Winning the Digital Race

When it comes to understanding the role of technology in society, few Canadians can hold a smartphone candle app to Tom Jenkins. As President and Chief Executive of OpenText from 1994 to 2005 and then Executive Chairman and Chief Strategy Officer until 2014, Jenkins—a member of the Canadian Business Hall of Fame and the Waterloo Technology Hall of Fame—helped pioneer many technologies commonly used to manage digital information in today’s complex world. After joining Canada’s largest software firm when it was still a University of Waterloo start-up in 1994, he took OpenText public on the TSX (via the first Canadian Internet IPO) and on the NASDAQ (where the company was the United States’ third Internet-based IPO). In addition to his duties at OpenText, Jenkins chairs the National Research Council of Canada and serves as a director of several other high-profile organizations. The Hamilton native—who holds an MBA from the Schulich School of Business, along with a Master of Applied Science in Electrical Engineering from the University of Toronto and a Bachelor of Engineering Physics and Management from McMaster University—is also Chancellor of the University of Waterloo and Chair of the University of Calgary’s School of Public Policy. In this IBJ interview, Jenkins talks to Ivey Business School Professor Gerard Seijts, head of the Ian O. Ihnatowycz Institute for Leadership, about the profound public policy challenges being created by the Digital Revolution and what Canada can do to overcome them.

Ivey Business Journal: During a recent presentation of the Ivey Business School Thomas d’Aquino lecture, you called Canada a leader in the digital race. But thanks to the fate of some of our former industry-leading technology companies, such as Nortel and Research in Motion, a lot of Canadians assume we are a digital laggard. So why are you bullish about our capabilities?

Tom Jenkins: Well, it is true that some bright tech stars of previous eras have dimmed or burned out altogether. But it is important to recognize that this is a natural part of the life business cycle driven by creative destruction. And despite real concerns about Canadian productivity and the ability of our largest corporations to remain competitive, our nation is actually doing relatively well in the digital race. In fact, as the second-largest ICT cluster in North America, the Waterloo–Toronto corridor is one of the top ten places in the world to start a company, which is why a growing number of major multinationals, ranging from Thomson Reuters and General Motors to Cisco, Microsoft, and Google, have invested in making Canada a critical part of their global footprint. Believe it or not, you can argue that we are the most significant alternative to Silicon Valley. I am not suggesting we should be overconfident, but a quick review of the TSX IT sector clearly shows we have ascending tech stars as well as dimming ones. Quebec-based CGI, for example, now has more than 60,000 IT professionals, regularly deploying digital solutions around the world as a major market player. OpenText, which I currently chair and had the pleasure of serving as CEO, launched as a University of Waterloo start-up, and it is now one of the largest software companies in the world with hundreds of millions of users. Other TSX examples include Constellation, Enghouse, Descartes, Shopify, and Hootsuite. And Canada currently has thousands of start-ups being incubated. That is quite positive for a country one-tenth the size of the United States. Clearly, we are not just hewers of wood anymore.

IBJ: I sense a “but” coming. Am I right?

TJ: Well, while Canada is currently a winner in the digital race, we do need to remember the lesson of the crow and the rabbit if we want to remain a player.

IBJ: Can you remind us of this cautionary tale?

TJ: Sure. A crow was sitting on a tree, doing nothing all day. A small rabbit saw the crow, and asked: “Can I also sit like you and do nothing all day long?” The crow answered: “Sure, why not?” So, the rabbit sat down to rest on the ground below the crow. But while the rabbit was sitting still, a fox suddenly appeared and ate it. The lesson, of course, is that safely sitting and doing nothing requires sitting very, very high up.

IBJ: So while we are doing relatively well in the digital race, you’re saying we can’t afford to rest, right?

TJ: Nobody can rest in this race, which is just getting started. As things stand, Canada is doing a lot to support digital in the public and private sector. We have created some of the largest digital companies in the world and we continue to create them. But we are not thinking deeply enough about the implications of the Fourth Industrial Revolution that is now upon us. To date, the Digital Revolution has generally transformed our lives for the better. But we have not really discussed the public policy challenges presented by an “always on” world that will continue to evolve and do so rapidly. We really need to think about the implications of this brave new world because very profound changes are on the way.

IBJ: Can you give us some examples?

