Unleashing Productivity: Softchoice CEO David MacDonald’s address to the CD Howe Institute

The following is a keynote address delivered by David MacDonald, President and CEO of Softchoice, delivered at the CD Howe Institute in Toronto on May 18, 2016.

Unleashing Productivity: The Role of Innovative Technology in Canada’s New Economy

Good afternoon, everyone.

Today, I want to talk to you about the disruptive technologies that are shaping the world around us, and how we, as Canadians, can take advantage of them to nurture a more productive, competitive, and true 21st Century economy.

Before we start, I want to tell you something about myself. I don’t just lead a company that sells technology, I really love technology. You remember those old Hair Club for Men commercials? “I’m not only the President, I’m also a client”?

I believe technology has the power to unleash the potential of people. It has the power to make businesses more productive and to help them compete on a global scale. Technology can help to diagnose, treat and cure diseases. It can give people regardless of financial standing access to the learning they need to build a better life. Technology is the great leveler. And in 2016, we’ve only just scratched the surface of what we can do with it.

I believe we are on the cusp of the next great age in human history. An Age of Potential. And technology is leading us into this new frontier. Over the last couple decades, very smart people have made some very incredible breakthroughs in technology from new connected devices and new computing systems, to cloud-based services and artificial intelligence.

Who knew that when we watched The Jetsons in their flying car all those years ago that a completely self-driving car would be a MUCH bigger deal? And they’re not too far off from hitting the streets of Toronto.

As far as we’ve already come – from the days of floppy disks and dial-up Internet – within the next couple years we’re going to see innovation accelerate and technologies used in ways that seemed like science fiction not too long ago.

This new era of accelerated productivity and innovation will be akin to the Machine Age, which reached its peak about a century ago. It will produce immense gains in productivity, new jobs, new services, and corresponding gains in our quality of life. It will quickly change the business landscape and societal norms. Business leaders will either need to adapt or risk losing everything.

In the Machine Age, entrepreneurs took the great innovations of the Industrial Revolution, and built upon them, and built upon them, and built upon them. It changed not just what we made, but how we made it.

This is the era that gave us the assembly line, mass production strategies, and the division of labor. Suddenly the craftsman that would build an entire product from start to finish gave way to specialized workers who would use new single-purpose machines to perform one specific task before sending the product on down the line.

There’s no better example of this in action than the originator himself, Henry Ford. In 1910, in their first year of mass production, assembly line workers built 19,000 Model-T cars. Two years later, they made 78,000. Two years after that, they made 261,000 – from that same single location.

It’s because they continued to invest in innovation to optimize processes and the tools they used. Within those first four years, they went from building a single Model-T every 12 hours to every 93 minutes. Within a decade, they were making one per minute.

This seismic economic shift from the farm to the factory also translated to gains in quality of life. From automobiles to radios to vacuum cleaners – mass production made things cheaper to build, more readily available to the public, and more affordable to the middle class. The skills gap it created fueled the need for better education, which ultimately led to a public school system.

A growing economy meant better public infrastructure from roads and bridges to electricity and water works. People started to live longer. By comparison, in 1900, the average life expectancy in Canada was 47 years for a man and 50 for a woman. Today, it’s over 80. In 1900, 70 percent of the world’s population lived in extreme poverty, today it’s just 11 percent.

Our World is About to Change

Like the Machine Age, today we’re seeing entrepreneurs and innovators build on and advance the products and services we use every day. The founders of Uber, for example, didn’t invent the smartphone. They don’t own a fleet of cars. They simply developed an app – a ride sharing app – that people find more user friendly, more efficient, and less expensive than taking a regular cab.

To show how far we’ve come from Henry Ford’s Model-T, Google plan to bring a self-driving car to market before this decade is out. A self-driving car! Their prototypes have already logged over 1.5 million miles of highway and city driving.

Recent statistics show 94 percent of traffic accidents in the United States are from human error. Globally, over a MILLION lives are lost in traffic accidents every year. Self-driving cars would not only virtually wipe out these stats, they would also double the capacity of our current road networks – DOUBLE – with efficiency gains to be found in everything from shipping and deliveries to daily commutes, to reallocating first responders like police and paramedics to other emergencies. Think of what that will do for our cities!

Who remembers Watson? IBM’s question-answering computer that beat two all-time Jeopardy champions? Well, developers at Google reached a new milestone in artificial intelligence this year and, just like Watson on Jeopardy, it came from the challenge of beating humans at their own game.

