firms are investing only $50-million per year in Canadian technology companies, compared with the $2-billion or so a year being invested by their U.S. counterparts. ITAC proposes ways to improve the financial climate for higher-risk ventures. And we outline ways to make the Scientific Research and Experimental Development Investment Tax Credit more effective.

Our fourth Goal concerns a competitive domestic environment in which these newly-born and well-capitalized companies will grow. We want a hot-house for development. We say that within five years, Canada must have a national policy and business environment that encourages open competition, and is free of trade barriers. There are obvious roles for the provincial governments to play in clearing the decks for a united Canadian economy. The government can also help by giving Canadian institutions a realistic picture of how the economy is behaving. Right now we’re relying on economic indicators that are measuring the buggy-whip industry! We need Government to adopt a new set of economic indicators that reveal the importance on knowledge and information. The old division of economic activity into goods and services obscures the world that has emerged.

Our final Goal concerns our migration to the international stage, through a global outlook.

We say that within ten years, all Canadian businesses producing goods and services that can be traded must compete and win globally, free of protectionist barriers. They must take advantage of the relative ease of exporting knowledge instead of goods, and sharing a commitment to continuous quality improvement. Governments should eliminate all barriers to trade. The only protection for Canada is a competitive economy.

Through these five Goals we want to create our Knowledge-Based Canada: The New National Dream. We know that it is an ambitious proposal.

But this kind of comprehensive framework is absolutely necessary if we are grow our infratechnology.

Let me isolate some of the specific growth steps we would like to see taken.

As I’ve indicated, I think we have to bear some basic roles in mind. Government should establish the “growing conditions” for our infratechnology, by setting rules and seeding selected projects. Industry should continue to be free to expand wherever grass-roots opportunities call out. And our educational system and other stakeholders should be encouraged and stimulated to participate in the new information economy.

We recognize, for example, that for our industry to stand up to the best in the world, we need a competitive environment here at home. In terms of infratechnology, we have to make the telecom regulatory framework uniform across the provinces. We need a consistent set of standards and regulations. These regulations have to encourage full and open competition in telecom services. Further, the recently tabled Telecommunications Act should be amended to establish a presumption that the CRTC will not regulate rates in the competitive sectors of the telecom market.

Government also has tremendous “inherent capacity” to create a growth climate, by setting the example for infotech acquisition. Its own procurement policies are a good place to start. A procurement policy that includes more “solution buying” could strengthen the infotech industry in Canada. It could also foster the use of infotech by helping to publicize infotech’s benefits as a strategic lever to improve competitiveness.

There are steps we can take to focus our efforts. In A Knowledge-Based Canada, we ask that government, industry and the academic community get together. We advocate that Canada undertake an infratechnology challenge: find and achieve one or more major, national projects of sufficient magnitude to stretch Canada’s infotech capabilities. Our objective: end up with a pool of talented companies and highly-trained individuals.

Here government can play a special role through its capacity to “seed” projects ~ projects that will spur other users. The federal government’s CANARIE project could be the modern-day answer to ITAC’s call for a “New National Dream”. I’m sure you’ve heard by now that CANARIE stands for Canadian Network for the Advancement of Research, Industry and Education. It has a number of laudable aims:

• develop and diffuse key technologies through collaborative R&D;

• encourage national science databases; and

• promote infotech products and services.

CANARIE calls for the establishment of gigabit-speed test networks in the next year. It could be impressive. We’ll see what the final budget numbers come in at.

The Ontario Government is also in the process of addressing infratechnologies. It recently heard from a task force of business, labour and other groups. It was chaired by Don Tapscott, of DMR Group, and its mandate was to devise a communications strategy for Ontario. Its report, “Telecommunications: Enabling Ontario’s Future”, wants to make the province a leader in the information economy.

The task force wants to do this by having Ontario organize a “network of networks”, linking communities, schools, businesses and other groups across the province. The Ontario Research and Education Network, for example, would be pushed ahead to link Ottawa, Toronto and Waterloo in a high-speed network. Databases would be coordinated and promoted. Ontario Online is a huge proposal, which would deliver information on government programs and services.

Equally important, the software industry would receive a boost from the creation of a software knowledge repository. Finally, a permanent Council for an Ontario Information Infrastructure would be set up. I’ll forgive them their use of the word “infrastructure”, because their hearts are in the right place!

This is the right mind-set. And I’m sure it also exists in the federal departments responsible for information policy. The CANARIE project, combined with the Ontario plan, could really give us a hot-house for infratech growth.

I would also like to extend some kudos for the SPIRIT proposal. This is a plan to jump-start the “electronic information industry”. SPIRIT stands for “Support and Promotion for Information Retrieval through Information Technology”. It is a joint industry-government initiative, combining the best elements of environment-setting and direct seeding.

SPIRIT seeks to promote the awareness of Canadian electronic databases and the value of successful applications by business. The Canadian electronic information industry is clearly underdeveloped in comparison with that of other industrialized nations.

SPIRIT is a new approach to solving this problem. For the first time, the industry players are pulling together to enter into an action partnership with government.

Based on an ITAC survey released last spring, the Canadian information industry was found to comprise 89 organizations, involved in the creation, organization, processing, or distributing of information using electronic means. They generated total 1991 revenues of some $250-million. This represents only 2.5 per cent of the $10-billion of revenue generated in the U.S. If the normal ‘ten per cent rule’ is used to adjust for the relative sizes of our populations, then our industry is less than half the size that it needs to be to provide strategic support to the rest of the Canadian economy.

In a global economy, Canadian business is lagging in the rise of electronic information services.

This is a serious problem. The information industry gains its strategic importance from the fact that electronic information is the largest single source of business information in North America. Both the volume and speed of information exchange compel industries to track information electronically as an effective and important way to stay competitive. This is recognized in other countries: Japan, Britain and the European Community have undertaken multi-million dollar long-term initiatives to stimulate the market for electronic information services.

The SPIRIT initiative would parallel those efforts. It would increase awareness of the benefits of electronic information on the part of end-users, and expand the market on behalf of the information organizations.

It would also have a huge indirect impact in boosting the decision-making skills and competitiveness of the Canadian information user community.

I have outlined the general climate we need for infrastructure growth, and some of the direct actions the industry feels are necessary. Let me conclude by looking ahead a bit — to speculate on the kind of future this growing infratechnology could give us.

I’m going to recognize right away that the most significant changes are probably hidden from our view. That’s the nature of invention ~ it is also an organic, “non-linear” process. The history of invention is a story of unexpected endings. Radio broadcasting was first thought of as a means of communicating with ships at sea. Individuals who wanted to talk to each other on land, it was argued, could use the telephone.

It was several years before radio took on its present ****** role: that of broadcasting information to thousands of people at once.

In future, we will see two main trends changing our communications infratechnology. The first is ever-increasing individual control over information. As organization extends to the broadcasting industry, for example, television and radio will also become amenable ******** “tailoring”. They will reflect individual tastes, consumers will have more control over all their immediate choices, through smart terminals.

The second major trend is the increase in mobility: and ****** personal freedom. We are evolving to a situation where a person is reachable anywhere in the world by phone number, not by geographic location. Some people wonder whether this constant contact is a good thing. We have no such concerns.

Remember that back in 1927 sociologists were fretting that telephone calls were ending personal isolation. At that time, calls were flooding in at an average of 1.5 per day! The real issue is not constant contact, but control over the contact. And the new smart technologies give you more information control, as well as more freedom.

