Manitoba’s future in the new world economy is one of significant challenge. The industries we relied on to generate our wealth are threatened by globalization, economic restructuring and regulatory reform. Our social institutions are under pressure to become more accountable and responsive and our economic and cultural heritage is in danger of being overwhelmed by external influences.

Manitoba’s future is also one of significant opportunity. Our diverse industrial base, impressive cultural sector and broad-based social institutions are restructuring to meet the challenges of an information-based global economy. Manitobans from all walks of life are anxious to participate in the new competitive landscape to ensure a strong economy for future generations. Manitobans are interested more than ever in creating their future.

Manitoba can be a leading competitor in the global economy. But, we need to consider carefully and plan prudently for how we will establish ourselves in the Knowledge Era.

This paper has three goals:

This paper is divided into four main sections. First, a review of the demands and expectations of the new global economy and the implications for Manitoba is undertaken. Second, a discussion of several development models used by other jurisdictions to help their regions make the transition to the new economy will be presented. And third, the paper discusses ways in which Manitoba can survive and thrive in the new economy. Finally, the paper will make several important recommendations regarding our shared future.

Evidence emerging from the United States and other advanced industrial nations has demonstrated that variations in local institutions and the shape and size of corporations have much to do with regional capacities for adaptation. In fact it is now recognized that differences in economic performance within nations can be as great or greater than the differences between nations. In other words, economic success is much more dependent on regional than national leadership. The implication for Manitoba is that the responsibility for our economic success will reside within the Province. How we work together will determine our level of employment, our possibilities for generating wealth and our quality of life.

As our traditional sources of information-based employment begin to decline — finance, government, retail, telephony, education — we need to look beyond the traditional models of industrial revitalization which seek to achieve success by building science parks, funding new enterprises, and, promoting links between industry and universities.

The Manitoba Innovation Corridor promotes the idea that nothing less than an opening of the boundaries among technology businesses and between these firms and surrounding financial, educational, and public sector will enable Manitoba to compete successfully for knowledge-based jobs in the global economy. Particular areas of concentration would be with start-ups in key areas like networking, wireless communications, multimedia, and Internet applications.

The concept being recommended will take several years to realize. In that time we will need to have many institutions and entities buy into the vision. Our business community will have to work hard to overcome in such a brief time the culture and practices of secrecy, self-sufficiency, and risk-aversion which have been such an integral part of the current industrial system. Indeed the mechanisms of social and institutional change need to be far more flexible than they are today for such a change to occur.

It will take the passage of several years to allow for the implantation of the cultural changes made necessary in this report. We will know when we have achieved success when our technologists develop a stronger commitment to one another and to the cause of advancing technology and their craft than to individual companies or industries. In this context a company, university, college or government agency is just a vehicle which allows you to work. If you're part of the industry the important thing is to do excellent work. If you can't in one entity you'll move on to another one.

This report makes four very important recommendations:

Recommendation One:

Economic Development Winnipeg, in conjunction with the Manitoba Innovation Network must begin the process of visioning, planning and developing a Manitoba Innovation Corridor to act as focal point for our digital economy strategy and that the process begin with the health telematics, new media content and education and training sectors.

Work should begin under the responsibility of a new Executive Director who would be funded by the Province and act as liaison between the Innovation Council and the new Corridor. The Corridor would have as its central role the bringing together of Business, Education, and Government in support of Innovation Corridor members. This collaboration would extend to all elements of the community as each plays their part in creating wealth and employment opportunities in the following areas:

Private Sector partners must use their buying power and business networks to provide important information and support to Corridor members. Our industry partners must:

The Provincial Government must articulate the realities and value of the networked industrial system and describe its planned efforts toward shifting the patterns of collaboration and competition among networks of specialist producers. The Provincial Government should assume a lead role in the following areas:

Our provincial government, in conjunction with other community stakeholders, must create or assign an "Innovation Council" charged with the task of recommending a strategy and implementation plan for Manitoba’s digital economy future. This strategy/plan must have clearly defined goals for short, medium, and long-term success, measurable outcomes and deliverables. The Innovation Council will have at its core the task of recommending and monitoring the restructuring our regional institutions to make them more capable of responding to the digital economy. The Innovation Council should consider the following elements as high priority items for strategy formulation:

Recommendation Four:

Business education and government, leaders act at the earliest possible moment on the recommendations contained below Our community stakeholders need to articulate the importance of a new digital economy strategy in the overall plan for the province and transmit this information with the utmost urgency.

