E-Business-EBusiness_the_Engine_of_Innovation

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					                        E-Business, the Engine of Innovation

                                            OECD Global Forum
                          Policy Frameworks for the Knowledge-Based Economy
                                  ICTs, Innovation, and Human Resources
                                                                   Bra silia, September 16, 2002

                                                    Richard Simpson, Director General
                                              Electronic Commerce Branch, Industry Canada




simpson.richard@ic.gc.ca




                                                           We Are Now in the Network Age

                  ”The realities of the market today - intense international competition, the rapid pace of
                                               today           international
                  technological development, and the ease with which investment and knowledge flow around
                  the world - mean it is more important than ever for companies to strengthen competitive
                  capabilities based on productivity and innovation.”
                                                                                       Canadian Manufacturer and exporters, Canada’s Excellence Gap , 2001
                                                                                                                                     Excellence



              •         Instant access to knowledge
              •         Transformation of business
              •         Borderless, global economies
              •         New ways of citizen – government engagement




                                                         Growth is Increasingly Dependant on ICT

      “Policies that engage ICT, human capital,                                                                      Real GDP Growth in G-7
      innovation and entrepreneurship in the growth                                                                   Countries* 1997-1999
      process, along side policies to control inflation                                                        4.2
                                                                                                                        3.8
                                                                                                                        3.8
      and instill competition, while controlling public
      finances, are likely to bear the most fruit over the                                                                    2.6
                                                                                                                                     2.5
                                                                                                                                     2.5
      longer term”                                                                                                                          1.7
      - OECD Ministerial Report, 2001
      -                          2001                                                                                                              1.3
                        Technological Infrastructure World Rank - 1999**
                                      Infrastructure World        1999**                                       1st     5th
                                                                                                                       5th    14th 21th
                                                                                                                              14th          20th 28th    23th
                                                                                                                                                         0.0
     * Average of year-to-year percentage changes in real GDP
      Source: Main Economic Indicators, OECD, April 2000
                                                                                                               U.S.        France     Germany     Japan
                                                                                                                                                  Japan
      ** Standing among 46 countries. Index based on 12 characteristics including investment in                       Canada      U.K.
                                                                                                                                  U.K.      Italy
      telecommunications, computers in use, computer power, internet connections, number of telephone lines,
      cost of telephone calls and use of robotics.
      Source: World Competitiveness Yearbook, 2000
                                                     E-Business Is the Engine of Innovation

                                               Buying & Selling Online Is Just The
                                                        Beginning...
                          In almost every industry, business processes of all kinds...
                                                       Inventory Management
                                                          Customer Service
                                                               Online Marketing
                                                               Product Delivery
                                         e-Payments
           …are taking an electronic form along the entire supply chain




                                                      E-Business & P roductivity


           • E-Business is increasingly a key tool for increasing productivity at
             economy, sectoral and firm levels
                    – survival in a competitive, global economy
                    – essential for sustainable growth


           • e-Business has to be adopted across all sectors of the economy to
             ensure growth and competitiveness




                                                     E-Business Applications are Driving the Economy


                                            … The deployment of Internet business solutions ha s yielded to date a
                   Cost                     cumulative cost savings of $155 billion to U.S. organizations, and is
                                            expected to produce another $373 billion in cost savings, most of
                                            which will be realized by 2005.




                                            Internet busine ss solutions could account for 40% of the U.S.
                                            productivity growth increa se over 10 years, possibly making it the
                                            single largest private sector contribution to productivity growth over
             Productivity
                                            the next decade.