Consider one example – the freedom to telecommute. With a growing infratechnology, more people will have access to this option. The benefits to the worker are obvious: less time on the road, more at work. The benefits to our businesses are also real. An A.D. Little study estimates that the U.S. economy could save close to $23-billion by substituting telecommuting for certain transportation activities. Other studies have shown that the turnover rate of telecommuters is lower than that of office workers, resulting in lower training costs. Further studies point to higher productivity and quality of telecommuters over office workers.

This could be an increasingly popular option for both employers and employees.

So there are big changes possible over the next decade, in our work, our living conditions, and our life-styles. Everything, including the expanding of our economic options through prosperity, depends on a vibrant infratechnology. Let’s do everything possible to help it grow.

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INTERCOMM 93

Vancouver, British Columbia. February 25, 1993

As I was flying in for this delightful conference, I was struck by two thoughts.

One was how close the water seemed to be just before you land at the airport.

The second was that a port city such as Vancouver operates very much like an association.

Vancouver’s harbour is two things: it is Canada’s conduit to the outside world, sending our exports across the globe. It is also a door to our interior, bringing the world’s goods into our homes.

Associations also face both ways. In the association world, we are living in constant tension between two roles. We have an inward-facing role, dealing with the business challenges our members are facing and providing support services. We also have an outward-facing role, linking our members to the larger community, and providing awareness, understanding and promotion to these external audiences.

As the Chairman-Elect of the Information Technology Association of Canada – ITAC – I have become aware of a rapidly mounting urgency in these two missions. Now, more than ever, associations are playing a critical role in the development of a nation’s information technology capability – and with it, national prosperity.

I intend today to highlight some of IT AG’s responses to these challenges. But first, I’d like to put the challenges of associations, and the urgency of their mission, into context. I’d like to talk about a changing world, and the new empires that we are building.

Last year, a pivotal event took place in the world’s economy. It passed almost unnoticed in the media, but it should be framed and put above the desk of every economic pundit. Last year, for the first time, information technology became the world’s largest industry! It overtook automaking to grab the title. And if present trends continue, it won’t give up the championship title in our lifetime, or in the lifetime of our children. Let’s take a look at this mega-trend: the long-term acceleration in the importance of our industry. Imagine that the length of this room represents the time from the beginning of the planet to the present day. The width of your chair would then represent the time since humans first made fire; the width of your pen the time since papyrus was invented. The thinness of the material of your suit would measure the time since Gutenberg invented the printing press, and the thinness of a strand of computer tape would account for the years since Babbage invented the first computer, or Bell invented the phone.

Like a spool of computer tape, the world in that thin stretch of recent time is spinning faster than it ever has before. Ninety per cent of all the scientists who have ever lived are alive today. Scientific knowledge is now doubling every five years. The compression of time; the urgency that this snowballing knowledge has generated will only increase. More and more people are being brought into the global network every day, and the number of human brains working together is expanding almost exponentially. This year, for example, there are some 80 million personal computers installed world-wide, with ten times as many telephones connecting every corner of the Earth.

A few weeks ago, a book was launched in Montreal that gave an apt label to this new “industry of knowledge”. It was titled: “Invisible Empires – the history of telecommunications in Canada”. Invisible Empires! Its a lovely image. It fits with Winston Churchill’s observation that “The new empires are empires of the mind”.

We are in the invisible empire business; the empires of the mind. As such, infotech industry associations have a very difficult “external” job to do. “Invisible empires” is a hard concept to explain to policy-makers and the business communities.

But I think the evidence is overwhelming that infotech, despite being invisible, is transforming the entire world of international business. President Clinton’s new Secretary of Labour is Robert Reich. In Reich’s view, every advanced nation is now involved in a race to increase the value of what their citizens can contribute to the “webs of enterprise”*. By “webs of enterprise”, Reich is talking about trade or joint ventures within multinational corporations.

The relevance of his message to our invisible empire is this: Reich is saying that something new is happening in international business. Corporations in these webs of enterprise are shopping the world, with R&D facilities in one place, and production in another. They are able to do so because information technology has given them the power to outsource and coordinate these activities on a global scale. Information technology is the “web” in Reich’s “webs of enterprise”.

And to seal the importance of infotech, remember that the recent Presidential election was the first time in anyone’s memory when telecommunications became a campaign issue – with Vice President Gore’s proposal for a national fibre-optic network!

Around the world, information technology is becoming the single most important tool of business, and the prime creator of the new global economy. ITAC’s outward-looking face is devoted to two tasks; connecting Canadian industry to other international organizations, and explaining the industry’s importance to Canadian influencers.

Our international effort is done in several ways. ITAC works through voluntary committees that connect with international groups. Our Standards efforts, for example, are dedicated to ensuring that Canadian firms are offering products that meet universally-accepted criteria. We work closely with the Canadian Standards Association, and we’ve delighted with its recent accreditation in America. Together with the existing Standards linkages in Europe and Asia, we are easing the path for the entry of Canadian companies into the global certification net.

We also have special Task Forces that address immediate international trade issues such as NAFTA. ITAC has been a strong supporter of the North American Free Trade Agreement, and our Task Force was heavily consulted in the weeks leading up to the Agreement.

ITAC provides a full “export emphasis” in its programs. We have a Director of International Activities, who travels the world strengthening our linkages and arranging trade missions and conferences. We have a major conference coming up in the Fall, for example, here in Vancouver. Softworld 93 is THE showcase for Canadian software expertise. This is very important to Canada: more than 60 per cent of our software revenues come from export sales. Softworld 91 in Vancouver was our “trial balloon”, and it floated pretty high. We had more than 300 companies participating. Representatives from ten key Asian Rim countries attended. They were there to see, and buy, Canadian expertise and products. They were high-level players, and this kind of clout is something that an industry association can obtain for its members ITAC gets high-level Canadian government players involved, and they invite their high-level international counterparts, and these senior people can make the buying decisions.

In Softworld 91, for example, more than two out of three attendees were CEO’s, Presidents or Vice Presidents. And they made buying decisions: an incredible 42 per cent of respondents at Softworld 91 completed one or more business deals!

Softworld 93 will take place from September 12-15. I urge you to see for yourselves what opportunities can unfold for you. Go as participants or as visitors. I’m sure you’ll be impressed.

Our other “outward” face looks at promoting the industry to Canadian policy-making and business influencers – promoting in the sense of building understanding and awareness. Collectively, ITAC’s Vision Statement is “Helping Canadians Build a Better Future Through Information Technology”. This is a very outward-looking Vision – a Vision calling for active missionary work on behalf of information technology.

We try to accomplish this:

• through policy advocacy

• through lobbying

• and through communications and networking.

All of these activities have a single thread – a single message – running through them.

The Canadian Government recently undertook a major search for the key to prosperity in the Twenty-First Century. Our response to the Government’s Prosperity Initiative took the form of a report called & Knowledge-Based Canada – The New National Dream, A Knowledge-Based Canada rides on the high ground of a total economic vision for a new Canada. We start with the view that our world at a “hinge of history”. We agree with Reich that we are at one of those moments when the very drivers of economic prosperity are changing.

For ITAC, this knowledge-based Canada must embody two essential elements. It must rest on a foundation of skilled people, who consistently create new knowledge and are capable of quickly absorbing new technologies. Equally, it must contain an advanced infotech infrastructure, so that knowledge can be disseminated rapidly and collaboration can be ensured.