The Chinese board game Go is considered more complex than chess, because it has a larger board with a broader scope for play, on average longer games, and more alternatives to consider per move. It’s so hard for humans to learn a strategy for Go, it was once thought impossible to teach a computer to play the game at a master level, because it requires the program to mimic more elements of human thought than chess and certainly more than Jeopardy. But just two months ago, Google’s AlphaGo became the first computer to beat a world champion – and the machine won four out of five games.

While these innovations started out as fun challenges to beat, the applications of the technology have tremendous real world potential – in manufacturing, energy, health care, finance, education, every sector. Computers doing complex automated tasks more efficiently and effectively than we can – from driving cars, to diagnosing medical conditions, to manufacturing goods and managing supply chains.

What is Driving These Innovations? 

So what trends, what disruptive technologies are driving this new accelerated era of productivity and innovation? Technology consultants, Gartner, have coined them the Nexus of Forces. These are Cloud, Mobility, Social Technology, and Big Data Analytics. I’m sure you’ve all heard these terms before, but who can really define them and why they’re so important to business productivity?

Starting with the most common… Cloud is a general term for the delivery of hyper-scale computing over the Internet. Instead of building and maintaining an IT infrastructure that is physically in your office building, you’re essentially renting space as needed from a third party vendor, and accessing it over the Internet.

Mobility, along with Cloud, is also shaping our work habits and how we access information. Mobile devices like laptops, tablets, smartphones, and wearables like the Apple Watch are becoming more prevalent in the workplace. They allow us to unplug from our desks and perform business tasks from virtually anywhere, anytime. Mobility has also given rise to location-based services, which use your GPS position to provide information based on your immediate surroundings – helping us find a nearby restaurant or pharmacist, to order an Uber car, or notify us of a sale from inside the shopping mall.

Social Technology is essentially any technology that facilitates social interactions. Think web conferencing. Think social media like LinkedIn, Facebook and Twitter. Taken together with Cloud and Mobility, Social Technology brings us virtually together and allows us to collaborate and communicate in real time.

All of our online interactions, social or otherwise, are being monitored and catalogued by businesses, creating enormous amounts of data. In fact, the total amount of data that industries capture and store doubles every single year. That’s why they call it Big Data! The websites we visit, the purchases we make, the ads we click on, the terms we search for, the things we post and like on social media… businesses today are turning this data into actionable outcomes: better understanding and targeting customers, streamlining businesses processes, and optimizing performance.

Gartner recently added a fifth trend to their Nexus of Forces, which ties the first four together, and that’s the Internet of Things. This is a term for a network of everyday objects – devices, vehicles, buildings, home appliances – with network connectivity that allows them to collect, send and receive data. Whenever you hear an object referred to as ‘smart’ this is what they’re talking about. Smartphone, smart car, smart home. You might already own a smart thermostat or smart washing machine in which your thermostat communicates with your washer to start a load when you’re not even home and when it’s most cost-efficient. On a larger scale we’ll soon have smart cities in which traffic lights co-ordinate during rush hour based on traffic algorithms and real-time data like car accidents and road closures.

This Nexus of Forces are already having a tremendous impact on the business world. These are not fads, and they won’t die out in a couple years. These are the driving forces of innovation, accelerated productivity, and business analytics that are helping organizations to better understand their customers, introduce new products and services, and gain a competitive edge in the marketplace.

Why Should You Care? 

Fifty years ago, the average life expectancy of a Fortune 500 company was 75 years. Today, it’s just 15 years. That’s 75 to 15 years in half a century. And it’s getting shorter.

So what changed? Technology has shifted the balance of power in favor of the consumer and the agile entrepreneur. Never before have your customers had more choice or been better informed about their choices than today.

That shift is challenging the established order, creating new market opportunities, and forcing us to try new things to maintain strategic relevance and deepen their loyalty. Sometimes those things don’t work as planned, but it’s always the companies with an eye for innovation – and the guts to go after it – that survive.

You can bet if you’re not keeping up with the changing needs and expectations of your customers, then someone else will. If you’re not leveraging modern tools and technology to improve productivity, you will lose ground to your competition or some new kid on the block who comes out of nowhere to take your market share.

For every Uber, there’s a Beck Taxi. For every Netflix, there’s a Blockbuster. For every Apple, unfortunately, there’s a Blackberry.

At Softchoice, I’ve led the transformation of our business in recent years from a reseller to a full IT solutions and managed services provider. We needed to change to stay ahead of our customers’ needs in the face of growing complexity of IT. Nobody buys software from a box anymore.