Source: The Momentum Group, The Net Impact St udy, D ec 2001
                                                              Next Wave of Productivity Growth



                                                                      E-business productivity wave
                                                                      E-business

                                                                                                             How does e-business affect
                                                                                                             How does               affect
                 Productivity:                                                                               productivity?
                 (%change in
                 (%change                                                                                    • Lower transaction costs
                                                                                                                       transaction
                   output per
                   output
                     unit of
                          of                                                                                 • Improved market information
                  labor input)                                                                               • Intensifies compe tition
                                                                                                               Intensifies competition
                                                                                                             • Improves inventory Management
                                          IT productivity                                                    • Eases product delivery
                                                                                                                               delivery
                                             productivity
                                               wave
                                  1990                                                               Time
                                                               2000
                                                               2000                       2012




 Source: Forrest er Researc h Inc .. Nov. 2001
 Source: Forrester Researc h Inc Nov. 2001




                                                              E-Business Increases Sectoral Productivity

              “Through innovation,
                                                                      Estimated Savings of B2B E-commerce
                                                 Estimated Savings of B2B E-commerce
              knowledge i s applied
              to the development of
                     developm ent                                                           Forest Products
                                                                                            Forest
              new products and                         Com ponents Chemicals
                                              Electric Components              10%
                                                                               10%
                                                    29-39%                                      15-25%
              servi ces or to new
              ways of designing,
              producing or                                               Paper 10%
                                                                               10%
              marketing an exi sting Life Sciences 12-19%
                                          Sciences                                               Communications
              products or services                                                               5-15%
              for public or private
                                                                                  Computing
                                                                                  Computing
              markets.”                                                            11-20%
                                                                 Aerospace Machining
                                                                           Machining       Freight Transport
                                                                                                   Transport
                         Achieving Excellence,
                         Achieving
                                                                        11%                15-20%
                          Canada’s innovation                           11%
                                Strategy, 2002
                                          2002
                                                                                                                         Source: Goldman Sachs, Jan. 2000




                                                               Impact of Internet Business Solutions On
                                                               Increasing Revenues

                            80%                  71%

                            70%

                            60%

                            50%

                            40%
                                                                        25%
                            30%                                                               17%
                            20%
                                                                                                                    7%
                            10%

                             0%
                                        Attracting new          Existing customers   Existing customers    Existing customers
                                          customers             buy more frequently buy in greater volume buy more expensively




Source: The Momentum Group, The Net Impact Study , Dec 2001
                                                               Impact of Internet Business Solutions On
                                                               Reducing Cost of Goods Sold


                               60%              51%

                               50%

                               40%                                35%
                                                                                  30%
                               30%
                                                                                                    21%
                                                                                                                    0.17
                               20%

                               10%

                                0%
                                          Increased            Improved      Reduced            Reduced         Reduced
                                         workforce             inventory   materials costs   distribution or production costs
                                         efficiencies         management                     shipping costs




Source: The Momentum Group, The Net Impact Study , Dec 2001




                                                              Canada Established an Early Lead...

                                                         Milestones
             “…make Canada a
             centre of excellence
                                                         Canada has been recognized internationally for its
             for electronic                              leadership in legal and policy frameworks for the conduct
             commerce…”                                  of e-commerce:
             - Speech from the Throne,
                           the                                                                                       “Our objective should
             1999                                                                                                    be no less than to be
                        Á     Canadian E-Commerce Strategy (September 22, 1998)
                                                                                                                     recognized as one of
                                                                                                                     the most innovative
                        Á     OECD Ministerial Conference, Ottawa (October 1998)                                     countries in the
                        Á     Personal Information Protection and Electronic                                         world”
                              Documents Act Bill C-6 (April 13, 2000)                                                Speech from the Throne,
                        Á     Canadian E-Busine ss Opportunities Roundtable
                                                                                                                     2001

                               á Fast Forward (January 2000)
                               á Fast Forward 2.0 (February 2001)
                               á Fast Forward 3.0 (March 2002)




                                                              An E-commerce Friendly Policy Environment
                                                                        Fiscal Climate
                                                                        Fiscal Climate
              u Ta x Neutrality                                                        u Economic Statements 2000, 2001
                  Commitment to technology neutral taxation regime
                                                            regime                                Rewarding innovation-based investment
                                                                                                  Rewarding

                                                                     Consumer Trust
                                                                     Consumer Trust
              u Privacy                                                                       u Consumer Gu idelines
                   Framework legislation governing the protection of                              Voluntary business guidelines to protect
                                                                                                  Voluntary                        protect
                   personal information                                                           consumers conducting online transactions
                                                                                                                        online transactions