Based on this ambition, our report presents compelling arguments that Canada’s national imperative in the next decade is to build “mega projects for the mind”. We want the investments that were once made in capital projects to be turned towards human capital, in the form of lifelong learning. We must make every industry a knowledge-based industry.

To bring this Vision within our grasp, we crafted a set of Goals. We attached Strategies to each Goal, and we further proposed a series of Actions to realize the Strategies.

This has been one thorough exercise. But a launching-pad for a new National Vision must be a substantial edifice.

There are five Goals, and I will review them with you. There are twenty Strategies. There are no fewer than 73 Actions. Needles to say, I’m not going to review them al! here! But I will set out the Goals, to give you some taste of our report.

The first Goal calls for a transformation of the workplace. We think that Canada has to.become the most attractive environment for global investment in knowledge-based work. Behind this Goal is the Idea that the assembly-line worker is becoming a relic of a bygone age. In an information economy we must engage the minds of our staff; tap and engage their enthusiasm. We must train it to think, to use information, to value change, and to prepare – as Marshall McLuhan said – to LEARN a living.

Our second major Goal is to create a commitment to innovation in Research and Development. We want Canada to be the leading country for the performance of IT-based industrial R&D in the world, with particular emphasis on software development.

Third, we want to translate this new innovative talent into concrete commercial products, through effective financing. Aimed at the venture capital sector, we say that Canada must have a critical mass of investors knowledgeable In information technology, and it must have an adequate pool of capital available for technology investments.

Next is a competitive domestic environment in which these newly-born and well-capitalized companies will grow. We want a hot-house for development. We say that Canada must have a national policy and business environment that encourages open competition and the application of information technology to all sectors.

Our final Goal concerns our migration to the international stage, through a global outlook. All Canadian businesses producing goods and services that can be traded must compete and win globally, free of protectionist barriers. They must take advantage of the relative ease of exporting knowledge instead of goods, and sharing a commitment to continuous quality improvement.

Those are the five Goals which we think are required for the establishment of our Knowledge-Based Canada: The New National Dream. We think there can be immense rewards from following this knowledge-based path.

Of course, with this message, we are crossing the line from “external-missionary work to “internal” industry needs and concerns. This is the other face of association work.

The most important association prerequisite for success in “internal” industry-support work is to ensure that the industry is fully represented. This ITAC does. Our members account for some 70 per cent of the industry’s revenues of $41-billion, and the lion’s share of its employment of 300,000 people.

Through self-help seminars, committees and networking, ITAC strives to support its member’s industry objectives.

We create marketing tools, like our “Things Change, Economies Evolve” booklet. This booklet highlights Case Studies of successful infotech applications, and is in great demand as an easy way to visualize the benefits of infotech. We also create analytical reports like “The Enabling Effect”, that clarify how infotech actually works to boost company performance.

Of course, we respond through our Committees to specific regulatory issues, with papers setting out the industry’s position on telecom policy, tax incentives, outsourcing, R&D, and labour relations legislation. Regional forums provide serf-help seminars on topics like marketing, finance and export development.

We serve as the network node for the industry, with high-level Conferences. And we try to be the “information source” representing our members, through media conferences, internal communications and special supplements.

Finally, we offer industry-wide programs designed to galvanize our whole sector as a “super change agent” for issues close to the industry. “Making A Difference”, for example, is a program we are in the process of launching. It will hopefully inspire some ten per cent of our employees to volunteer to become active in Canada’s educational system. We are asking people to get involved on school boards, in the classroom as teaching assistants, in the community as links to corporate resources, and in the home as informed and supportive parents. On this initiate lies our future as a industry of knowledge-workers. Again, it crosses the line between altruism and self-preservation. But perhaps this line is largely artificial, in any case.

Every port – every harbour like Vancouver – faces both outward and inward. Associations like ITAC try to prepare the nation for an information world, and try to prepare their own members to thrive in that world. We export and we import, simultaneously.

It could easily be argued that this is one of the most important jobs facing our nations. Infotech industry associations are the appointed representatives of the “invisible empire” – the greatest change-maker in technological history. We are the interpreters of a world where prosperity comes from “empires of the mind”. It is our job to master duality: to handle the roles of being both prophet and servant, and to advance a world revolution through domestic excellence.

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BITS, BYTES AND BOLD STRATEGIES

MISSISSAUGA BOARD OF TRADE. MARCH 8, 1993

Last week my attention was caught by two fascinating little items in the newspaper.

One was a news “factoid” saying that Toronto now has more mobile telephones per person than any other city in the world!

On behalf of Rogers Cantel: “Thank you very much, Toronto!”

The other item was a cartoon! Two people were sitting in a modern, well-equipped office. One says: “Okay. desks, chairs, computers, phones, fax machines. Now, what can we do with all this stuff to make money?”

It seems to me that many of today’s business people are caught up in this confusion. On the one hand, we Canadians are among the world leaders in making, and using, information technology such as computers and telecommunications. On the other, there is an ambivalence about how to use it for maximum effectiveness. I think the topic of your meeting today is most appropriate: “Bits, Bytes and Bold Strategies — how to cope with changing technologies and use them to help your business.

I’m going to cut this subject up into three courses, to make it digestible:

• First, I’m going to talk about the new technologies themselves, and where they’re going.

• Next, we’ll look at the changes they are causing in our business world.

• Finally, we’ll talk about how to benefit from the new technologies.

Let’s start with the new technologies, and where they’re going.

It’s one of the world’s best-kept secrets, but Canadians are leaders in pushing information technology forward.

And today technological change is happening faster than it has at any other time in history. It has two main drivers:

• the vast increase in the power of computers; and

• the equally vast increase in communications, making information accessible.

Power and access:

The power of computers is increasing exponentially.

If you buy a new car this year, you’ll find more computer power under its hood than Neil Armstrong had in his Lunar Lander! Computer power is surging because we can cram more and more circuitry into smaller and smaller spaces. The volume of a computer “switch” has dropped from the size of a fist in 1940 to that of a finger in 1950, a pencil eraser in 1960, a salt grain in 1970 and a small bacterium in 1980. Where is this going? The visionaries of nanotechnology foresee atom-sized switches that could put the equivalent of human-like brainpower onto a thumbnail-sized chip within three decades.

No one knows if that is possible, but it is true that the number of components on a computer chip is doubling each year. There is no sign that this curve is leveling off. We will likely have billion-bit chips by the year 2000. You show a quantum physics problem to a supercomputer like Dan Hillis latest parallel processor and it practically yawns! It handles the trillions of operations in a heart-beat; it would have taken a century for a mainframe to do that, only ten years ago. Canadians are in the forefront of this research. The world’s largest integrated circuit, for example, is built by DALSA Incorporated, in Waterloo!

From a user’s viewpoint, this drop in the cost of computing power is great news. By way of comparison, if the cost of automobiles had dropped as fast as the cost of calculation, it would be cheaper for us to abandon a Rolls Royce at the parking meter than to feed the meter!

You will be able to do things that seem magical today. By the year 2010 you may have a pocket computer with enough power to carry within it an 8,000-volume neighbourhood library. You may be working on “dynapaper” – an electronic notepad that eliminates the need for paper. It records and networks everything you write or dictate.

A personal “memex” device could provide the storage capacity to build an individual’s “life file” of all the books, articles, letters, songs, pictures, movies and other images that have significance for your career or life.