As an example, before Cloud, Softchoice earned a significant portion of our revenues from selling and managing software licenses for our customers. Microsoft was, and still is our biggest partner. Only now, we’re #1 in Canada and #2 in the US for deploying Microsoft Cloud technologies like Office 365 and Azure – their cloud computing platform.

When the world around us changes, we are forced to adapt… to advance… to innovate… to find new ways to fulfill customer needs. In business, as in life, the more urgent the need… the quicker we must rise to the occasion.

How Can We Capitalize? 

So, how can we as Canadians make sure we’re on the right side of progress? How can we take advantage of this accelerated era of technological innovation?

#1. Business leaders need to rethink their business models and look at where disruptive technologies can give them an edge.

Canadian businesses have long been slow to adopt leading-edge technologies. We’re behind many of our peer countries when it comes to investing in new technologies and innovation. Canada’s ICT (or information and communications technology) investment per worker is half of that in the United States – and the trend line is going in the wrong direction. Whether they see it as too expensive, too risky or too complex Canadians are reluctant to implement new systems that will enhance their competitive position.

Productivity is one of the most important factors of determining a country’s future prosperity, as it’s a measure of how efficiently and sustainably we’re producing our goods and services. Canada’s labor productivity, while getting more efficient, has been growing slower than other top performing countries for decades. This needs to change now.

There are tremendous productivity advantages to Cloud that give even small businesses the same computing power as multinational corporations. It’s infinitely scalable, you only pay for what you need, and it removes the hefty capital investment for an on-premises, complex IT environment. A recent Harvard Business Review article reported that 74 percent of businesses believe cloud computing has given them a competitive advantage. The main reason is that they felt cloud enabled them to “capitalize on opportunities more quickly” than their competitors.

We can’t hold ourselves back with data residency concerns over where that data is being stored. If the CIA can work securely in the Cloud, then so can our government, banks and large enterprises.

In addition to productivity gains, a recent Softchoice study found that North American workers truly do value Mobility. Most people want greater autonomy over their work week, even if it means working outside the 9-to-5. Technology is enabling that. 70 percent of the workers we surveyed said they’d be prepared to quit their jobs for an employer that gives them more flexibility over where and when they work. As the millennial demographic grows in the workforce, implementing this type of mobility will be key in attracting and retaining the industry’s top talent.

And #2. We have to regain that entrepreneurial spirit of the Machine Age and invest in innovation again.

Canadians have some natural advantages that put us in a position to succeed. We’re a natural trading partner to the biggest economy in the world. We have a vast country in terms of size, resources and people. We grew up reading the Corn Flakes box in English AND French. We naturally adapt and adopt new cultures, new ideas, new perspectives. We’ve developed to be more adaptable in business, too.

While Canadian businesses spend over $15 billion per year on research and development, as a group we spend much less as a percentage of GDP than our international peers. In particular, large business R&D has fallen dramatically in Canada over the past 15 years, while it has continued to climb among peer countries, including the U.S., U.K., Japan, Germany and France.

Canada also lags behind the U.S. on venture capital investment as a percentage of overall GDP. That’s a key indicator of innovation, as venture capital is needed to seed start-up companies and help existing companies to increase their competitive edge through new and improved products, processes and services.

While Canada has been able to maintain a high standard of living despite their relatively weak investment in innovation, such things aren’t meant to last. That tenuous balance is straining under the weight of an over reliance on our resources economy and increased competition from abroad putting strain our trading relationship with the United States. Investment in the ICT sector will not only support direct STEM sector job creation, but also nurture an emerging services based economy.

Ladies and gentlemen, businesses that resist change will find themselves on the wrong side of history. I believe we’re at the next exciting inflection point in that history. One in which we must choose to get on board with or sink.

It won’t come without challenges and bumps in the road. Some professions will be forever lost. Other professions and businesses will be forced to transform to stay viable. Change will pose interesting questions about our long-standing approaches to education, government services, and economic stimulus.

But with this new Age of Potential will come new jobs, new businesses and new opportunities that will enrich our economy. We will enjoy incredible advances that will enhance our lives, and new industries that will enhance our GDP.

It presents an enormous opportunity for Canadian businesses to accelerate and grow with the pace of change that’s coming… to break new ground, invent, and innovate… and to ensure that the next Henry Ford, Steve Jobs or Elon Musk has a Canadian passport.

We have to have the courage to change, and change now.

Thank you.

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