Will Québec’s digital strategy make local businesses more competitive?

The Québec government recently published its Digital Strategy, a highly awaited document in a world shaken by digital technology, especially in services to citizens, the economy and culture.

As omni-channel strategy specialists, this Strategy caught our attention right away, since we support the success of local businesses, and are eager to see how this will open new possibilities for them during this major digital transformation, which is forcing them to rethink the way they conduct their operations and is bringing new competitors to the market—often foreign giants. It also allows them to reach clients they couldn’t reach before.

What does this Digital Strategy mean for our local businesses?

First, note that this Strategy is meant as a real, ambitious social project, especially for the following 7 sectors: infrastructure (Internet access), education, public administration, cities, health, culture and economy.

Our focus will be on the latter, and on the section: “An economy of digital excellence”—since this applies directly to a majority of businesses, even if they operate in health, culture or provide network infrastructure.

Digital intensity…what does that mean?

The section “An economy of digital excellence” states a willingness to improve by 50% the “digital intensity” of Québec businesses in 5 years (from 2016 to 2022). “Digital intensity” refers to the Institut de la statistique du Québec’s index, based on various indicators (ironically, their website was down all day while I was writing this article, and on January 12, 2018; doesn’t the government have a continuity plan for its hosting services?).  

These indicators are clustered in 37 different general indicators, such as businesses’ Internet uses, online sales, mobile Internet connections for employees and digital data exchanges. These indicators are then sorted by larger themes, like informational excellency, customer experiences and digital governance.

“At the moment, even if different reports are being published with findings from the Enquête sur l’intégration d’Internet aux processus d’affaires, it’s difficult to understand the real meaning behind ‘digital intensity,’ and more importantly, if this is a true indicator of our businesses’ digital vitality, or mainly a simple term to describe their basic use of technology.”

This raises some questions for businesses who want to improve their digital presence:

• Can these indicators really ensure success or competitiveness in the digital world?   
• Even with a high rating, can a business find itself in a financial or competitive crisis?
• Why not choose an indicator based on success for a digital business?
  • For example, incremental revenue and savings generated, like the amount of digital businesses contribution to the GDP.
  • Revenues from international clients (not necessarily exportations).
  • Since it’s a regional indicator, how can we compare with international players?
    • What would Amazon, Google, Facebook or Apple’s ratings be?
    • What would be Canada’s? France’s? The US’s?
• Since this indicator is based on several criteria, is it possible for a business to build a weak or incoherent strategy and fail?

“In the end, an entrepreneur or an average manager can understand (and apply) this orientation, but a question remains: will this Digital Strategy help our businesses, since 70% of online sales in Québec are not made locally?”

A few sub-points in the Strategy could give us more details about that.

1. Businesses’ digital transformation, in all industries

The goal is to sensitize business owners, particularly in SME, about the necessity of a digital transformation, and an increase of digital efforts, especially in terms of e-commerce, 4.0 industry and modelling building data.

Here are the most concrete steps proposed:

a) Personalized assistance for 3,000 SME

This program, created with the CCQD, is already in place for 1,325 sellers, who share $4.63M of funding (i.e. $3,500 per seller, which is the cost of a few classes, some digital advertising or a few sales with an average conversion rate).

Other types of businesses will have a preliminary diagnostic and support from consultants in economic development at MESI, particularly for 4.0 businesses.

b) MACH-FAB 4.0 program

This program was created to digitize the production process of manufacturing in the aeronautic industry. Its impact will probably be negligible for a vast majority of businesses.  

c) Better financial support for 1,700 SME

This is mostly an improvement of existing programs and tax credits, such as:

• T.I. integration tax credit: this program helps SME, especially retailers who want to implement new software package for their operations, integrated management, customer service, logistic chain or supply.
• Essor Program: part of this program is about “Digital projects dedicated to equipment and software acquisition, retail businesses, wholesale, distributors (with added value), if they have a minimum spending of $250,000.” This funding can only be used to buy equipment or software, and covers 15 to 25% of the cost, in the form of monetary contributions, loan guarantees or stakes held. The two other parts of this program are dedicated to logging, and businesses concerned by countervailing duty and antidumping.
• [Créativité Québec: this program is not available to retailers.]

What is the value for our businesses?

In the first or third cases, some SME could benefit from a welcomed support: T.I. integration tax credit has been available to existing systems for 25 years, and you could apply for it without a digital plan.

Let’s not forget that the retail industry includes 27,321 establishments in Québec, excluding the automobile, food and wholesale industries.

With the exception of the Essor program, it’s difficult to see how this program will help bigger players and outsiders, both facing more risks of international competitions brought on by digital change.

These bigger players have complex processes and a wider range of products and services, all of them harder to sell online. According to ISQ’s latest numbers, only 32% of retailers and 26% of wholesalers in Québec generate their sales online. And online sales seem to be only one of the 37 indicators observed, among others with more uncertain economical impacts…

Some of those programs do not cover the cost of equipment or software: where will we buy them? In Québec?

Why not pay for this type of investment? It could help e-commerce development in Québec, thus supporting the media and advertising industries (also going through tough changes).

2. Stronger digital industry

Only digital businesses in Québec are concerned with this section. With the help of an Action Plan for digital economy and Startup Québec program, the goal is to create new possibilities for startups in Québec, and support the local technological industry.

Even if retailers are not concerned by this Strategy section, they could benefit from a partnership with those affected by it, since they need sellers to join forces and test their innovations.

3. National presence in digital technology

This part aims to promote digital technology, in order to advertise Québec’s offering of products, and the fact that it can open borders.

In this case, the government will “intensify its exportation initiatives to support Québec’s businesses presence in global markets, with digital tools such as e-commerce”; a welcome measure in our present context.

However, two concrete actions listed in this section don’t concern retailers:

• Technopolys project, which aspires to promote our digital expertise abroad; Adviso is already a partner.
• ENCQOR project, in collaboration with Ontario, which concerns the roles both provinces want to take in network innovations (like 5G), and could support new apps in intelligent transportation.

An opening to go further

So far, our analysis may seem critical of the Strategy, but we also note the following passage:

“Since implementing this Action Plan in our digital economy is a progress, adjustments and enrichments will be made depending on the economy’s evolution, as well as Québec’s businesses and organizations needs. Thus, new tools could be created for them, and adjustments made to facilitate the process, stimulate digital innovation and reinforce the digital industry.”

That’s why this Strategy was published: as a way to inspire digital expansion in Québec.

However, it’s hard to imagine how this will help well-established Québec businesses (B2B and B2C), who have been investing in their Digital Strategy for 5, 10 or 15 years (Amazon will celebrate its 23rd anniversary this year), are trying to stay competitive every day and are already waiting for the 2.0 (or even 5.0) version of their Digital Strategy, to push back boundaries and competition.  

This leads us to consider new digital logistic patterns, digital shops in an omni-channel context and evolving business models (products lines, like a services membership instead of a simple sale).

A need to reinvent ourselves?

By reading this Strategy, businesses are forced to ask themselves an existential question: what if the main function of a seller were to change?

For instance, Amazon is a major retailer, but also a major digital player and innovator in smart logistics. What about businesses in 10 or 20 years?

• Maybe they could become digital firms, since technology is taking more and more place in their activity (and budget), which could open all sorts of opportunities?
• Maybe they should consider creating new services or products that could make them not only retailers, but also producers?
• Maybe they should get closer to local startups, in order to create new opportunities?

In any case, “it’s always day one” for e-commerce, as Jeff Bezos would say. Let’s hope this Strategy will help our local businesses innovate as much (if even more) than Amazon.