Lorna Wright
Executive Director - Centre for Global Enterprise
Part of the Spotlight on Scaling Canada’s SMEs

SMEs Need to Adopt A Global Growth Mindset to Scale Up

Takeaways

  1. Canada needs more institutional support for SMEs to scale up in the form of financing, mentorship, talent management and global connections. The government must communicate better on where and how SMEs can access this support.
  2. SMEs should transition from a build-and-sell mindset to a build-and-grow mindset. They must think global from the start, aim to export, and must pay particular attention to the high-growth markets of the future.
  3. Academic institutions should provide a safe space for budding entrepreneurs to try out ideas. They must also provide opportunities for experiential learning through partnerships with businesses.

Action

Our government must understand and act on the fact that our SMEs need better access to capital, talent attraction and global connections to scale up. Although there are government programs targeted towards these areas, it needs to do a better job of making them accessible.


Why are SMEs important for Canada’s future economy?

SMEs constitute 99.8% of Canadian companies and create approximately 75% of the jobs in the private sector, so they are extremely important. It is also extremely important that Canadian SMEs have a global mindset. Canada represents only 2% of the global economy, so we are a tiny market. SMEs need to have access to international customers in order to grow and a lot of research shows that SMEs that export tend to be more productive and competitive; they grow faster with higher revenues, are more innovative and are less vulnerable to risk. But, according to federal data, only 11% of Canadian SMEs export and according to the Toronto Regional Board of Trade data, only 4% of manufacturing sector SMEs export. We need to encourage SMEs to move from a build-and-sell mindset to a build-and-grow mindset. If they are able to access international markets with some more effort, their revenues could jump from $10 million to $100 million.

“SMEs constitute 99.8% of Canadian companies and create approximately 75% of the jobs in the private sector, so they are extremely important.”

There is a lot of support for start-ups, but we need much more support for scale ups. Contrary to popular belief, financing may not be the largest impediment to scaling. The biggest challenge for SMEs is finding the best talent, that is, the people that can marry technical talent with business talent, expertise and experience. Financing helps companies find talent, scale sales and commercialize technology; so, it is the fuel for growth.


What roles should government, investors and our universities play in helping SMEs scale?

There needs to be a stronger relationship between the government and businesses. Although there are funding resources out there, they are inconsistent and extremely difficult and time-consuming to find. If the CEO of an SME is spending all of his or her time raising money, it is not the best way to run a business. The government needs to get better at marketing the available funding programs. I have heard so many SME owners talk about either not knowing where to get funding or finding the funding process so onerous that they feel it is not worth it. So, we also need to make access to funding easier by centralizing our funding programs and doing away with the red tape. Ultimately, our government must understand and act on the fact that our SMEs need better access to capital, talent attraction and global connections to scale up. Although there are government programs targeted towards these areas, it needs to do a better job of making them accessible.

“Financing helps companies find talent, scale sales and commercialize technology; so, it is the fuel for growth.”

In terms of investors, the evidence is clear that Canada’s funding community is a lot more risk averse than America’s. Financial institutions need to have an intelligent approach to risk. Our banks got us through the 2008-2009 recession, but our investors and venture capitalists need to take some risk in order to reap rewards. We need to inculcate the mindset that it is okay to fail, learn and grow in our investors and entrepreneurs. I was delighted to see the Canadian Business Growth Fund (CBGF) rise up to the occasion because it fills the funding gap for scale ups. It provides not just capital, but also counsel, which scale ups need just as much, if not more. I also like the fact that it provides patient capital with a long-term outlook.

Entrepreneurs themselves, on the other hand, must take more risks as well as fully utilize all the services and resources at their disposal. They must make use of EDC, BDC, the Trade Commissioner Service, the Centre for Global Enterprise, CBGF and foreign agencies.

“SMEs that export tend to be more productive and competitive; they grow faster with higher revenues, are more innovative and are less vulnerable to risk.”

Our universities should be used by businesses as a key resource and source of talent. For example, I often hear from companies that they do not speak the foreign language required to do business abroad. If you do not speak it, hire someone who does. With Canada’s diversity, our universities have people from every country around the world. So, if an SME cannot figure out the business culture of another country, it can hire a student from that country. Or, it could hire a group of students through York University’s Strategy Field Study to do a strategy plan for them. So there are lots of ways in which the academic community can integrate with the business community. I do not think a lot of SMEs are aware of what is available through business schools that could fulfil their needs. I often hear from SMEs that is it takes a lot of time to bring an intern up to speed. But they can find a way to make it work, especially because internships give them a chance to test drive a potential employee with no obligation to hire them if they do not meet expectations.


