Entrepreneurial nation: How the rise of entrepreneurship saved Canada's economy

When the four-volume Canadian Encyclopedia was published in 1985, it only managed to find room for a column and a bit on "small business." By some ironic jest of the alphabet, the listing was squeezed in between the entries for "slug" and "small claims court." Canada's first homegrown encyclopedia was a personal passion and a huge risk for feisty Edmonton publisher Mel Hurtig. But the academics and researchers who filled the encyclopedia's pages didn't seem to understand the importance of entrepreneurship or its contribution to Canada. They gave more space to salmonella, seashells, short fiction and snowshoeing than they did to the small-business sector. Such was the climate when PROFIT, then known as The Magazine that's all about Small Business, debuted in 1982. Across Canada, entrepreneurs such as Timothy Eaton, Harris Massey, John Molson, Joseph-Armand Bombardier, John Bayne Maclean, H.R. MacMillan (of MacMillan Bloedel), Roy Thomson and K.C. Irving had shaped the nation through the businesses they'd started. But the media, the universities, the intelligentsia and the Zeitgeist focused on big business and centralized solutions: Bay Street takeovers, government-funded megaprojects, Crown corporations and economic regulation (which rated three columns in the Canadian Encyclopedia). As PROFIT's founding editor, Donald Rumball, recalled in the magazine's 10th-anniversary issue: "Most people in the media, who worked for large organizations, positively sneered at small business." But the times, they were a-changin'—in ways neither the Canadian establishment nor Bob Dylan had foreseen. New businesses, created by the power of personality meeting opportunity, were turning Canada inside out. New names like Stronach, Southern, DeGroote, Péladeau, Pattison, Minacs, Reichmann, Ghermezian, Belzberg, Keevil, Desmarais, McCain, Munk, Asper, Watier, Cowpland and Matthews—and Hurtig—were creating new markets, finding value in neglected niches and exploiting new technologies. The recession of 1981-'82 shook the traditional economy to its roots. No longer could Canadians depend on selling unprocessed natural resources to create wealth. Global markets—and consumers tired of shopping at Eaton's and Simpsons—were demanding innovation and new ways of doing business. Suddenly, Canada confronted an economic restructuring that few people understood. But as icons such as Massey Ferguson, Dominion Textile, Woodward's and Canada Post—not to mention General Motors and Chrysler—ran into trouble or started shrinking their payrolls, workers and opinion leaders alike slowly began to realize that these baffling new entrepreneurs, unknown and undaunted, were the country's best hope for innovation and jobs. The result was an entrepreneurial revolution that changed the face of Canada—and just in time, too. The past quarter-century has seen shock after shock, from recession to NAFTA and globalization, from the PC to the spreadsheet to e-commerce. By pioneering innovation, new market niches and lower-cost ways of doing business, entrepreneurs helped the Canadian economy adapt to tough times and keep on growing. Since entrepreneurs shine in unstable environments, it seems likely that Canada's entrepreneurial revolution will keep right on churning. With advancing technology, new competition from China, India and other "tiger" markets, an aging population and a tightening energy supply, Canada will face many challenges—but its entrepreneurs, if history is any guide, will lead the way by facing them first. By 1982, the desire to innovate in entrepreneurial fashion reached even Canada's largest magazine publisher, Maclean Hunter. Its flagship, the Financial Post, was celebrating its 75th anniversary in 1982, but the celebration was muted. The Globe & Mail's growing Report on Business section was eroding the Post's status as Canada's chronicler of commodity prices and business news. Anxious to find new avenues of growth, publisher James Warrillow green-lighted a spinoff magazine that would go where no Canadian periodical had gone before—into the heart of the entrepreneurial economy. "We saw it as a huge opportunity," says Warrillow. "We realized that business is all about small business. There may be a lot of high-profile companies in Canada, but in numerical terms, business is a pyramid: just a few companies at the top and thousands at the bottom." At a time when the business media were competing for what advertisers were calling "decision-makers," a magazine that reached small business could reach the largest audience of business leaders in Canada. Plus, adds Warrillow, "From a media point of view, there was a large role to play in telling the stories and sharing the experiences of small business." Closely modelled (we can admit it now) on Inc. magazine, the bible of U.S. entrepreneurs founded three years earlier, The Magazine that's all about Small Business launched in April 1982 as a chronicler of opportunity-oriented and solutions-focussed business stories based on the successes and hard knocks experienced by Canadian entrepreneurs. Never a personality magazine, and with no investment recommendations to be found, Small Business (as it eventually came to be called) was a new type of publication focused on the process of doing business. Inevitably, the magazine's writers and editors focused on case studies and best practices found among Canada's most successful small businesses, usually identified by their track records of growth in sales and profits. In time, the magazine's focus switched from small business to growing business, which eventually resulted in a