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Small is the new big when it comes to ecosystem success

There are things in Saskatchewan that we all like to complain about – the weather, the referees at Rider games, people who say SK is flat with nothing to see and of course how the centre of the universe is assumed to be Toronto, Montreal, Vancouver, etc.

While living in a Province with 1.2 million people does have some real challenges (think air travel schedules), it doesn’t have to be a challenge in our ability to scale globally successful businesses from right here in Saskatchewan.

When we originally started thinking about how to bring an incubator and a venture fund to Regina, we researched what makes some places better than others to start a business? What is it about those communities and how they support founders that makes them work better? Our research took us far and wide to some of the largest ecosystems in the world and also to some of the newer emerging places that seem to be having success. We found two interesting things:

  1. Incubators located in close proximity to farming communities seemed to do quite well
  2. The degree to which an ecosystem worked together cohesively to support founders made a huge difference

It was a curious learning on the surface but as you think about it, maybe not so much.

The first time I heard references linking founders and farming was in a discussion with some high-profile Canadian founders from Kitchener / Waterloo. They opined about the resilience of farmers and farm communities and the roller coaster that both have had over the decades. They thought that it created communities that could better respond to drastic changes in operating models and respond with new ideas, new innovation and frankly, survive. Sounds a bit like founding a company….

Secondly, in much larger ecosystems, the community is fragmented, disjointed and if you are a founder with a great idea, they are incredibly hard to navigate. How do you get introduced to others that can help you? How do you get connected with those making buying / procurement decisions in your particular space, like Government? How do you find a mentor? How do you learn from others traveling a similar path and learn from their challenges? How do you find the capital you need when you are ready?

The degree to which ecosystems are focused around founders and that the component parts work together and cohesively to support entrepreneurs matters greatly. We talk often in Regina and Saskatchewan that we have only one degree of separation. In fact, I know that some make fun of us because of our ability to connect with each other. In this instance, that “smallness” can be an unbelievable competitive advantage as we forge the next generation of our economy.

I was at a small event just a few years ago hosted by former world entrepreneur of the year, Murad Al-Katib. He had invited Dominic Barton (currently the Canadian Ambassador to China) to address some business leaders in our community.  At the time Dominic was the Global Managing Partner of consulting firm McKinsey. He was speaking about his work to advise the Federal Government on the Innovation Economy and what places like Regina could do to participate in this economic shift that he was proposing.  In the midst of his prepared remarks, he stopped and offered a key observation for Regina.  It went something like this

“Do you realize what you have here in Regina? In this room, you have Business Leaders, Academics, Government, Sources of Capital, Entrepreneurs.  You have everything you need to be successful and yet we are in a room small enough to get things done and done quickly.  In the next generation economy, that level of connectedness and agility will be an unbelievable competitive advantage.”

Fast forward just a few years and pandemic aside, I have never been as optimistic about our ability to build and scale high growth companies as I am today. At Cultivator, I try to make it to pitch events to learn about the progress of these companies and hear some of the new ideas being pitched. I am always amazed at the quality of the founders, the soundness of their ideas and their passion for bringing them to life.

Sure, we still have some issues to resolve in Canada and in Saskatchewan to better unleash the innovation economy.  We need better policies to protect the intellectual property of founders and give them a chance to scale their companies.  We need a larger pipeline of STEM (Science, Technology, Engineering and Math) talent to drive these companies forward. We need to work with the current Government and their Growth Plan to determine the right policy supports to support innovation.  Finally, we need some additional critical mass of founders in Saskatchewan.

We should all have lots of optimism about the future of our economy in Regina and in Saskatchewan. Once the health crisis subsides, and it will, we should get back to what we were doing in 2019.  We should leverage our smallness, double down on AgTech and Ag Innovation and take our rightful place as one of those communities that has the ability to spit out new high growth companies faster than others. It is a once in a generation opportunity that we cannot let just pass us by.  Let’s be AUDACIOUS Regina and Saskatchewan.  Let’s go get it.

 

Patience, “The Infinite Game” & Cooperatives

I just finished reading “The Infinite Game” from Simon Sinek. The book is based on earlier work from James Carse in 1986 about understanding the difference between a finite mindset and an infinite mindset. It was a provocative poke at the current state of business and capitalism and the need to ensure that both investors and business leaders are focused on the long game of creating value through their investment choices (for investors) and business decisions (for leaders). Sinek argues that business today talks about “winning” and “beating the competition” and the disconnect that creates in the behaviour of both investors and leaders. In the case of my industry – how do you “win” banking? There must be some secret scorecard for our industry right? Of course there isn’t. Ultimately, he argues that there is no such thing as “winning” in any industry, just arbitrary, near term business metrics that drive leaders and investors to a more short term view of their businesses.

At the same time, I have seen and read many articles suggesting that the global pandemic we find ourselves in will be an inflection point in terms of business disruption and that the behaviour of the consumer has been or will be forever changed. Watching in our own credit union how the pandemic has accelerated the move to digital transactions makes the argument easy to believe. Of course, time will tell if this is truly the “TSN turning point” for digital disruption in commerce. They say that you always overestimate the change that will take place in the near term and underestimate the level of change that will happen over the longer term. I don’t know who they are, but that has certainly been the case in my business career as business has evolved faster than I would have predicted over the longer term course of my career. That’s an easier way to say that I am old 😂.

For me, there are a number of signals that confirm that things are indeed changing. Here’s a few that have been top of mind for me lately:

Capital market shortcomings – Last week, Canadian markets were at virtually the same level as they were pre-pandemic. What?!? Are you telling me that investors believe that an identical stream of future cash flows will accrue to them from the same firms post pandemic as pre-pandemic? Really? On the contrary, I believe they are desperately betting on short term hail mary / efficiency / cost cutting / M & A / etc. will prop up share prices in the near term. Do you think this will incent business leaders to consider the strategic choices of this inflection point or drive for nearer term success that they can showcase as “beating the competition” and “winning” in a down market?

