By: Margarita Garcia - Managing Director, Naoitech
Small businesses are the backbone of the Canadian economy. They create jobs, drive innovation, and contribute to the vibrancy of our communities. Investing in small businesses is not only good for the economy, but it is also the path to reignite the Canadian economy.
During the past 4 years, small businesses have suffered insurmountable strain caused by the pandemic, the disruptions of their supply chains, the investment required to comply with sustainability regulations, and the economic downturn. Despite all these challenges, entrepreneurs have approached this time as a possibility of reinvention and courageous determination to continue moving forward, which is why investing in these businesses not only will benefit the economy, but also foster a climate of innovation and prosperity for their communities.
According to Innovation, Science and Economic Development Canada (ISED), there are approximately 1.22 million employer businesses in Canada; Small businesses comprise the vast majority at 97.8% (1.19 million), medium-sized businesses accounted for 1.9% (23,395), large businesses made up the remaining 0.3% (3,128). The data clearly indicates that a massive investment in small businesses is required to invigorate the economy and to drive Research and Development (R&D) at this crucial moment, when technological advances are creating a new industrial revolution. However, there is currently a lack of investment in small businesses. Banks often prioritize short-term profitability and may be hesitant to invest in companies with higher perceived risk, even if they have long-term growth potential.
Relying solely on large corporations for economic success is risky. Large corporations, in general, are diseconomies of scale with limited investment in R&D. They are primarily focused on maximizing shareholder value, which often translates into relentless pressure to maintain specific profit margins. Most of these large corporations are not committed to the success of the economy of the country where they operate. When the economic conditions change they either compensate for the losses with price increases, massive layoffs or simply relocate seeking more favourable tax climates, and lower labour costs, leaving behind economic devastation.
On the other hand, Canadian entrepreneurs are fueled by their passion for creating products and services that strengthen their communities and industries. They are fully committed to the economic prosperity of the country aiming for long-lasting contributions rather than short-term economic gain. That is why it is crucial to provide these companies with the investment, resources, tools and support to thrive in an aggressive business environment. A relevant example is the rise and fall of BlackBerry, a company that in the 2000s, led the development of smartphone technology with breakthroughs such as push email, messaging services, and advanced encryption. These features focused on the security and privacy of their business users and to this day have not been matched by any of the current Smartphone company manufacturers. Alas, their slow approach to innovate and adapt to the changing mobile landscape ultimately led to their decline. If the investment required to perform Research and Development is not provided, Canadian companies can be left behind in innovation and competitiveness.
At Naoitech, we have conducted extensive research on several AI initiatives and solutions that can address some of these issues:
Small business investment analysis: Banks can optimize their business loan assessment approach using AI predictive analysis. The current bank loan approaches are quite simplistic and outdated. By analyzing only the credit history and liquidity of the business and not taking into account current economic conditions, long-term value, R&D, and future innovation capabilities, they could be missing on companies that are on the verge of innovation and that can make long-lasting contributions to the economy. By effectively leveraging AI, banks can improve their ability to serve small businesses, reduce risks, and enhance overall profitability while fostering a more inclusive and efficient lending environment.
Business distribution per region: Using digital twin technology, the Canadian government can develop sophisticated models of each region within the country. These models can include factors such as: demographics, population needs, industry trends, future technology requirements, infrastructure, resources, economic conditions like employment rates, GDP, and investment levels. Using that data they can Identify regional economic gaps and opportunities so they can create programs to provide training and allocate the resources for existing and potential entrepreneurs offering those goods and services.
Canada has made outstanding contributions to the world. Most of the advancements that we see in AI today have been driven by the work of Canadian Nobel Prize Laureate Geoffrey Hinton. His work in neural networks has been instrumental in advancing many of the AI breakthroughs we use today. Entrepreneurs in Canada have the drive, the intelligence, and the commitment to make products and services that contribute to their communities and industries, all they need is the support, investment, and tools to succeed so Canada can become a leading economy once again.
Sources
Stephanie Tam, Shivani Sood, and Chris Johnston “Analysis on small businesses in Canada, second quarter of 2024.” June 13, 2024
Statistics Canada - Monthly estimates of business openings and closures, June 2024
https://www150.statcan.gc.ca/n1/daily-quotidien/240926/dq240926b-eng.htm
JLuo - Harvard Alumni "The Rise and Fall (and Rise Again?) of BlackBerry"
https://d3.harvard.edu/platform-digit/submission/the-rise-and-fall-and-rise-again-of-blackberry/