TJ: Sure. Within 10 years it is estimated there will be close to one trillion connected devices out there. Computing ability is expected to surpass the human brain within five years. When that happens, many intelligent people argue the human race will lose control of the machines we are creating. It already happened in the financial sector, where the “flash crash” was caused by nanosecond trading algorithms that concluded the market would go to zero and started making billions of transactions before market regulators were even aware of what they were doing. Our only response at the time was to shut the machines off and to re-set the market back to where it was. We may not have that luxury the next time this happens. We have to think long and hard about the governance implications of that event, which took place more than five years ago. Think about military drones. The technology advances we saw during the war in Afghanistan have made machine-to-machine conflicts something we need to consider. Things can get out of hand very quickly, with terrible consequences. According to Ray Kurzweil, the so-called moment of Singularity, when computer thinking surpasses human ability, will result in the end of civilization as we know it. Yet we rarely discuss the profound implications of this potential loss of control in policy development. Perhaps this is due to lack of knowledge or a desire to avoid adding complexity onto already tough issues. The pace of change is going to increase substantially along with the potential for negative impact on society as we move from human-controlled data collection and analysis to machine-generated data collection and analysis. Computers may not enslave us in the near future but significant change is definitely coming our way and we need to consider them in terms of the major public policy issues facing Canada at the moment: productivity and innovation, infrastructure, information and security, governance and machines, talent and education.

IBJ: What are the issues related to education?

TJ: A teenager living in Africa with a smartphone today now has more information at their fingertips than the President of the United States did 15 years ago. That is profound. The Millennial generation was born with an extended brain called the Internet. As a result, the education system has become outdated. Many parents of these digital pioneers report that their kids can’t remember as well as mom and dad. Those observations are supported by research in California, where CAT scans of digital natives have found areas of the brain associated with memory function greatly diminished while the area that networks right and left spheres of the brain has enlarged. What is behind this? Smartphones. The Millennial brain is just efficiently handing over memory function to a machine in order to concentrate on the integration of information rather than data storage. But these physiological changes have substantial implications. In fact, as the first generation of digital natives, Millennials are one of the most important generations in the history of human evolution. They will drive change in the education system because we now need to figure out how to align education and training with a brain that is substantially different than the previous 100 generations.

IBJ: We probably also need to think about what exactly we should educate and train people to do in the digital world, right?

TJ: No question. Most jobs that today’s workers have been educated to perform will eventually be better done by machines. So we need to figure out what people will do. As things stand, we are not organized to retrain employees on the scale that will probably be required to prevent serious job losses and some sectors clearly face the risk of massive unemployment. At some point in the future, for example, we won’t need drivers for trains, trucks, or taxis. Even Uber cars will drive themselves. This has profound implications for how wealth is distributed. If you recall, Henry Ford made history by creating the production line that enabled him to sell low-cost automobiles to the very workers paid to build them, which created a virtuous circle that lifted the quality of life for the middle class in America. This pattern was repeated elsewhere. But we are now automating so many jobs, so quickly, that our ability to benefit society has noticeably started to slow down and in some cases reverse. And the threat to existing jobs goes well beyond transportation. Banking. Accounting. Law. All of these professions may be substantially eliminated in a decade because the so-called big data analytics trend may eliminate the need for humans to do deductive reasoning. Our creativity may be the last vestige for humans contributing to the overall productivity of society. But we cannot just be consumers of the goods and services that machines produce. We must also produce something of value or the virtuous circle created by Ford as the economic pillar of modern society will be forever broken. But policymakers are not really thinking about these things fast enough. It’s understandable but not very wise.

IBJ: Doesn’t public policy just need time to adjust?

TJ: The problem is that the numerous profound changes facing society today are all coming at once and they are all coming in digital time. The pace of innovation is very deceiving. Most believe that growth and change occurs in a linear fashion. So what happened in the last five years will be about the same as what will happen in the next five years and so on. But innovation is not linear. Believe it or not, the iPad is only about six years old. And the following waves of digital advancement will have an accelerated influence in terms of adoption time and impact on society. Simply put, we are running out of time to prepare for what is happening to society both here in Canada and throughout the world. But while we need to take a serious look forward, public policy tends to be nearsighted. In some cases, we are even looking backward.

IBJ: Can you give an example of backward-looking policymaking?