Cheap money – We are operating at historically low costs for money. This also artificially inflates near term success for firms and further, encourages higher leverage positions as money is considered to be on sale these days. That might not be all bad, if the additional cash is used to support new initiatives, research, growth and transformation but watching consumers and businesses and how they are taking advantage of low borrowing costs and where the additional money is being spent, makes me nervous.

Rapidly changing consumer expectations – Make no mistake that the mindset of the consumer is changed. I have read lots about how the health crisis has only accelerated the shift to digital for consumers and that the shift was already underway. Perhaps. But the speed with which consumer behaviour is changing is striking and businesses will need to respond not with tweaks to their model but transformative change. We will no longer have the time to make slow methodical changes to our business and still keep up with what consumers expect.

Growing concern about inequity and exclusion – the current business models have contributed to exclusion and income inequity and those challenges are being surfaced in front of all of us in a really big way. Look around. Every conversation I am in today involves inclusion, equity, diversity and a growing sense that all of us (POC, LGBTQIA2S+, Allies, CIS, Indigenous, Short fat bald guys, etc.) need to come together to make it better. It matters greatly that people feel like they can participate in the economy and have opportunities to succeed.

The demand for transparency / authenticity in business – In a similar way, I believe that we are on the cusp of a new era of expectations around transparency and authenticity in business. That doesn’t mean that everyone needs to be happy with the decisions you make, but what it does mean is that you are open, honest and transparent not just about WHAT you want to achieve but HOW you intend to get there. My sense is that there is a real desire for people to work, engage and partner with businesses that they trust and those that demonstrate values that align with their own. People don’t expect perfection, but they do expect to know what you stand for and they expect for you to try your best to live that everyday.

If we are at an inflection point in terms of business models and transformational changes are necessary to support new ways in which to serve customers and build businesses, then this is also a perfect time to reset expectations and mindsets of  both investors and business leaders. I have a few ideas on how leaders can stay focused on changing their mindset:

  1. Purpose: Business were historically created to solve problems and monetize the solution. Today, I believe that businesses and organizations exist to deliver on a purpose. What is your why? This clear articulation of why you exist and what you seek to do is not marketing fodder. It is a promise to employees, consumers and your community about what you stand for and what you will be held accountable to deliver. It is the call that will galvanize organizations, pull people together and inspire them to do great work. In our organization, we have done away with mission, vision and all of that other garbage I learned in business school. Today, in our organization, we have a single purpose and we are united in our passion to bring it to life. It is not a short statement of some metric – it is a moonshot of aspiration that permeates our DNA.
  2. Courage: It takes great courage for investors and business leaders to swim against the current. I am speaking next month to a group of young finance professionals on the west coast about changing the “it hasn’t been done that way before” mindset.  I have a few examples in my career of ideas that were pitched and ridiculed that today, seem brilliant. In a discussion with a colleague yesterday morning about this topic, he offered a new book for my reading list that speaks to this same idea. Offering new ideas and gathering momentum around them is hard and few do it well. Why do you think we have a whole industry that has emerged around change management, innovation, agile, etc? How are ideas surfaced in your company and what happens to them and those that propose them?
  3. Profit Models vs. Sustainability Models: We have worked hard in our business to think about financial performance through the lens of sustainability. This thinking goes back to a discussion about 15 years ago with a colleague in my former role and has taken that long to think through. Today, we think about how we are performing in the context of how much is sufficient to sustain the business and how much capacity do we have to invest in creating the next generation of ourselves. The amount we have available is calculated in almost real time and is used to accelerate or decelerate as necessary. The model has bled into decision making, Board reporting, pandemic responses, etc. as a more long term way to financially plan in our cooperative.
  4. Daily Improvement: Much has been made about agile, minimum viable products, fail fast, etc in current business literature.  I am no expert on all of those things but I believe the root of all of it is in the idea of constant improvement and continually moving towards the purpose of the organization. The products may change, the delivery model may evolve, new channels will be built – but at the end of the day are you constantly moving towards the purpose in #1 above. This is a very different mindset than “winning”. In the end, you just have to keep moving forward towards your purpose.
  5. Team: I start presentations about leadership development with a statement “that the business with the best people will win”.  I appreciate the irony in using the term “win” in the context of this blog but just realized that now so will change my statement after this reflection 😂.  The point is that the level of performance of any business is a direct correlation to the diversity, quality and smarts of the people that work there. I have had the luxury of working alongside of some very bright people in my career and some that come from very different backgrounds. The funny thing is that great people tend to follow each other around and there is a gravity that pulls them together. When you are able to find a few of them, more want to join. Working amidst a group of really bright, diverse minds gives you more courage, provides more critical thought and considers new and unique perspectives. I have another blog half written about the change it is taking from me as a leader to more consciously create and then harness the power of diverse teams, so will leave that for another day. Suffice to say that our success has been directly correlated to our level of human talent.

Leading in this challenging environment is hard. When I look back on my leadership journey, this may be the most difficult leadership environment that I will ever face. Will it lead to new thinking, new business models and new strategies for for us to pursue?  Or will this lead to more pressure on near term results, diminished strategic investments, less research and development, less continuous improvement and the pursuit of more efficiency in current business models. I hope it’s the former and I am trying hard to make it so.

The last thing I would offer, and selfishly, is that there are business models that work better in times like this. Business models that favour the creation of long term (i.e. generational) value, that incessantly focus on the customer, that care deeply about the “how” and the impact they have on communities and on people.

It’s never been a better time to be a cooperative ✌️.