If this seems fantastic, remember the changes that have already occurred. Computers are penetrating society at an accelerating rate. Twenty years ago, there were only 50,000 computers installed world-wide. Now, 50,000 computers are sold every day. In fact, fully ninety per cent of all today’s computer users had not touched one in 1980! And the number of things that are not being affected by computers is shrinking every day. I defy you to tell me how many computers you own. You may not think you have any – but they are so small and cheap that they are being embedded everywhere! They are in your VCR, your watch, your kitchen blender.

In Canada alone, the number of micro-computers units being shipped to meet this demand has sky-rocketed: from just over one million units ten years ago to 7.5 million units in 1991!

These secondary and unexpected uses of computers are outweighing their original purpose. If I asked you, for example, to name North America’s largest domestic computer presence, which company would you name? IBM? Digital Equipment? None of the above! America’s largest computer presence is Nintendo!

That’s how much computer power and penetration has grown; what about communications – the accessibility of information?

By a strange coincidence, there has been a parallel technical revolution in the communications network. It is based on the same kind of digital breakthroughs that drove down the price of computers.

The cost of “communicating” has plummeted. To go back to the automobile analogy, if the cost of fuel had dropped at the same rate as the cost of communications, you would be able to buy gas today for two cents a litre! And the fuel would have improved so much in quality that you would be traveling faster than the speed of sound!

A world of information is as close as your portable telephone. Again, Canadians are taking a lead. The Canadian cellular industry has experienced one of the fastest adoption rates in the world – faster even than in the United States. From a “zero” start just seven years ago, Cantel alone now has almost half-a-million customers. Overall, Canada’s mobile customer base is expected to grow to three million users by the year 2000.

Looking ahead, mobile “telepoint” phones will soon be available that will carry digital sound and computer information in a package no bigger than Captain Kirk’s communicator on Star Trek. By the year 2000 wristwatch phones could be common, fed by powerful satellites. These direct broadcasting satellites will make the world of digital video information available to anyone with a napkin-sized receiver sitting on their window sill. And fibre optic technology has become so good that something we call “world on a thread” is theoretically possible. In theory, half of the total population of the earth can talk to the other half over a single fibre optic line!

What changes are these technologies are causing in our business world?

This combination of computer power and information accessibility are creating a totally new business environment.

Here are some of the more dramatic changes:

• a shift to knowledge-based competition – the raw material of a new age, knowledge is becoming the most sought-after competitive ingredient. World trade is growing two- to five-times faster in knowledge intensive goods and services (such as engineering or robotic devices) than in resource intensive goods and services (such as logging or pulp and paper). This trend will only accelerate. Today, scientific knowledge is doubling every five years. Let’s make that visual. We know in principle that we can make an optical memory device out of polymer that could store all human knowledge in a one centimetre cube. The contents of all the major libraries in the world, in the space of a sugar cube. By the time your children retire in year 2050, everything humankind has learned up to 1993 will amount to only one per cent of the knowledge available to them.

In the working careers of our children, humankind’s knowledge will grow in volume from a sugar-cube to an encyclopedia.

• smaller hierarchies – industry guru George Gilder identifies a process he calls “the Law of the Microcosm”, which is responsible for pushing more and more power onto the desks of individual workers. The microcosm is the computer chip, and every year, as we have seen, the effective processing power on a computer chip doubles. This “cheapening” of knowledge power is shrinking the “grain size” of decision-making and knowledge processing. According to The Economist magazine, for the past thirty years there has been a decline in the average employee size of North American firms. This reflects the erosion in the relative effectiveness of large hierarchies.

• a surge in networking – the flow of information is now a flood. In the past 20 years, the volume of phone traffic in North America has increased 30 times.

• a huge growth in infotech – the fastest-growing area of all is information technology. Infotech is now a trillion dollar industry, and it will double again within ten years. Last year, in fact, it overtook automotive to become the world’s largest industry.

• a shift in employee capabilities – companies now depend on employees with knowledge skills: professionals, technical people and senior management. In a survey of some of the largest American companies, it was found that the higher they rated in human resource development, the better their long-term performance. This isn’t just something that is “nice to do”. This is an imperative if we are to grow.

Books like Richard Crawford’s “In The Era of Human Capital” say that in the next ten to fifteen years, virtually all employment growth will occur in “knowledge economy” areas. The knowledge economy comprises those organizations with high ratios of skilled and educated workers (professionals, technical workers, and senior managers).

• the “no country is an island” syndrome – Infotech’s networks are dissolving borders and creating a global knowledge-based marketplace, where international corporations operate through knowledge networks. Companies are able to leap borders because of the power information technology gives them to coordinate production in distant locations. This “enabling effect” of infotech makes a statistic such as “product origins” extremely hard to define. Texas Instruments, for example, is the most competitive producer of memory chips in Japan.

More than half of its annual Japanese production goes back to the U.S. The trade figures, however, do not show the Texas Instruments shipments from Japan as boosting the overall trade balance of the American economy. Instead, they show up as a U.S. “import”! The President’s Secretary of Labour, Robert Reich, calls this trend the “web of enterprise”. Reich confirms that imports are no longer finished products like cars. Most imports today are parts of a finished product. Information technology is allowing corporations to shop the globe; in doing so, they are re-engineering the entire world of trade!

These are the effects that the new information technologies are having on our businesses.

How can you benefit from these trends and these new technologies?

The Information Technology Association of Canada (ITAC) has undertaken a series of reports and original studies that could help you make actionable decisions. ITAC recently asked Canadian economist Nuala Beck to give us an overview of the growth areas in the new “information” economy.

She confirmed that the world, and North America in particular, is in a rapid transition to this information economy. Our current measures of economic growth – housing starts, auto sales and so on – no longer reflect the true picture of our economic strength. Information technology, for example, contributes more to Canada’s GDP than pulp and paper and transportation combined. More Canadians work in infotech than in banking, mining, forestry or auto assembly. Infotech accounts for more than one-third of Canada’s industrial R&D. In the U.S., more Americans make computers than make cars.

In fact, Nuala said, we are dealing with two economies. The older, mass-manufacturing economy ended about a decade ago. The new “information economy” has an entirely different set of leading industries. The infotech economy has four “engines of growth”, all based on cheap computers, semi-conductor, and communication – providing ways to gather, store and analyze information. And in this new economy you can hardly tell where a “good” ends and where the “service” begins.

One growth engine is the health and medical sector – and not just the “care” side. It includes all the goods: the pharmaceuticals, the diagnostics, the instrumentation, and the supplies that are driving this sector.

Another engine is instrumentation. Most Canadians don’t even realize that we have an instrumentation industry in this country, let alone the fact that it already employs more Canadians than the entire brewing, distilling wine and soft drink industries combined.

The other two engines are computers and telecommunications, and all the goods and services that feed into it.

Three-quarters of Business Week’s 100 fastest-growing companies for 1991 fall within these industry groups!

Canadian business people should therefore try to position their companies to take advantage of these engines. There are three options for growth:

• become one of the four “engines of growth”;

• become a supplier to one of the “engines”; or

• use the power of the engines to revitalize an industry. This is important for all companies, including those that are not high-tech. Many traditional sectors are being galvanized by new techniques. The technology-driven concept of just-in-time manufacturing, for example, has driven up sales of pallets and skids.

ITAC is making help available for everyone wanting to explore the routes to change. ITAC has produced a new study called “Things Change, Economies Evolve” that highlights the experiences of 15 organizations that invested in infotech.

“Things Change. Economies Evolve” helps people see how infotech impacts on the success of an organization’s goals. All the organizations involved in the study used infotech to control costs and improve the quality of products and services.

