Wayne Robert
Economic Development and Management Consultant
How do Canadian municipalities plan and implement SMEs support programs?
How do they plan it? That is where the municipality really has a role to play. They would actually take on some of the initiatives of planning. They would help support the LED function. From that LED function, they will create strategies. And then, they might be a catalyst in planning and in initiating SME development. But, the municipality doesn’t actually take on the direct responsibility of SME support. It is not their function. And they do not have the required skills. What they do is they create the strategies and they help with creating a supportive environment through regulations, access to land, access to infrastructure, transportation. They do focus efforts on inbound investment marketing, but as far as SME direct services – they do very little. Largely because of their minimal capacities. A lot of SME development work is done in the community by NGO’s, associations and firms, not local government.
What are the biggest problems that SMEs face in Canada?
That has changed over the years. We now have good programs and services to support SME development in Canada. But there are still a lot of real concerns that businesses anywhere in the world have such as access to markets and marketing, access to marketing information and intelligence, so that they can make sound decisions. And these are small and medium businesses that we are talking about. They are often not trained business people. They are typically someone who started a business because they have a skill, whether it is an IT specialist, or a trades person, or an engineer that has decided that they want to start a business. They are very good at producing and delivering a product of high quality but they are not businessmen. They lack that capacity to make strategy, to deal with changing environments. Another challenge for Canadian SMEs is regulations. Every country has their regulations. And every business has burdens trying to follow them, which takes time energy and money often it restricts the business. Also, the fluctuation of the Canadian dollar is a significant issue because our businesses are tied to int4renational trade. When the Canadian dollar fluctuates, it causes some problems with pricing.
Which Canadian model of business development is the most successful?
There is no one magical solution to SME development. The secret regarding the application of the best model is in the approach to finding it, determining the business needs, mapping out the business community by other service providers, and then being open to innovative solutions that do not exist. Over the past few years a popular SME development modality has been business incubators. Recently there has been greater interest into accelerators. However these approaches are ever changing as well. They used to be broad-based (horizontal) incubators and accelerators. Now we are going into vertical incubators and accelerators. This means they are starting to focus on niche industries. They cluster like industries or people, using some of their products together so that they would have that synergy and better growth. So right now those are two the most popular. But if you do the process of needs determination properly, the best solution presents itself. There is no two identical anywhere in Canada.
What is the difference between a business incubator and a business accelerator?
They both have a membership: if we are starting a business, we would apply to become a client, whereas in an incubator we share and cohabitate in a work environment. There will be a longer organic period, and more holistic in growing the business. There is not a lot of pressure for them to grow or graduate. So they can work more at their own pace. There would be more hands off mentoring and training. It is well-structured. You can attend, but then you are on your own during the day. You are usually not assigned a coach. In an accelerator, if you wish to join, you would offer equity within your business (usually between 5-12%) in return for some seed capital and entrance into the program. The program focuses on graduating successful business on a usually tighter timeframe. The approach to the accelerator is exactly to accelerate; it has a “fail fast” mindset. That being if the business will not be successful then it is best to determine this early and have the entrepreneur move onto a idea that will be successful. So, there is a lot of pressure. The real differences are the releasing if equity for seed capital, the length and pace of the program, and the degree of structured support and programs.
How business support approaches in Canada differ from ones in Ukraine?
I think the largest difference is that we have business service programs for fifty years. I know business centers that I work with are 35 years old. We have a long history of developing SME programs, running them and involving them. But that is also a product of the environment. We also have entrepreneurship since the day Canada was born. We have been raised and have only known a market-based economy. We have longevity, we have history. The Canadian SME sector is in its maturity stage. We have tools to apply to maturity, whereas in Ukraine the SME sector is more in the in the introduction stage. Another reality is that both of our business climates are different. While the development of SME development services is relatively a recent area of focus in Ukraine we have witnessed some great success. It has been very impressive with the speed that Ukraine cities can develop SME services and supportive ecosystem.
What is the main difference between Ukrainian and Canadian small and medium businesses?
There are a lot of similarities. In fact, they have the same list of concerns around regulations. But they have been able to be mitigated somewhat due of the longevity and history of governments and institutions supporting it. The largest difference between a Ukrainian business owner and a Canadian business owner is that we have a culture of a free market. We have a culture of business and entrepreneurship. Being a business owner is not only an accepted form of a career. For many, it has some prestige attached to it. For many entrepreneurs they are not forced into business. They choose this career. The other is that Ukraine borders many countries while Canada borders one country – the US, which is our largest external market. We are able to export quite easily. There is some cohesion between the governments. We have some issues, of course. Canadian businesses are not prone for only local procurement and sale but we also focus on importing and exporting.
Canada is the 12th largest export economy in the world and the 33rd most complex economy according to the Economic Complexity Index (ECI). In 2013, Canada exported $438B and imported $437B, resulting in a positive trade balance of $1.69B. In 2013 the GDP of Canada was $1.83T and its GDP per capita was $42.8k.
The top exports of Canada are Crude Petroleum ($80.5B), Cars ($45.9B), Refined Petroleum ($18.6B), Petroleum Gas ($12.6B) and Vehicle Parts ($10.7B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Cars ($26.1B), Crude Petroleum ($24.3B), Vehicle Parts ($21.4B), Refined Petroleum ($17B) and Delivery Trucks ($13.1B).
What would you recommend for improving the development of SMEs in Ukraine?
I think it has three of four layers to it. First, there is a cultural aspect to SME development. As I said earlier, if a university graduate wants to start a business, it is acceptable. There are support centers. There might be the family history doing small or medium business. Culturally, it is willingness and prestige around business. There is also a culture of sharing and of learning from failures. Failures don’t define you. Failures actually build business. At some point, every business will fail. You have to be able to achieve cultural acceptance of business being a viable alternative career. You have to embrace taking risks, and if a failure happens it doesn’t define you. You have to learn from it. In fact, if you don’t fail you are not learning. So you need to have that cultural experience.
There is a lot of policy and regulations that need to be mapped out. There is obviously a lot of deregulation currently being focused on at the moment. Nothing changes over night. It takes time. But at the same time tax regulation has to be more transparent. If you are going to export, you will need to have at the border policy and procedures that are efficient. Transportation routes have to be efficient. There have to be institutions in place that are client-centered (SME centered). What the business community needs and wants and how it wants it done is the customer and we have to be designed accordingly, otherwise they will not use them. We had that experience in Canada. Some organizations designed centers thinking they knew what the business want. They didn’t engage businesses. As result there was not a significant level of participation by the SME sector. This approach had to change. These are some of the types of activities that can really help in the SME sector.