name change that spoke to entrepreneurs' ambitions, not (as an editorial said at the time) to their shoe size. In 1990, Small Business became PROFIT: The Magazine for Canadian Entrepreneurs. Since then, it has increasingly drawn inspiration and insight from any companies that might be considered entrepreneurial, whatever their shape or size. From its start in 1982, PROFIT had been structured as an entrepreneurial business—in effect, drinking its own Kool-Aid. The magazine was founded on an innovative model, drawing its audience not from paying subscribers but from a database of business owners—making it the only national business magazine that could directly address its audience because it knew exactly who they were. It was also set up as a "skunkworks" all its own. "We had to find our own space and negotiate the rental agreement, scrounge for furniture and shop around for supplies," says Rumball. The launch did not go smoothly. The magazine began publishing in the midst of the biggest economic downturn since the Great Depression. Although it was a necessary catalyst for economic change, the recession set PROFIT back on its heels. "There was lots of interest in the editorial content," says Warrillow, "but the team charged with running the magazine as a business found the going a lot tougher than expected." In that, of course, the magazine reflected the challenges endured by its readers. As the 1980s wore on, Canada's culture of entitlement shifted to one of creating value for others—the first rule of business. Battered but unbowed, the Canadian economy emerged stronger than ever, with entrepreneurial leadership emerging throughout the country. The entrepreneurial revolution was unstoppable because it was fuelled by a convergence of many different factors, all intertwined. Consider just 10 of them: PEOPLE: The entrepreneurs of the 1970s and 1980s were the first post-war generation. Growing up in an environment of boundless confidence and economic progress, they first enjoyed the fruits of a burgeoning consumer culture—and then started pushing the barriers. Example: Don Green and Michael Budman turned casual clothes into a lifestyle statement and then into a global brand called Roots. DEREGULATION: As old business models slowly changed, entrepreneurs drove stakes through the heart of the old economy. Max Ward's Wardair fought for years to overturn the scheduled airlines' monopoly by offering charter fares to everybody; Ted Rogers (who bought Maclean Hunter in 1994 and now owns PROFIT) battled the CRTC to build a national cable TV system and then an integrated media empire. CONSUMERS: As the post-war boom made Canadians more affluent and increasing immigration exposed them to a wider diversity of cultures, styles and ways of life, consumer tastes changed forever. No longer did all Canadians start their day with Shreddies or finish it with a Molson Export; from No-Name bologna and macaroni and cheese to flatbreads, imported liqueurs and entire stores devoted to pasta, consumers demanded more varieties of food and other consumer goods, at increasingly polarized prices ranging from No-Frills to no-limits luxury. Suddenly, specialists were back in vogue, and "white bread" producers of commodities struggled to keep pace. OUTSOURCING AND THE DECLINE OF BIG BUSINESS: The first seven decades of the 20th century witnessed the growth of massive, integrated companies that centralized all production and control; the last 30 years saw the decline of corporations that try to be good at everything. It was Big Oil's departure from Alberta in the 1970s that created the opportunity for a Canadian-owned oil patch. The big automakers' increasing acceptance of third-party components created billion-dollar parts specialists such as Frank Stronach's Magna Corp. and Frank Hasenfratz's Linamar Corp. And Onex's Gerry Schwartz thrives by buying floundering operations of large companies and transforming them into independent industry leaders. SOCIAL CHANGE: Ever since the Beatles brought back long hair, North American society has been marked by whirlwind change. Shifting family structures, the rise of environmentalism, demands for daycare and other services for two-income households, the new affluence and the aging of the baby boomers are just a few forces that have transformed society and created entrepreneurial opportunities. TECHNOLOGY: Entrepreneurs thrive in volatile marketplaces, and technology has disrupted them all. Michael Cowpland and Terry Matthews were among Canada's first tech wizards with Mitel Corp., which helped deliver us from the tyranny of telephone switchboards; both continue to pioneer in other technologies. Canada's traditional leadership in various industries, from animation to transportation and telecommunications, has created many more technology successes, from Softimage and Alias to Clearnet (now part of Telus) and Sierra Wireless. On another level, the rise of affordable technology tools enabled many small businesses to compete with bigger rivals for the first time. It's no coincidence that the entrepreneurial revolution developed hand in hand with spreadsheets and the personal computer. But the most important enabler may have been wireless. Many small businesses are run by the vision and expectations of one individual—and nothing enabled entrepreneurs to be in two places at one time, always in touch and in charge, more than the cellphone. WORLD MARKETS: As global trade barriers fall, many companies have foundered, but others have thrived. Founded on the lowly potato but sustained by an appetite for growth, McCain Foods has become a $6-billion giant with customers in 100 countries and 55 plants on six