What role should academia play in boosting entrepreneurship in Canada?

I am a bit of an usual academic; I became an academic rather late in life and I would also consider myself to be an academic entrepreneur. In the last 15 years, business schools in particular, have started to actively promote entrepreneurship as a career option. They are also taking pains to instil an entrepreneurial mindset in students before graduation. Academic institutions can also provide role models for students. We already have executives-in-residence, so if we can add entrepreneurs-in-residence students will get a chance to interact with and learn from them. The addition of more experiential education through internships with small and medium-sized enterprises, coop programs, and other integrated learning opportunities is also crucial. We need to bring the world into the classroom and let students experience it while they are still studying. We also need to teach learning skills and critical thinking since much of the technical knowledge that students are going to learn in their courses will be obsolete five years into their working life. But learning how to learn and think will never get old.

“We need to inculcate the mindset that it is okay to fail, learn and grow in our investors and entrepreneurs.”

Most importantly, academic institutions should provide a safe space for budding entrepreneurs to try out ideas. Students often start to build companies while they are still at school and academic institutions are able to connect them to the opportunities, contacts and resources they might need. Moreover, fostering both a growth mindset and a global mindset is critical, not just among entrepreneurs but for all students. Universities can help develop that global mindset through exchange programs and experiential learning abroad. We also need more integration between courses so that technology and management, marketing and finance, science and strategy move forward together. Students should be able to understand that all aspects of our economy are linked; things are not as siloed as they think.  We also need integration between academia and the business world because theory needs to serve practice. As one thinker once said, “There is nothing so practical as a good theory.” But I think we have lost sight of that.


How does the Centre for Global Enterprise fit into Canada’s entrepreneurship ecosystem?

We started the Centre for Global Enterprise in 2013 to facilitate integration and collaboration between SMEs and economies all over the world. Our website is almost like a search engine itself. We collect information from all the other actors in the ecosystem so that an SME can find it easily. We source information from over 100 different organizations such as Export Development Canada (EDC), Business Development Bank of Canada (BDC), Royal Bank of Canada (RBC), Scotiabank, Japan External Trade Organization (JETRO) and Korea ‎Trade-Investment Promotion Agency (KOTRA). More than competing with other universities, we focus on working with them towards the common goal of improving the Canadian economy and best equipping our students – the future workforce – for success. I think we need more public-private partnerships to foster the growth of Canadian SMEs and that is exactly where CGE is trying to position itself.

“Fostering both a growth mindset and a global mindset is critical, not just among entrepreneurs but for all students.”

CGE also wants to promote a global mindset among Canadian SMEs. First of all, companies need to recognize, understand and bridge the gap between different business cultures. SMEs need to understand what to adapt, what to adopt and what to keep the same in a global context. We are currently running a pilot project called the Global Business Alumni Network program. It allows Canadian SMEs to develop an international coaching connection with one of 30,000 of our alumni working in 90 countries. Our goal is to ultimately build a network of several internationally-engaged business school alumni across Canada, because that would be extremely helpful to our SME community as well as the alumni.


How do you envision Canada’s economy by 2050?

Canada needs to further diversify its trade portfolio, and I was delighted to see that our International Trade department was renamed International Trade Diversification. I was also happy to see that we now have a new ministry for Small Business and Export Promotion. We have to reduce our trade dependency on mature, slow growth markets like the US and focus on emerging fast growth markets. By 2050, the global top 10 in terms of GDP will be countries that are not even in Canada’s top 20 current trading partners list. So, Canadian companies need to have more foresight when choosing trade partners. Moreover, Canadian companies have to get better at taking advantage of our trade treaties across the world.

“By 2050, the global top 10 in terms of GDP will be countries that are not even in Canada’s top 20 current trading partners list.”


Part of the Entrepreneurship Series presented by:


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Lorna Wright
Executive Director - Centre for Global Enterprise

Dr. Lorna Wright is the Executive Director of the Centre for Global Enterprise and an Associate Professor of International Business and Organization Studies at York University. Dr. Wright’s research interests are in the areas of cross-cultural management, international negotiations, strategic alliances, conditions for SME business success internationally, and the situation of women-owned SMEs in the digital economy. She holds a PhD in Business Administration from the University of Western Ontario.


The Centre for Global Enterprise is based at the Schulich School of Business in Toronto. It was established in 2013 and counts both public and private sector organizations amongst its founding members. The Centre’s mission is to assist Canadian businesses reach their full potential through engagement with international markets. Its particular focus is SMEs and the innovation economy of rapidly-evolving businesses with global potential.