Will Quebec's digital strategy make local merchants more competitive?

The Quebec government recently published its  Quebec Digital Strategy , a long-awaited document in a context where digital technology is disrupting services to citizens as much as the economy and culture.

As specialists in  omnichannel strategy , the Strategy quickly caught our attention, especially since we have the success of local businesses at heart, and we are curious to see how its implementation will change the possibilities for these companies, which are currently going through major upheavals, both because digital technology is forcing them to review their way of operating and because it is bringing in new competitors, often foreign giants, and because it is also making it possible to reach customers up to here inaccessible.

So what does this Quebec Digital Strategy hide for Quebec merchants?

Let us first note that the Strategy wants to position itself as a real ambitious social project, oriented around seven different sectors, namely infrastructure (Internet connection), training, public administration, cities, health, culture , and the economy.

It is this last sector that interests us in particular, and it is with the orientation “An economy of digital excellence” that the Strategy is aimed more directly at the majority of companies, although some companies work for example in sectors related to health or culture or provide network infrastructure.

DIGITAL INTENSITY… BUT WHAT DOES THAT MEAN?

The orientation “An economy of digital excellence” aims at a target of 50% improvement in the “digital intensity” of all businesses in Quebec over 5 years (from 2016 to 2022). Concretely, the digital intensity is an index calculated from a set of indicators put together by the Institut de la statistique du Québec (whose website was ironically completely out of order when writing of this article, and all day January 12, 2018; doesn't the government have a continuity plan for its hosting?)

These observations are grouped into  37 different general indicators , which vary from the use of the Internet by businesses, to online sales, through mobile Internet access offered to employees, and the electronic exchange of information. . They are grouped into very broad themes such as informational excellence, customer experience and digital governance.

“For the moment, while certain findings from the Survey on the integration of the Internet into business processes are  beginning to be published in  various reports , it is difficult to find clearly what “digital intensity” really means. and above all, if this indicator really testifies to the digital vitality of our organizations, or simply to the use or not of technologies taken in the very broad sense.”

This target raises several questions for companies wishing to improve their digital presence:

• Do these indicators really guarantee success or competitiveness in a globalized digital world?
• Can you obtain a good rating and, despite everything, be in danger from a competitive or financial point of view?
•  
• Why not choose an indicator based on digital business success?
  • For example in incremental revenues and savings generated, such as the contribution of e-business to GDP.
  • A facet concerning the generation of income from international customers (without necessarily speaking of exports) could have been added to such an indicator.
• As this is a regional indicator, how do you compare to international players?
  • What rating would, for example, Amazon, Google, Facebook or Apple obtain with regard to this index?
  • What is the average rating in Canada? In France? In the USA?
• Since the index is calculated on a large number of individual points, is it possible for a company to implement many tactical points while having a weak or inconsistent overall strategy, which will end in failure?

“At the end of the day, the average entrepreneur or manager understands (and can support) the orientation's intentions, but the question remains: will this digital strategy strengthen our business in a context where  more than 70% of purchases in line of Quebecers escape the merchants here ?”

To this end, the sub-objectives of the strategy provide a little more concrete detail.

1. THE DIGITAL TRANSFORMATION OF COMPANIES, ALL SECTORS COMBINED

This objective aims to raise awareness among managers, particularly in SMEs, of the need for digital transformation, and to intensify digital efforts, particularly in terms of e-commerce, industry 4.0 and building data modeling. .

The more concrete measures proposed seem to be concentrated around 3 axes:

A) SPECIALIZED SUPPORT FOR 3,000 SMES

These include the  program set up with the CQCD , which already involved 1,325 retailers with a  subsidy of $4.63 million  (about $3,500 per retailer, which covers approximately the cost of a few days of courses or a few thousand digital advertising visits, i.e. a few dozen transactions with a typical conversion rate).

Other companies will obtain preliminary diagnoses and support, particularly for Enterprise 4.0, via  MESI's regional economic development advisors .

B) THE MACH-FAB 4.0 PROGRAM

This program mainly concerns support for the  digitization of manufacturing processes in manufacturing companies in the aeronautics sector . Its impact is likely to be negligible for the vast majority of merchants.

C) IMPROVED FINANCIAL SUPPORT FOR 1,700 SMES

These are mainly  improvements to existing programs and tax credits , in particular:

• Tax credit relating to the integration of IT  : this program is intended for SMEs, in particular merchants for the planning and implementation of an integrated management software package for operations (ERP), customer relations ( CRM), or supply chain (SCM) and related material.
• Essor Program  : One  component  of this program concerns  “Digital projects relating to the acquisition of equipment and software by businesses in the retail trade, wholesale trade – distributors (with value-added activities) whose eligible expenses are of at least $250,000.”  This assistance available to traders  only covers the purchase of equipment and software , and covers 15 to 25% of the costs in the form of a contribution, loan guarantee or equity participation. The other 2 of the 3 components of this program target the logging sector and companies affected by countervailing and  anti- dumping duties .
  