continents. IMMIGRATION: Canada's reputation as a refuge for immigrants from all over the world has brought generations of restless, ambitious entrepreneurs to its shores. From Asian emigrants such as ATI's K.Y. Ho to Hungarian refugees Hasenfratz and Peter Munk, Britain's Cowpland and Matthews, and Detroit's Budman and Green, citizens-by-choice have applied their entrepreneurial energies to Canadian business and demonstrated the value of wide-open markets. NEW BUSINESS PROCESSES: Reinvention is the lifeblood of business. The endless need for greater efficiency and innovative business practices creates a constant flow of entrepreneurial opportunities. Greig Clark's College Pro Painters changed the house-painting business by inventing a low-cost business model. At the other end of the scale, Michael Potter's Cognos Inc. has specialized in business intelligence and leading-edge data analysis for nearly 40 years. THE AGE OF IMAGINATION: The leaders of the entrepreneurial revolution grew up in an era of Disney, Expo 67, Star Trek and the Apollo moon landing. To them, nothing was impossible. As U.S. author and venture capitalist Guy Kawasaki says, "Your typical Silicon Valley story starts with some geeks saying, 'Wouldn't it be cool if €¦?'" Canadians have always said "What if?" And this country's entrepreneurs have never been afraid to try to make those dreams come true. Today, few would deny that the entrepreneurial revolution continues. In Ottawa, a Conservative government is cutting taxes and pushing for further deregulation. Entrepreneurial companies such as Cirque du Soleil, WestJet, Gildan Activewear, Alliance Atlantis, ATI, Sport Chek and Boston Pizza have become household names or global brands. In a paradigm shift unthinkable just a few years ago, Magna was recently kicking the tires on Chrysler Corp., in case it's put up for sale by parent Daimler-Benz. Entrepreneurial role models are all around, from Apple's Steve Jobs and Anita Roddick of The Body Shop to Quebec sportswear entrepreneur Louis Garneau and Research in Motion's Jim Balsillie and Mike Lazaridis. Besides the 10 factors above, which are all still at work, new trends continue to fuel entrepreneurship. The explosion of video gaming, the Internet, Web 2.0 applications and even Internet dating services has created broad and fertile markets for entrepreneurial innovation. Growing networks of angel investors and cash-rich venture capitalists are eager to throw money at scaleable tech opportunities. The Net enables more and more entrepreneurs to operate sophisticated businesses from home, or oversee networks of employees and associates aligned in low-overhead "virtual" companies. In all, Canada now boasts 2.3 million small businesses (firms with fewer than 100 employees)—about twice as many as 20 years ago. A million of them employ nearly five million Canadians, or more than 47% of the private-sector workforce. The other 1.3 million are "non-employee" firms, demonstrating the difference that single individuals can make. And even that 2.3-million total excludes hundreds of thousands of self-employed entrepreneurs with unincorporated businesses whom Statistics Canada doesn't know how to count. Of course, entrepreneurship isn't growing in every direction. "Small businesses" account for 98% of all Canadian companies with employees, a percentage that hasn't changed in decades. And according to data compiled by B.C.'s Statistical Service, businesses with 50 employees or less generated about 22% of Canada's total GDP in 2005, down from 25% a dozen years earlier. Much of that decline occurred in smaller provinces, suggesting that big-box stores such as Wal-Mart, which entered Canada in 1994, may have had a significant impact on many small-town retailers. But even as traditional markets shift, there's other good news on the entrepreneurial front. Research shows that the self-employed are happier than regular employees, while surveys report that Canadian youth choose "entrepreneur" as a career goal even above traditional "power" occupations such as doctor, lawyer or filmmaker. Awards programs such as Ernst & Young's Entrepreneur of the Year, now in its 14th year, and Queen's University's Best Small and Medium Employers ranking, now in its third year, demonstrate the business establishment's continuing interest in entrepreneurial magic. Government and schools have gotten into the act. High-school students now study entrepreneurship, while MBA schools offer it as a specialty. Governments offer small-business training through Community Futures offices and other local centres, while the feds' Canada Business Service Centres now bring federal, provincial and municipal services for entrepreneurial business under one roof. Even the mother ship of centrally planned CanCon, the CBC, enjoyed hit ratings last fall with Dragons' Den, a prime-time TV show in which millionaire business owners judge funding pitches from aspiring entrepreneurs. Then there is John Warrillow—the son of former Financial Post publisher Jim Warrillow—who is an entrepreneur with his own consulting firm that helps big businesses market more effectively to small business. Warrillow & Co. encourages major marketers such as banks, telecom and software companies in the U.S. and Canada to sign up for a "subscription" to its small-business research, at annual prices of up to $200,000. After two years of marketing this way, Canadian companies account for nine of his 57 subscribers—a sign, he says, that big business is taking small business seriously. And yet, something seems missing. "Entrepreneur" may no longer be a dirty word, but it doesn't seem to open doors, either. Business owners asking