CATA Pushes Service Innovation to Federal Committee
February 06, 2008

Services are key to Canada’s prosperity; call for commercialization clearing-house

Ottawa February 5, 2008 -- CATA told a House of Commons Committee today that national prosperity heavily depends on increasing productivity in the service sector. In a meeting with the House of Commons Standing Committee on Industry, Science and Technology, spokespeople for the Canadian Advanced Technology Alliance proposed the establishment of a centre and online Hub where ICTS service productivity can be improved, through pre-competitive work on the design of the user experience. “The outcome would be innovation and monetization in the software service sector,” stated Eli Fathi, President of Orbit IQ and CATA VP of Commercialization. “This centre would be world-leading, because almost no work has been done to understand these ideas.”

CATA EVP Barry Gander noted that a new realization is becoming top-of-mind in the U.S., Japan and some European countries: “While the production of hard goods is important, services are responsible for 70% of our GDP and 76% of our employment. The vast majority of the 400,000 new jobs created in Canada last year were in the service sector, and the top 10 industries enjoying rapid salary growth today are all service industries.”

Mr. Gander added that Canada’s service sector is driven by Information and Communications Technology and Services (ICTS) -- a field in which Canada has momentum and national advantage. “ICTS has the potential to make Canada a global economic centre; global competition in the framework of a service economy competition is good for Canada because:

  •  The Canadian ICTS sector is growing fast -- more than 8% a year;
  • Productivity impacts are quickly felt. Improving productivity in the service sector takes much less effort than improving productivity in (e.g.) manufacturing. To obtain a 7.5% increase in Canadian productivity by enhancing manufacturing productivity, one would have to increase manufacturing productivity by 50% (because manufacturing is only responsible for 15% of GDP). Clearly a tall order. To obtain the same productivity boost of 7.5% through the service sector, one would need to increase service sector productivity by only 12% -- difficult, but not the same order of magnitude;
  • The service sector is recession-resistant, with a longer lag time built in regarding economic trends;
  •  Canada’s service economy is not as heavily dependent on American trade as other sectors. Half of Canadian service revenues are made selling to other countries. ICTS services are digital, without borders. Global purchasers treat Canadian service companies as equally competent with American rivals, so there is no in-bred disadvantage to being Canadian.
  •  Canada’s population, representing the “world in miniature”, has major global market connectivity advantages over rivals like India or China;
  •  Canada has the touch-stone of prosperity for the ICTS sector: a well-educated workforce.

“Canada can make most rapid headway in growing its GDP by improving productivity in the ICTS service sector, which depends in turn on solving a mystery: how do we monetize the value of services?” said Mr. Fathi. “In CATA’s view, the key to the successful monetization of ICTS service success is to become expert at the design of the user experience. “The experience” is the link between ICTS and user demand. Software and hardware by themselves are not valuable; they become valuable or monetized when a user can experience an advantage. Google and Facebook are valued because of the design of the user experience, not because of the technology.”

Mr Fathi also noted that iinnovation and profit-making in the services sector is a very different process from the manufacturing sector. “Manufacturing innovations most often start with a product or problem. Service innovation begins with consumer needs or wants – frequently unexpressed. And while manufacturing innovation commercializes technology and tools, service innovation monetizes consumer behaviors…Facebook is not commercialized, it is monetized.”

The CATA delegation concluded by noting that the ICT sector has the potential to propel and secure Canada prominence as a global economic leader and ensure our quality of life.

The meeting with the House Committee follows a meeting last week with Industry Minister Prentice.

Executives who are interested in receiving CATA’s full briefing on the service economy should contact:

Cathi Malette, CATA
cmalette@cata.ca