• [ Créativité Québec  : this program does not seem to be accessible to merchants.]

WHAT VALUE FOR OUR TRADERS?

In the first or third case, several SMEs could benefit from welcome assistance, albeit linked in a limited way to the digital world: the tax credit relating to the integration of IT covers types of systems that already existed 25 years old, and which could very well be acquired without even resorting to digital technology.

Note, however, that the retail sector includes  27,321 establishments in Quebec , not counting the automotive, food, distribution and wholesale trade sectors.

For most measures with the exception of the Essor program, it is difficult to see how the program will cover the biggest players, and the less local establishments, which are more at risk in the face of the international competition brought by digital technology.

Not to mention that these big players have complex processes and a wider range of products and services that are more difficult to bring online. Especially since according to the most recent figures from the ISQ,  only 32% of retailers and 26% of wholesalers in Quebec sell online , and online sales seem to be only one of the 37 indicators observed, among several others with less certain economic impact.  

Note also that many of these programs can only cover the purchase of equipment or software: will these purchases be made in Quebec?

And why do we only cover this type of investment (we could, for example, support online marketing in Quebec, which would also support the Quebec media (and advertising) sector (which is also experiencing disruptions)?

2. A STRENGTHENED TECHNOLOGY SECTOR

This objective specifically concerns the digital technology sector in Quebec. Based on the Digital Economy Action Plan and the  Startup Québec program , it aims above all to  enrich the possibilities for start-  ups  in Québec, as well as to support the Québec technology sector .

Although this facet of the Strategy is in no way aimed at merchants, they could see the possibility of forming partnerships with targeted technology companies which, for their part, would need merchants to test or apply some of their innovations.

3. AN INTERNATIONAL DIGITAL PRESENCE

This objective targets the use of digital technology to make Quebec's offer known abroad, emphasizing that digital technology lowers borders.

In this case, it is said that the government “will intensify its export initiatives to support the presence of Quebec companies on world markets through the use of digital means, for example through e-commerce”, a welcome measure in the context explained in the introduction.

However, the two concrete measures listed in this section do not directly target merchants, but rather:

• The  Technopolys project , which aims to promote Quebec's technology sector abroad, and of which  Adviso is already a partner  ;
• The  ENCQOR project is joint with Ontario , which concerns the place that the two provinces want to take in innovation around next-generation networks (including 5G), which will be able to support various applications, particularly in intelligent transport.

AN OPENING TO GO FURTHER

So far, our analysis may seem to draw a critical portrait of the Strategy, but note that its text also mentions:

“Since the implementation of the Digital Economy Action Plan is evolving, its measures will be adapted and enhanced based on the progress of the digital economy as well as the needs of Quebec businesses and organizations. Thus, new tools can be made available to them, and improvements can be made to current measures in order to accelerate this movement, stimulate digital innovations and strengthen the digital technology sector.”

It is in this perspective that this text is published: the orientations of the Digital Strategy of Quebec and the general intentions described in this document are motivating for the development of digital technology in Quebec.

However, one can easily imagine that established Quebec merchants (both in B2B and B2C), those who have been investing in their own digital strategy for 5, 10 or 15 years (Amazon will be 23 this year), are trying to remain efficient on a daily basis and are already waiting for version 2.0 (or 5.0) of this digital strategy, which will really allow them to push the limits and the competition.

We are thinking, among other things, of themes such as new digital logistics models, the digitization of stores in an omnichannel context, and the evolution of business models, in particular the offer of products in the form of subscription services rather than simple purchases. .  

AN OBLIGATION TO REINVENT YOURSELF?

Reading the guidelines of the Strategy finally forces traders to question themselves: what if the very role of traders were to change?

For example, Amazon is a major retailer, but is also a major technology player and a major smart logistics innovator. What will it be like for traders 10 or 20 years from now?

• Perhaps they could set themselves up as technology firms, since technology is taking up more and more space in their activities (and their budget), which would open up all sorts of opportunities for them?
• Maybe they should think about creating new services or products that would make them not only resellers, but also producers?
• Maybe they should approach the  startup  sector here in order to create new possibilities?

Either way, when it comes to e-commerce, “we're only at day 1,” as Jeff Bezos would say. Hoping that this Strategy will also help our merchants to innovate as much (and even more) than Amazon.