for startup loans at the bank are still referred to family or friends, unless they have enough money in their homes to back a line of credit. "Entrepreneurship is still not really respectable," says Rumball, who now divides his time between writing books and government reports on entrepreneurship. "I don't think we yet have an economic environment in which people really look up to and value the entrepreneurial contribution." Think back to the Toronto-based Reichmann family, billionaire downtown developers before they overstretched in the early 1990s with a mammoth office project in London. "Before the Reichmanns went under, they used to be called tycoons, developers, real-estate magnates," says Rumball. "The minute they went under, they became entrepreneurs." Stimulating entrepreneurship was a major initiative of governments a decade or more ago, but Rumball says that's over: "While the bureaucrats who work in the small-business departments are very keen, the government attitude is not supportive." Having recently completed a study on entrepreneurship in the Kitchener-Waterloo region of Ontario, he says he would like to see more encouragement of entrepreneurial "clusters," such as those found in Waterloo, Ottawa, Vancouver and Montreal. Particularly important, he says, is supporting networks of angel investors to invest in early-stage businesses, but he adds governments have done little on that score for years. Rumball believes one thing has changed for the better: Canada's entrepreneurs. "They're significantly more competent than 25 years ago," he says. "You used to see a lot of people who went by the seat of their pants. By chutzpah and persistence, they did okay." Today's competitive markets, he says, have winnowed out most of those people: "You had to up your performance or check out." He credits the improved performance to two trends: The spread of peer groups such as Young Presidents' Organization and the Canadian Association of Family Enterprise, which lets entrepreneurs talk business in confidence and share real-life problems and solutions, and the growing emphasis on business plans. "Only 10% of entrepreneurs had a written plan 25 years ago. Most had just a goal or target," he says. "Now a much larger percentage have business plans, even if they don't use them as well as they should." But Rumball is disappointed that, after an initial surge, entrepreneurial education in Canada's public schools has flattened. "I don't think teachers see entrepreneurship as a viable career choice, so they really don't support it." High in the Peace River country, in Dawson Creek, B.C., farmer and entrepreneurial evangelist Mac Taylor agrees. A teacher of high-school agriculture courses for 20 years, he made his students work and sell the fruits of their labour. To complete their education, he organized trips to Toronto, Montreal and California, funded by the profits made on their ventures. "There's got to be a payoff," he says. "I put a map of the world in front of them and said, 'You can go as far as you like. The more money you make, the farther you can go.'" With help from the Kiwanis Club and a school board worried about the lack of local employment opportunities, Taylor established an independent training centre to turn high-school grads into entrepreneurs based on the 4H motto, "Learn to do by doing." Located beside the high school (but not in it), with costs shared by the school board and various government agencies in return for delivering their training programs, the centre functions more as a mentoring agency than a school, encouraging students and adult learners alike to roll up their sleeves, get into business and ask for help when they need it. In 21 years, the Kiwanis Enterprise Centre has trained hundreds of students and won national awards for innovation and entrepreneurship. Taylor can drive down the street and point to trucking companies and software firms started by graduates of his programs. While he retired from the centre seven years ago, it continues to make a difference, leading a local campaign for farmers to add more value to their products (to reduce their reliance on commodity prices), and even coming up with a plan to "rebrand" the Peace region—the most northerly agricultural centre in Canada. But Taylor is disappointed that governments and school boards haven't set up enterprise centres across the country: "There seems to be resistance to supporting entrepreneurship in the schools. They just don't understand it." While the current resources boom has alleviated Peace River's unemployment—for now—Taylor thinks the future of rural communities is at stake. With Wal-Mart and big-box stores sapping money out of smaller towns, he believes that only entrepreneurial approaches will salvage local economies once the resources cycle shifts again. On a larger scale, he sees many of Canada's big businesses selling out or moving production offshore, and wonders where the business opportunities of the future will come from if more young Canadians are not exposed to entrepreneurship. He sees it as a challenge that business should take on, but he isn't holding his breath. "Maybe it takes hard times to do it," says Taylor. "Maybe we become more entrepreneurial when we get poorer." Of course, the essence of entrepreneurs is turning adversity into opportunity. "My definition of entrepreneurship is people shooting for goals for which they have inadequate resources," says Rumball. By that definition, making such people heroes and offering them too much support might be the worst thing we could do for them. So, here's to the next 25 years of the entrepreneurial revolution, and Canada's anti-heroes of hope.