Beyond that, however, infotech gave them new power — power to create new products, enhance management and create new conceptual or operational models for their industries. Several important lessons emerged:

• infotech by itself is not the salvation of an organization. Its impact depends on its role as part of an overall re-thinking of current practices. When the Ottawa newspaper Le Droit automated its printing processes, for example, it also changed its work environment. It used its new flexibility to bring out two more editions of its paper, with more locally-relevant news in each edition.

• electronic communications is an important consideration. Information processing needs to be reshaped and accompanied by new ideas about the movement of information between people. The five Quebec hospitals involved in SIDOCI have created a fully- integrated health care system. It makes patient information available instantly – in an integrated and paperless way – to doctors, nurses and staff in the format that suits them best.

• even organizations not traditionally considered product-focused were able to turn new infotech applications into marketable products and services. The Royal Bank uses Electronic Data Interchange (external and internal data transfers) to offer revenue-generating, information-based products – including the sale of its expertise in EDI!

• better infotech-based external communications with suppliers and customers dramatically changed the nature of business relationships. Union Gas enhanced its customer service by equipping its service vehicles with computer terminals, which streamlined clerical tasks and increased system responsiveness.

• integrating infotech often leads to higher workplace skill requirements and richer working environments. General Motors provided its field reps with portable computers, allowing the reps to improve the quality of their interaction with dealers. The system improves market data, speeds the processing of orders, and allows the field rep to work interactively with the dealers.

These findings complement and enrich an ITAC study done in 1988, called The Enabling Effect. The “Enabling Effect” described the levels of benefits that happen when companies invest in information technology.

Finally, ITAC offers help on a different scale. ITAC has a Vision of a different Canada — a Vision designed to help all our business and social sectors. We put it forward in our response to the national Prosperity Agenda.

Our report to the Prosperity Steering Committee was called “A Knowledge-Based Canada: The New National Dream”.

We believe that the key to our national future is to create a climate of innovation – a culture and environment where change is valued and change is sought. We say that change in the new information-driven economy is only going to flow from the creation of a knowledge-based Canada.

We want a country founded on the creation and movement of information and human knowledge. For all our sectors, we want “megaprojects for the mind”. Our Prosperity Report says:

“The investments once made in capital projects must now be turned towards human capital, in the form of lifelong learning. We must make every industry a knowledge-based industry.”

That is the message I would like to leave you with today. Knowledge, and its growth and cultivation, will become the main event in business competition, as in social progress.

As business leaders, we have a responsibility to pass along this message to our business partners.

We have a good-news story to tell with it: that some of the best information companies in the world are located in Canada. We have world-beating technology, and we have software that is one of our most under-appreciated national treasures. It is our responsibility to get our institutions in line with these new times, so we can adequately develop and deploy these new ways of doing business. I’m not sure our governments of banks, for example, fully understand how to evaluate and finance these new knowledge-based companies.

And I am sure that most of our society does not understand what is happening in the information age. This is our second great responsibility: social leadership. We must give our people an understanding of what the information economy means. They are being paralysed by economic uncertainty and fear of job loss. I think that right now our population is being confused because they are watching the fringes of the problem of change. They don’t know the trends behind the job losses, the manufacturing shifts, the call for new qualifications, the decreasing profits and loss of trade. There is, in fact, a very simple message we can give them in this seemingly complex age.

The valuable commodities in the information age are knowledge and brain-skills. All of the competitiveness surveys now available confirm this: we must move away from being passive processors of raw materials to areas where knowledge adds value to work.

Capital for new investment will flow to those countries where the people are perceived to be capable of enhancing a product with their mental expertise.

This has important implications for business. Today, for example, our business capabilities are more closely woven into our social fabric than they have ever been!

Educational decline, for example, means business decline. We cannot lose sight of this interrelationship in the information age. Our age empowers individuals, and requires their mental commitment and enthusiasm. As business leaders we must improve our educational system because it would be entrepreneurial suicide not to!

In the information economy the linkage between consumer and business, private individual and corporate citizen, grows tighter all the time.

Our workers can’t just passively assemble widgets any more and then go home and forget about the job. We are entering an era which requires us to engage the minds of our staff; to tap and engage their enthusiasm.

Ultimately, we have to help each other, and our society, prepare for the information age. We as business visionaries have the task of being guides and change-masters. We alone are in the best position to appreciate the central change-making role of information technology. We have to keep step with the future to keep our faith with our past. It is my hope that, together, we can create the kind of “change awareness” and “information awareness” that Canada needs for this future success.

Back to Section E Index or just read on

Â

THE STRATEGIC RESOURCE

CONFERENCE BOARD OF CANADA. MAY 11, 1993

The title of my talk is “Information: An Ever-Changing Strategic Resource”.

In fact, when I was reviewing some examples of information technology in use, I found that the most interesting story was not the technology at all. The most interesting story was what the technology allowed the business to do — or rather, to become.

It is easy to say that information technology or “IT” is the most liberating force that has ever been handed to an organization. It allows businesses to re-define their missions, re-invent their products, slash their prices, and reach around the world. But it only allows people to do that. Actually grasping the power of IT and using it takes courage, imagination and discipline. And the stories I’m going to tell today show these human proactive qualities to be the key to dramatic change in performance through information technology.

To illustrate my remarks I will use a few examples from my own company, but I will also take advantage of my position as Chairman-Elect of the Information Technology Association of Canada (ITAC) to pull in relevant cases for you from other companies.

Before going into cases, though, let me set the stage. I made some pretty sweeping statements about the revolutionary potential of information technology. What measurable effect is it really having on us?

For starters, more than 90 per cent of new economic growth is coming from the information technology economy. Tremendous increases in computer power and communications capabilities are shifting the basis of global competition. We are seeing a dramatic shift to knowledge-based competition. Knowledge is the raw material of a new age. It is becoming the most sought-after ingredient for competitive success. There are signs of its surging importance everywhere:

• World trade is growing two- to five-times faster in knowledge intensive goods and services like engineering or robotic devices, than in resource intensive goods and services.

• This trend will only accelerate. Today, scientific knowledge is doubling every five years. Let’s make that visual. We know in principle that we can make an optical memory device out of polymer that could store all human knowledge in a one centimetre cube. The contents of all the major libraries in the world, in the space of a sugar cube. By the time your children retire in year 2050, everything humankind has learned up to 1993 will amount to only one per cent of the knowledge available to them. In the working careers of our children, humankind’s knowledge will grow in volume from a sugar-cube to an encyclopedia.

• Information technology is also causing a big change in our organizational structures. It is flattening these structures. Pre-IT companies were organized with one leader or strategic manager at the top, and a steadily widening base of order-takers. It’s a classic pyramid. In the information economy, the organization chart looks more like the serrated edge of a saw-blade. It has hundreds of decision-makers at the tips of hundreds of information-enabled opportunity centres. This kind of organization gives a company immensely more flexibility; immensely more speed.

• Another big change we are seeing is a surge in networking. The flow of ideas and information is now a flood. In the past 20 years, the volume of phone traffic in North America has increased 30 times.

• This is causing a huge growth in the IT industry itself. In fact, the fastest-growing business of all is information technology. Infotech is now a trillion dollar industry, and it will double again within ten years. Last year, it overtook automotive to become the world’s largest industry.

• Information technology is causing a shift in employee capabilities. Companies now depend on employees with knowledge skills: professionals, technical people and senior management. In a survey of some of the largest American companies, it was found that the higher they rated in human resource development, the better their long-term performance. This isn’t just something that is “nice to do”. This is an imperative if we are to grow. In Richard Crawford’s book “In The Era of Human Capital” it predicts that in the next ten to fifteen years, virtually all employment growth will occur in “knowledge economy” areas.