                                                                 Business Confidence
                                                                 Business Confidence
              u E-Signatures                                                     u Cryptography
                   Legal framework for digital signatures in
                                                          in                                     Policy allowing domestic use of any
                                                                                                 Policy                       of
                   electronic records                                                            strength cryptography, no mandatory
                                                                                                 strength                  mandatory
                                                                                                 key recovery
                                                                                                 key recovery
                              Canada’s Innovation Agenda

                                             The process through which new economic and
                                             social benefits are extracted from knowledge
                                                      –OECD definition

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                              Innovation Agenda

                                             The process through which new economic and
           Innovation
                                             social benefits are extracted from knowledge
                                                      –OECD definition


Goal is to be recognize d as one of the most innovative countries in the world.

Objectives:
    •    assesses the national challenge
    •    propose national goals, targets and federal priorities
    •    leverage comp lementary commit ments by partners
                       le mentary
    •    build support for tracking progress




                          Fast Forward 3.0: Canada’s 2001 e-Report Card


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    >   ‰r‡ˆ…rÃv‰r†‡ €r‡        >        iˆ†vr††r†Ã‚ yvr     >             BPG


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            r‰v…‚ €r‡
                                              p‚rp‡ v‰v‡ ’


         8hhqh¶†Ãty‚ihyà          >
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         riˆ†vr††Ãi…hq
                                                Continuing Challenge:
                                                Marginalization of SMEs
                                                                                                   Percentage Revenue from e-Commerce Sales
                                                                                                                     2000
    “In term s of selling
    online, large Canadian                                                               Small
    companies are on par
    with their U.S.
    counterparts, but                                                                  Medium
    Canadian SMEs are
    clearly trailing those in                                                           Large
    the U.S.”
    - Fast Forw ard 2.0, E-
                ard      E-
    Business Opportunities                                                                           0            2           4            6           8            10          12
    Roundtable
                                                                                                                                  Canada          U.S.
                                                                                                     Source: IDC, U.S./Canada Comparison, 2001




                                                  Continuing Challenge :
                                                  Promoting adoption of e-business by SMEs
                                                                                                     E-business Adoption in Canada, 2001
                                                                                                                by size of firms

                                                                                       100
“While more than two-thirds
                                                       Percentage of Enterprises (%)




                                                                                        90
of Canadian firms are
                                                                                        80
connected to the Internet,                                                              70
there is a noticeable difference                                                        60
in the rate of Internet                                                                 50
connectivity between SMEs                                                               40
and large firms.”                                                                       30
                                                                                        20
                                                                                        10
   Embracing E-business Opportunities,
   Embracing
           Connectedness Series 2002                                                    0
           Connectedness
                                                                                                    Small                   Medium                  Large                       All

                                                                                       Internet Access          Web Presence              Purchasing Online              Selling Online



                                                                                                            Source: Survey of Electronic Commerce and Technology , 2001, Statistics Canada




                                                Continuing Challenge:
                                                Business Technology Use in Canada by Sector, 2001

                     Use Int ernet        Have Web site
                                                                                                                                            93%

                                                 82%                                         82%                            82%
                                78%
                                                                                                                                                            71%
               68%
                                                                                                            65%                                    65%



                                                                      46%                                                         48%

                                      39%                                                          38%

                                                                                                                                                                    29%
                                                                                                                   27%

                      15%




                                         il
             Forestry, Logging Mining & O &      Manufacturing                           Wholesale T rade   Retail T rade     Finance &         ICTs       T otal for Private
                & Support      Gas Extraction                                                                                 Insurance                         Sector
                 Activities
Source: Electronic Commerce and Technology Survey; Statistics Canada, April 2002.

