A report released last week made two facts painfully clear about Canada:
1.) We love the Internet.
2.) Our businesses do not.
Canadians rank number one on the globe in terms of number of webpages visited each month and have the most social network users in the world on a per capita basis, according to a white paper produced by the Internet Association, a trade group composed of 40 tech giants like Google, Facebook and Etsy. Further, 93% of Canadians research products online before buying and more than half use the web to actually purchase goods or services. Despite these high adoption rates, the digital market is still growing. Canadians purchased $122 billion worth of goods online in 2012, doubling the amount from five years earlier. In stat after stat, the report casts Canada as a nation of early adopters.
And yet. Only 46% of Canadian businesses have a website, with the number falling to 41% among small and medium sized enterprises. Even worse, 3% of our retail economy takes place online—less than half of the United States and one-eighth of the levels in the United Kingdom. Between 2004 and 2009, the Internet contributed 10% to the country’s GDP growth, far lower than the average of 21% across other industrialized countries.
The wide gulf between consumer activity and business strategy in Canada is depressing. The Internet Association paper notes “there is no easy explanation” for why Canadian businesses don’t invest in digital technologies, but suggests part of the problem is a lack of capital for both start-ups and businesses looking to upgrade. Dithering on the part of policymakers on a cohesive digital strategy by federal politicians didn’t help either, the Internet Association suggests. Indeed, a press released issued in November 2010 promised then-Industry Minister Tony Clement would unveil a strategy by spring of the following year. It did come in April—of 2014.
One possible cause for the digital gulf between consumers and companies that isn’t mentioned in the report is obliviousness. It’s entirely possible Canadian firms just don’t realize they’re lagging behind. This has been the case in other, related areas. A 2013 Deloitte study found one-third of business executives and owners felt they were spending equal to or more than their peers on R&D, when actually they were spending far less. It’s hard to believe, but some companies look at stagnation and see innovation instead.
The best incentive for companies to embrace digital economy is, well, money. A McKinsey study found small businesses that embraced the Internet brought in twice as much money from exports compared with their peers, while 2.6 jobs were created for every one lost due to Internet-related efficiencies.
The business case for developing a digital strategy is clear. Which makes some of the proposals contained in the Internet Association report seem misguided. Their call to reduce barriers to foreign investment is welcome, as is the notion that governments need to “lead by example” by moving more of their own services online. But a call for a “Digital Renovation Tax Credit,” which would subsidize the creation of advertising online or construction of a website, is ludicrous. That’s not like paying a child to eat their broccoli—it’s like paying them to eat a chocolate bar.
Governments shouldn’t pay companies to do something that will make their lives easier and hike their revenue. If incentives are required, they should come from the businesses that benefit directly from the growing digital economy. Examples of this already exist. Through its “Get Your Business Online” program, Google lets any small business build a website for free. Shopify runs an annual “Build a Business” contest. Both firms benefit from a robust digital economy. Canada shouldn’t pay businesses to get online. Companies need to heed the ample evidence and existing support and do it for themselves.