• Finally, “no country is an island”. IT’s networks are dissolving borders and creating a global knowledge-based marketplace, where international corporations operate through knowledge networks. Companies and capital are able to leap borders. This means that national governments are less able than in the past to shelter inefficient industries from international competition. As IT increasingly squeezes the world’s national economies into a single unit, national protectionism will increasingly fail. Yet, ironically, national governments now have tremendous leverage in their ability to create the preconditions for growth. They can set the stage for all the factors that make success possible in a knowledge economy: people, education, and innovation catalysts.

These are the general effects that the new information technologies are having on our businesses. What have Canadian companies done with these trends?

As I’ve indicated, this is a human story. It is a story about people grasping an incredible power and using it to invent new ways of doing things. This is a very difficult art. In fact, the political genius Machiavelli said that “nothing is more difficult to accomplish than to change the present order of things”. Here are some companies that re-engineered their businesses to make good use of the new power.

Most of these cases are contained in an ITAC study called “Things Change. Economies Evolve”.

Canada Post was faced with stiffer competition from IT-based electronic products offered by other carriers. President Don Landers turned to IT for a solution. His charge to the organization was to run the post office as a profitable business while increasing the added-value service for customers.

Canada Post’s solution was to develop a new system for registered mail. “Trace Mail” uses bar codes to track mail through the stages of the mail processing cycle. Canada Post can now monitor a single piece of mail at all points in the distribution, processing and delivery operations. “Trace Mail” technology made possible a spin-of service: Automated Voice Response. Customers can call an inquiry line and key in a few telephone numbers to find out where their packages are in the mail flow. Not only did Canada Post get a 50% reduction in handling costs, but the public has perceived the organization in a very favourable light, as a more response and caring company.

Don Landers told ITAC, though, that the greatest challenge was not implementing the hardware or software, but changing the attitudes of the employees. This was accomplished through education and training programs for their workers. The employees responded when they saw real-world benefits flowing to them. “Trace Mail” took the drudgery out of handling Registered Mail. It also gave management the tools to make better strategic judgements. A centralized data base is able to display routing patterns to managers, who can then make real-time adjustments to the system.

Gilbert Lacasse told ITAC how Le Droit faced bankruptcy in 1987 with a deficit of $1-million, despite significant staff reductions. The decision was made in 1989 to fully automate production. The editorial, advertising, design, layout, circulation, and accounting functions were integrated into one system. This system was designed and implemented in eight months. Staff numbers went from 250 to 125 employees. All remaining employees underwent training to make the new technology work.

The resulting empowerment of the work force increased momentum within the company. In a sense, it accelerated Le Droit’s “information metabolism”. It now offers additional versions of its paper, for example, that would not have been feasible before. Further, it redefined newspaper publishing, resulting in a new operating vision for the company. By taking the IT risk and making the changes, they dramatically cut costs, improved labour relations, led to new products, and improved management within the company.

In the health field, Pierre Laverdiere of SIDOCI described how information problems and increasing budgetary constraints caused five Quebec hospitals to band together to find a way to maintain quality patient care. The solution was a new paradigm for health care in Canada: a fully-integrated, paperless patient care system, available on-line at the patient’s bedside. In essence, it replaces the traditional patient chart and has resulted in increased accountability as well as improved resource allocation and information accuracy.

Again, though, the most significant impact of the technology has been an improvement and empowerment in the “people balance sheet”. Now all the health care professionals involved with a patient can have a focused and structured dialogue using a consistent, shared database. The main benefit is improved internal communications, especially between doctors and nurses. This has resulted in enrichment of the nursing job. It also leads to greater and more direct patient involvement in their own treatment by allowing nurses to spend more time at the bedside.

Financial services are undergoing change with IT. Craigg Ballance related how Canada’s largest financial institution, the Royal Bank of Canada, saw the potential in electronic data interchange to create revenue generating products. Another case of being driven primarily by competitive pressures, the bank is transforming the banking business from supplying financial transactions into supplying information based products. Using Electronic Data Interchange, the automated teller machines of the Royal Bank are able to communicate with other banks, including those in the U.S. & Europe.

EDI has enabled both internal and external communications to become more efficient and effective. Using the customer data as a management tool, the bank’s employees can see previously invisible inefficiencies. Client management can be much more pro-active. IT is helping people find new ways to serve other people. Craigg predicts that the “Bank of the Future” will be a “value-added” financial information service company. This is changing the very nature of the company’s business, opening up new fields of competitive opportunity.

In manufacturing, David Monteith of EDS Canada provided a classic case of how IT investment made for one purpose, can address unexpected changes in corporate priorities. EDS, with responsibility for information processing capabilities for General Motors Canada, developed sales and marketing lap-top computers. Loaded with dealer information like market outlooks and sales forecasts, the laptops enabled field representatives to work interactively with a network of 1000 car dealers. It was developed by EDS for the strategic purpose of getting direct orders inputs from dealers in an electronic format. The system is much faster, and errors have been dramatically reduced.

But it has been in a larger “people sense” that the main impacts have been felt. The system has allowed the field reps to come up with longer term plans that the dealers understand and support. At the customer end the system is faster in meeting consumer needs. It could even lead, in the long run, to “virtual dealerships”. The laptops could provide a direct conduit from the customer’s orders to the production lines. This would be business transformation with a vengeance! It would combine high levels of customer satisfaction with a unique competitive edge. There have already been immediate tactical advantages from the system, however. When the current recession hit the automotive industry, GM was able to respond with shorter term and more flexible market plans.

It was partly a search for flexibility that led Pratt & Whitney to create a “state-of-the-art manufacturing facility” in Halifax. This new computer-integrated manufacturing plant combines IT with socio-technology concepts. The facility combines an advanced technological environment with a radically different management philosophy and organizational culture. The system provides real-time feedback to the shop-floor staff, who operate in a Japanese-style team manner. Staff are multi-skilled, morale is high, and turnover is almost nil.

From the beginning, Pratt & Whitney recognized that the commitment to IT would lead to higher skill requirements. The company therefore developed special training programs in conjunction with local community colleges. The result is a flexible manufacturing system. It has quick turn around, and builds a wide range of products. The setup time for new parts declined from ten hours to two hours and parts that previously took 4-6 months to manufacture can now be produced in two weeks. Again, the key is the impact of the technology in empowering the people: a culture became collaborative.

Eugene Polistuk of IBM provided another example of automated manufacturing. In contrast to the Pratt & Whitney case, IT was applied to an existing IBM plant in Toronto. It was rescued from imminent closure by adopting a computer integrated manufacturing system. Communication technology was the key IT enabler. The shop floor systems were linked to an office automation system which, in turn, was connected to the IBM world-wide network. This resulted in a de-layering of management, empowerment of the work-force, substantially strengthened overall management. Another significant impact was a strengthening of supplier relations through the communications system. EDI allowed IBM to enter into closer partnerships with suppliers, and get ‘buy-in’ for the company’s philosophy of product quality.

The thread running through these stories is the message that when IT is applied to people in innovative ways, the result is a transformation of the business itself. And as new kinds of IT emerge, new opportunities and freedoms exist for this transformation process.