                                                                                                                                                                                             13
                                                               Continuing Challenge:
                                                               Growth concentrated in a few key Sectors

                                          Value of Internet Sales ($millions)                           1999       2000              2001
                                      Manufacturing                                                     900.0      1304.8            1680.3
                                      W holesale trade                                                  156.3      1041.2            1914.7
                                      Transportation and warehou sing                                   164.3       990.2             937.4
                                      Retail trad e                                                     610.6       889.9            1485.1
                                      Finance and in surance                                            320.8       634.5             623.7
                                      Professional, scientific and techn ical services                  406.1       334.6             423.5
                                      Information and cultur al industri es                             552.7       273.9             388.5
                                      Accommodation and food services                                   429.3       175.3             259.4
                                      Real estate and rental and leasing                                114.8       137.0               ...
                                      Educational services (private sector)                               ...       71.4              80.6
                                      Admini stration and support, waste
                                                 m anagem ent and remedi ation services                  …          63.5                ...
                                      Arts, entertainment and r ecreation                                ...        10.5                ...
                                      Management of comp anies and enterpri ses                          ...         7.2                ...
                                      Health care and so cial assistance (private sector)               10. 0        3.1               -6.9
                                      Utilities                                                         15. 8        X                  ...
                                      Mining and oil and gas extraction                                 15. 0        X                  ...
                                      Forestr y, logging and support activities                          …           ...                …
                                      Other services (except public admin istration                     27. 4         x                 ...
                                      All private sector                                               4,179.7     7,245. 6          10, 388.9
                     Note:    … Figures not availabl e     X Confidential Data         Source: Statistics Can ada SECT 2000, 2001




                                                                  Continuing Challenge:
                                                                  Slow Regional Roll-Out

                                 60%          56%

                                 50%                42%
                                 40%
                                 30%                          27%
                                                                 22%
                                 20%                                                  12%
                                                                                 9%                    12%
                                 10%                                                            4%                                            6%
                                                                                                                  2% 3%                2%               1% 3%
                                     0%
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                                                               Share ecom              Share GDP


Source: Forrester Researc h, I nc.




                                                                       Forward Agenda


                   Policy                                                                       E-Business Development

                          • Privacy                                                                          • SME Acceleration
                          • Security                                                                         • Sectoral / Regional Rollout
                          • Authentication                                                                   • Broadband Development

                          • International Ground Rules
                        Continuing Challenge:
                        Businesses Looking For Broadband Connectivity
                                               B roadband
                           70%
                           70%              67%
                                                           63%
                                                                           60%
                                                                                           57%
                           60%
                           60%

Percentage of
                           50%
                           50%        45%
companies saying                                     44%
                                                                                                    2001
broadband will be          40%
                           40%
                                                                    38%
                                                                                                    2002
                                                                                     32%
critical to their
                           30%
                           30%
success this year
and next year              20%
                           20%
                                                                                                   Source: InternetWeek,
                                                                                                   Source: InternetWeek,
                                                                                                   September 2001
                                                                                                   September 2001
                           10%
                           10%                                                                     n=301 companies
                                                                                                   n=301 companies


                            0%
                                  Fe wer han 20
                                  Fe wer tthan 20    20 to 99
                                                     20 to 99     100 to 499
                                                                   100 to 499      500 employees
                                                                                   500 employees
                                    employees
                                    employees       employees
                                                    employees     employees
                                                                  employees           or more
                                                                                      or more




                        Growth of E-Business and Broadband Deployme nt


                                 • Creating
                                   Economy-
                                   wide Platform
                                                             • Access for
                                   for
                                                               SME’s
                                   e-Business
                    • Greater
                      Availability,                              • Sector-wide
                      Affordability
                                      Virtuous                     deployment

                    • Increased
                      Capability of
                      Networks
                                       Circle                    • Profitability


                        • Increased                 • Generating
                          Sustainability              Revenue Streams
                                                      for Infrastructure
                                                      Investment




                               For More Information




                                                                            Electronic Commerce
                                                                              Branch Web Site
                                                                             www.e-com.ic.gc.ca
                            Success Stories




•     E-com Success Stories
      (Industry Canada)




    http://e-com.ic.gc.ca/english/stories




                              E-business Tools

ebiz.enable
www/strategis.ic.gc.ca/sc_indps/ebiz/engdoc/home page.php

SourceCan
http://www.sourcecan.com/e/index.cfm

SME E-Business Information Toolkit
http://strategis.ic.gc.ca/SSG/ee00240e.html

Student Connection Program
http://www.scp-ebb.com/

				
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