TJ: Sure, infrastructure investments. Within current thinking, government infrastructure investments are seen as a sound way to stimulate the economy while meeting a need to improve and expand things like roads, railways, bridges, and so on. But this makes sense only so long as we expect to struggle to move people around and get goods to market. And the sharing economy, along with autonomous vehicles, could dramatically reduce our need for infrastructure investment. Will we need the parking lots in shopping malls? Will we need expanded highways? Will we even need the garage in our house or the parking level in our apartment? In other words, our sound fiscal thinking about infrastructure spending today may be based on a backward-looking economic model and that could result in a fiscal disaster for the country. This sounds farfetched until you consider what has happened in the IT world over the past decade. Computer hardware purchases have plunged thanks to software designed to link computers together in a virtual mainframe. Your email server is no longer dedicated to just doing email. At night, it is now used to run batch programs for accounting and so on. Simply put, machine infrastructure has massively increased its utilization, thereby reducing the need to expand it. And the same thing could happen to transportation. If you have a 3D printer and an Internet connection, you don’t necessarily need an elaborate warehousing and transportation system. How many trucks do you need on the road when drones effectively take over door-to-door delivery? We should at least think about these things before borrowing $1 trillion to expand transportation infrastructure. Meanwhile, we are probably underestimating what virtual infrastructure will be required to lead the Fourth Industrial Revolution. The digital world is all about bandwidth, so winning requires looking forward, not backward. A few years ago, I was in a meeting between Germany and Canada. When discussing our approach to digital, the Canadians explained we were working diligently to create a 5 MB communications network for the country at the cost of more than $100 million. The Germans politely asked why 5 MB was our bandwidth target and we told them it was based upon what consumers needed to livestream Netflix. The Germans had a target of 1 GB, which was going to cost them more than $10 billion. When we asked why they were making such an expenditure, they explained a business in a small German town needs to be able to receive a 3D printing file from an equivalent business in Japan. In other words, instead of planning bandwidth based upon consumer entertainment needs, they looked at what was required to keep up with the rest of the world and stay within the global value chain. Note the difference in approach here.

IBJ: So what does Canada need to do?

TJ: Well, if we anticipate the digital disruptions and implement strategy effectively, Canada could take advantage of its high education and multiculturalism to punch above our weight on the world stage and achieve both social and economic benefits. But we really need to shift our focus away from the old paradigms. In the old days, a corporation involved in a manufacturing operation would provide the required factories and tool-and-die machines, along with immediate infrastructure needs such as parking lots for workers, while government supported business development by providing things like roads, power, and telephone lines. To support business development in the future, we must realize that digital enterprises will requires digital roads. And that requires major shifts in public policy thinking. Millennials get it. Last year, I attended a consumer trends presentation and the speaker noted Maslow’s Hierarchy of Needs has been changed for Millennials. Remember how food and shelter once formed the base of the pyramid? Well, they have been replaced by Wi-Fi. That’s right. Millennials now consider Wi-Fi to be an essential need before anything else. They need it to connect to the other part of their brain: the Internet. So when we plan for the future, we need to see low-cost high-bandwidth as an essential public good. And we have to plan for the future in less rigid ways. Sectors like transportation and financial services are being transformed by computer scientists who are non-traditional sector players, so future breakthroughs in other areas such as healthcare and education are probably also going to be driven by computer scientists. With this in mind, we must think as a small country with principle-based policies and laws as opposed to the rigid rules typically developed for large countries with hundreds of millions of people.

IBJ: Change programs are never easy to implement, at least not with lasting success. So how can we change the Canadian public policy culture?

TJ: In government, I would suggest that we need to do two things. First, we need to create a substantial digital department that can be used as a resource within the federal government and encourage the provinces to do the same. This is not your typical CIO function either. It is a digital change agenda and that is different from providing digital tools and services. Second, we should give this department a mandate to review all major pieces of legislation and provide a broad update on how government operates and delivers services to society. If we staffed this department with a mix of government veterans and Millennial minds and connected it to resources in society such as the Waterloo–Toronto corridor with joint investments and partnerships, we could attract the best and brightest in digital. The digital participants would see a clear mandate and ability to make a difference, which would improve our digital capacity and provide senior public servants with better advice. This department would help generate critical mass and accelerate our investments along with our digital transformation. It would also give our citizens somewhere to turn when dealing with out-of-date public services. Now, this is not a panacea. We know that departments that have been created in the past to focus all of our energies onto a change management agenda have been challenged within the system. This digital department would not drive the change—rather it would support the change. Change management must be driven by the leadership within each of the major departments if it is to be effective. Therefore, the digital department would be an internal trusted resource to support the change agenda from each department. For all the reasons that we have discussed, now is not the time to under-invest in digital capacity. Our quality of life and standard of living in the future will depend on our ability to respond to these digital disruptions. We must overcome these challenges if we wish to remain relevant in the digital world. Other countries are doing this and we should be aware and not be left behind.

IBJ: So to punch above our weight on the world stage in the digital age, and achieve both social and economic benefits, we need to anticipate digital disruptions while taking advantage of our strengths. In other words, we have to stay true to our innovative roots and shift our focus away from the old paradigms. Is that why you published your recent book Ingenious with the Right Honourable David Johnston, the Governor General?

TJ: It was published to raise the awareness of innovation among Canadians and to foster a belief among Canadian youth that aspiring to global impact is a realistic goal.

IBJ: What is your favourite little-known example of Canadian innovation?

TJ: Canola oil. It is a $26 billion export industry created by a university partnership with the National Research Council of Canada and local farmers to cope with the collapse of the rapeseed oil market used for lubricating steam engines. It is an example of the innovativeness of Canadians that figure out a way to solve a problem when one is presented.

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