At Rogers Communications, of course, we are responsible for putting in place one of those lovely new IT services that really challenges companies to come up with people-empowering uses. Mobile phones have taken off in Canada. We have had a love affair with them. There has been a fantastic growth rate: more than a million units sold in only seven years. The forecasts are even more dazzling. We expect that three or even four million units will be sold by the year 2000 when one in five Canadians will have some form of wireless connection. Yet with this new technology, we are faced with a new dilemma: how do we use the new power to really transform our businesses? I don’t mean just using mobile phone to do the same old jobs faster, but really rethinking the new opportunities opened up by the technology.

Today, I suggest that we are still using mobile communications in very traditional ways. We are doing what we could do on an office phone, but simply doing it more often. This has obvious efficiency gains, but it is not a transforming activity — where the real money lies.

I’d like to offer, instead, the view that we should be using mobility as part of a larger IT business strategy to control space and time.

An organization should be able to reach its people regardless of geography or hour-of-day. I don’t mean instant communication at all times. I mean something more decisive: control over communications.

In the current highly competitive and global business climate, it is reasonable to assume that at any time many of an organization’s best people will be in the air, on a highway, or in a foreign country. I was reminded the other day that we used to think of business strategy as a chess game in which you planned out all future moves. Now businesses operate more like a video game, where you either zap or are zapped in real time.

In this environment, you can’t afford to ask the question: “where is she?” Now, with mobility, we only need to know “where can she be reached?” You are controlling space. And in a 24-hour world, technology like voicemail allows you to pass along information regardless of the hour or the disposition of the other person. You can control time. Let me go back to IBM as an example. At IBM here in Toronto almost 1,000 of the 6,000 employees have no offices. They are sales or service personnel who work out of their cars. A limited number of desks are available for use on a temporary basis. The only thing IBM management needs to know about where their employees are is that they’re with the customer!

Other examples: Pitney Bowes has reoriented its entire service organization to operate with mobile data, so they rarely come back to the office. Federal Express uses mobile data to keep track of each parcel or letter an entire business being built around mobility. And we are only scratching the surface of the applications.

The only certainty about a new technology like mobile telephony is that, once you give it to people to use, they will astound you with the sheer variety of clever and radical uses. Let me emphasize again that it is when the technology meets the people that the big changes happen. All the organizations that I have described today started off by trying to be traditional. They used information technology to control costs and improve the quality of products and services. They found, however, that IT was capable of giving them more. I call this the “George Fierheller Law of Unexpected Results” As soon as they used IT to lever their employees’ capabilities, they found they were in a new business: they created new products, enhanced their management and uncovered new operational models for their industries.

Information technology by itself is not the salvation of an organization. Its impact depends on its role as part of an overall re-thinking of current practices – people practices. When the Ottawa newspaper Le Droit automated its printing processes, for example, it also changed its work environment. It used its new flexibility to bring out two more editions of its paper, with more locally-relevant news in each edition. The Quebec hospitals involved in SIDOCI created a fully-integrated health care system by making information available instantly to the people concerned. As a result, patient care improved dramatically. Typically, too, IT leads to higher workplace skill requirements and richer working environments. General Motors’ laptop computers improved market data, sped the processing of orders, and allowed the field rep to enter the computer age interactively with the dealers.

The potential for new business capabilities is growing each day, with each new information technology product or service. My advice is to look beyond the immediate cost savings of a new application. Try to figure out how your business particularly the activities of your people can be re-directed. What new powers does it give you? What are you able to do today that you couldn’t yesterday? Is there a new “green field” opening up right in front of you?

The strategic use of information technology is really just the strategic empowerment of people. If we can all figure out how to apply this maxim, I’m sure that Canada will have no prosperity problems in the Twenty-First Century.

Back to Section E Index or just read on

BITS OF PROGRESS, CONVERGING TECHNOLOGIES

THE CANADIAN TELECOMMUNICATIONS CONSULTANTS ASSOCIATION
TORONTO, ONTARIO. OCTOBER 13, 1994

We all understand that convergence in communications technology results from the digitization of everything. It is this digitization that allows interactive Multimedia to happen. This whole process is now referred to as the new Digital Age.

Like many other recent terms, the name digital is not sales oriented. It is only slightly better than cellular telephony or pay TV. In fact, it is a complete misnomer. Obviously, the process has nothing to do with the real meaning of digital. The term refers to the Arabic numbers 0-9. It derives from the Latin digitus, meaning a toe or finger. The digitization we are talking about today involves the transformation of voice, text, graphics, still photos and full motion video into a stream of binary bits. Perhaps a better term would be bitification.

Oh well, we are stuck with the term and can better spend our time looking at the implications of the Digital Age. Nicholas Negroponte has often referred to this converging Multimedia phenomena as an interactive stream of co-mingled bits. The co-mingling refers to interspersed bits that tell a receiving device what meaning to place on the bit stream.

In fact he believes that there is a huge business in bits about bits. He used the example of TV Guide which is simply information about information.

At Softworld ’94 he went farther, and concluded that all businesses are now about either atoms or bits, i.e. you are in the business of creating, selling and servicing physical things or you are in the information business. The rate of change of an industry is directly related in his opinion to the ratio of atoms to bits.

The technological conversion of everything to bits allows convergence of information technologies to be dramatically more effective. It allows effective compression of data. This compression is becoming evermore dramatic. Although audio digital disks have only been on the market a few years, even simple technological changes could increase the density perhaps 16X’s (one could get a 4X’s compression simply by switching to a blue laser with better resolution and another 4X’s using better encoder techniques).

Even more dramatic compression can take place by storing or transmitting only the changed elements in a full motion video mode.

A second major advantage of the Digital Age is effective encryption. It is far easier to encrypt a digital signal than an analogue signal. This will be vital for the protection of privacy and the protection of Intellectual Property Rights (IPR). But if digitization makes convergence possible, what is making it practical and what are the constraints?

As with most new technologies the drivers and constraints have far more to do about power struggles, regulation, politics and yes – even the consumer’s desire, than it has about actual technology.

The power struggle is primarily between the major telecommunications carriers. The regulatory struggle is between Heritage Canada and the CRTC/Industry Canada over content control. The political questions revolve around NAFTA and GATT. Regardless of all of these, the consumer will ultimately determine what happens when he or she buys the product or service or not.

Let’s look at some of these drivers and constraints:

THE BATTLE OF THE TITANS

The CRTC decision 94-19 re-wrote the rules. Canada has taken a lead over the United States where a Bill to change the Telecommunications Act to allow similar competition has been delayed in Congress. It is now a national free-for-all with cable companies being allowed into the local loop business and the telephone companies being allowed into the information and entertainment business.

It did not take Stentor long to announce it’s Media Lime Interactive organization which will spend $250 million over the next couple of years to enter the Video-On-Demand business and other forms of interactive wannabes.

Ted Rogers had already announced a deal with Bill Gates to trial the Tiger software to provide the same kinds of services over the cable network.

So who will be the winner?

To understand the approaches to convergence, it is important to look at the mind-set of the cable companies and the phone companies.

The cable companies believe in the set-top box. This is a derivative of the channel converter with a remote control, with which we are all familiar.

Phone companies want to move the intelligence outside the home to the network.

Both approaches reflect traditional positions.

The phone companies have always been big switch thinkers – sort out remotely what the customer wants, and deliver just the desired signal over a narrow band wire. This is necessary because the phone is essentially a dumb device, similar to the old dumb computer terminals before smart work stations.

The cable companies have traditionally brought everything into the home and let the user select what he or she wants at the set-top.

These are fundamentally different approaches. The set-top box is betting on the TV set as the major device for convergence. The belief is that the consumer will want to do everything over the set in the family room and only the cable company has the band width to be able to deliver five hundred (500) digitally compressed movies or whatever the consumer may wish to that device. Whatever intelligence is necessary is built into the set-top box.

The phone companies do not have this luxury and therefore likely to bet more on the PC as the terminal device. The PC has some inherent advantages:

• It is here! In 1994, home PC’s numbered over 30 million in the United States alone with about 5 million with Multimedia capability. Set-top boxes may start to appear in 1995-6, but by 1997 there will be well over 50 million home PC’s, and 15 million with Multimedia capability compared to about 2 million set-top boxes.

• The PC has a keyboard.

To understand the importance of this requires us to understand the reality of interactive Multimedia. In my opinion, the average householder will not use interactive shopping, interactive education or other applications that require extensive access through menus. This is simply too complex to be usable.

The only way someone would reasonably shop for an item of any complexity is to key-in directly the desired parameters. Even with Personal Digital Assistants, it is doubtful if people will want to sit in front of their TV set with a bulky keyboard. They are already well attuned however to using a keyboard with their PC.

Another factor mitigating against the TV set as the primary interactive Multimedia device is the use and location of the unit. By and large a TV set is still viewed as an entertainment device. I have no doubt that delivering the five hundred (500) channels to the TV set will be a real and viable application. However the TV set traditionally sits in a room designed for group viewing. Further you are not that close to the screen and it becomes almost impossible to see icons and then use a remote mouse from perhaps fifteen (15) feet away. The CRT on a PC is however designed for one-on-one viewing from perhaps two (2) feet.

So my conclusion on which device or approach will be the winner is both. I believe that the TV set will stay right where it is and will be used for VOD. The PC will be in the den and will be used for applications requiring a high degree of interactivity.

However, this does not really answer the question about who wins between the cable companies and the phone companies. Negroponte has stated on many occasions that it should be possible to get full motion video over a 64K bit copper pair. I am sure this will be possible but this still puts the phone companies back in the position of having to deliver five hundred (500) channels down the street on fibre and then having the consumer select from that stream only what can be transmitted over the phone line into the home for Multimedia purposes. As undoubtedly, most homes will have multiple PCs and multiple TV sets. This is really not a suitable solution.

This would seem to give the nod to the cable companies who at least have coaxial drops in the homes. But it will not be all that easy for them either. They will still have to add a switching capability as access to the international PSTN will be required for Internet and other uses. Also, a number of the cable companies do not yet have two-way amplifiers in their systems.

The solution seems very obvious, although I assure you this is not a position of either Rogers Communications or as far as I know Stentor. The best approach would seem to be to allow both organizations to bring their specialty networks into a box in the basement and thence into a HAN (Home Access Network). Any device in the home could then access the switched PSTN, a broad band capability with as much spectrum as required or any combination. It would seem to me that this is sensible conversion best utilizing the national resources we already have.

I note that even Japan has backed away from the enormous cost of putting fibre into every home by the year 2015. If Japan cannot afford this, I doubt that Canada can. The implications are significant e.g. who owns the customer in this case and who provides the bill? It may be that for the time being the easy answer is to allow each organization to bill separately for it’s own services with the convergence being essentially electronic.

REGULATING THE UNREGULATABLE

The CRTC and Industry Canada have made their intentions known. Canada is to have a wide open competitive telecommunications system with minimum price regulation and then only in the form of caps. The market will decide what it wants.

Well, almost! The problem is the CRTCs mandate to protect Canadian culture, whatever that may be. There is more likelihood of the five hundred (500) channels being held up here than there ever will be because of the technology. I can see years of debate on how Canadian content can be protected in a five hundred (500) channel world.

The problem of course is competition from foreign satellites. Direct Broadcast By Satellite (DBS) will be here whether CANCOM likes it or not. I am reminded of Pat MacGeer’s comment years ago that if the Canadian government did not like him to watch foreign satellite programming then they should stop the signals from falling in his backyard. There will be no practical way to stop foreign satellites from delivering whatever the customer wants. The CRTC and Heritage Canada are going to have to resolve their differences, put in minimum Canadian content requirements and then let any carrier deliver whatever signals the customer will pay for.

POLITICS. POLITICS

As noted above, no country can protect it’s borders from the Global Village. We have not been able to do that for years.

If this is true of electronic signals, it would be equally true of foreign companies operating in Canada. CRTC 94-19 allows any Canadian company into any part of the telecommunications business or at least implies this as the direction the government is going. I question how long Canada can maintain a Canadian exclusive in this area. As Canadian companies, more and more must go abroad to continue growing, there will be increasing pressure on Canada to open up its telecommunications business to a much higher percentage of foreign ownership.

Already the government has undertaken to allow a communications holding company to go to 33% foreign ownership. This is absolutely essential for the financing of companies given the limited size of the Canadian financial markets.

I believe we will see pressure under NAFTA, GATT and the World Trade Organization to open up even local loop competition, wireless communications and broadcasting to more foreign competition. The implication of this is that Canadian companies operating in the Multimedia business are going to have to look well beyond their borders. Convergence in Canada will become less an issue than International competition in the Digital Age.

AN THE REAL WINNER – THE CONSUMER

The real winner in all of this convergence will be the consumer. What the consumer wants, as John Evans, President and CEO, News Electronic Data noted the other day at Softworld 94, is content. The consumer cares little about technology. In fact technology only becomes useful when it becomes totally transparent. He reminds us of the failure of High Density Television (HDTV). People did really not care about how many lines there were on a screen as long as the program was reasonably clear. They certainly cared however about whether the baseball season was cancelled.

If the secret to real estate is location, location, location, then the secret to Multimedia is content, content, content.

If you thought that the reason Ted Rogers is buying Maclean Hunter is for some additional cable capacity in a paging company, you are missing the point. The value of Maclean Hunter is its access to content. I might add that CRTC 94-19 in my opinion likely, ensures the approval of the Maclean Hunter deal. I cannot see the CRTC saying that anyone can get into anyone else’s business, the Stentor companies can put together a Multi Linx but the cable companies cannot rationalize their own networks.

But what does the consumer want? Recent surveys such as that done by Anderson Consulting indicate that Canadians will opt for business over entertainment. 58.7% said they were interested in educational services. 50.2% said they wanted banking from the home. Only 48.3% said they viewed as a priority seeing movies of their choice whenever they wish to see them. Other studies have indicated something the same. My own bet is that some of the winning applications will be very financially oriented e.g. using interactive Multimedia to get the best price on a car, a mortgage or an insurance policy (watch out if your title has the word ‘agent’).

But ultimately the consumer is going to want even more technological transparency than a PC or a set-top box will provide. I am a believer in voice recognition. Negroponti indicated that it might be two hundred (200) years before we would actually match the Star Trek capability of a replicator being able to respond to Jean Lues’ request for Earl, Grey, Hot. However, I believe that interactive Multimedia could work well with the assistance of a Commentator. This is essentially the way Comp-U-Card (CUC) works. This is really a electronically available sales clerk. This may not be High Tech but it is High Service.

BACK TO THE FUTURE

In summary, regardless of what the carriers, the regulators or the politicians want, the consumer will drive the process.

I am pleased to see that CTCA has as one of its objectives to “Encourage the Exchange of Information between Telecommunications Consultants and Organizations that contribute to the Telecommunications Industry in Canada”. You will be providing the right advice to your clients, if you ensure that the convergence of technology converges on what the consumer will pay for.