The world turns, as the expression goes, and so does the competitive advantage of cities. The strategic benefits Winnipeg once enjoyed because of its location are waning. The number of jobs, particularly well paying jobs, the City affords its residents is reducing in all of the traditional sources of employment: industry, health-care, government, and education.

While reduced budgets in the public sector are an important cause of job loss, a more serious long-term concern is the ability of Winnipeg’s information-dependant jobs (roughly seventy percent of Winnipeg’s job force) to compete in the new, global, and competitive information marketplace.

The pursuit of wealth is now largely the pursuit of information and its application to the means of production. Information technology companies and information intensive companies like banks have contributed significantly to the strength of the stock market over the last few years. Manufacturing and commodity companies now account for less than half of their prior weighting on the world’s stock exchanges. Microsoft, a knowledge-based company has few physical assets but now rivals General Motors in stock value. The wealth creating equation has shifted from "hard" material assets to "soft" human and knowledge-based ones. In turn, the new strategic benefit for cities all over the world derives from turning information into knowledge and applying that knowledge to work. These are the elements of the new value chain.

Powerful new information technologies are becoming the infrastructure for a new society based on the exchange of intangibles — ideas, information, knowledge and intelligence. This New World is referred to in many ways — "information society," "knowledge-based economy," "digital economy," "post-industrial society." Whatever name applies, the defining features of this new era are always the same. Physical distance as a factor in human relations shrinks in importance as the cost of an interconnected world goes down. The creation, manipulation and sharing of information and knowledge becomes the defining feature and the overriding human imperative of the new society.

Capitalizing on the digital economy hinges on the implementation of true multimedia. While the components of multimedia — voice, data, image and video — have been available individually for some time, it is the integration of these media that represents the sea of change.

True multimedia will enable real-time videophone conversations between experts in Winnipeg and New York as they discuss changes in international currency markets. People in Honolulu will chat face to face and exchange favourite recipes with relatives in Thompson. A patient in Nairobi will consult via real-time video and voice with a physician in Brandon while the physician reviews the patient’s digital lab results and medical records. Or a professor at the University of Manitoba will teach classes in London England using resources from the university's collection. These exchanges will take place between continents as easily as within cities, and often via a single piece of equipment.

Capitalizing on the digitized economy also hinges on another form of electronic exchange — the commercial transaction. The use of electronic commerce has enabled the airline industry to reduce the costs of issuing a ticket from $8 to $1. Banks, using essentially the same E-commerce technology, are reducing the cost of a basic transaction from more than a dollar today to an expected one-cent. Other electronic commerce applications create similar orders-of-magnitude reductions in costs. These changes result in the reduction of existing knowledge-based employment.

The move toward technology-enabled economies of scale is ongoing and increasing in its pace. As business adopts the new methods and processes made possible by technology, a fundamental shift occurs in the traditional white-collar job. Increasingly, white-collar jobs are refocused to support the methods and processes enabled by technology. As well, the main source for large numbers of new white-collar jobs becomes those jobs that are in or in support of the digitized, information economy. The competition for the best information has replaced the competition for the best farmland or gold fields.

Manitoba has been very successful in developing a diversified economy and in attracting post industrial era enterprises such as call centres. We have an unemployment rate that is the envy of the country. Our challenge now is twofold. First, we must build the support mechanisms that will help our industrial, social, and government sectors effectively transition their white-collar workforce from industrial workers to information workers. Second, we must concentrate on the opportunity to create new white-collar, high-value-added jobs to accept the inevitable casualties of the business process transition and to capitalize on the opportunities for Manitoba in the digital economy of the future. To do this we need to develop community-based policies that are aimed at maximizing Manitoba’s strengths in the new economy.

The following sections examine in greater detail the nature of the new, information intensive and digital economy and its technological underpinnings.

Over the next decade, all telecommunications will become Internet communications. The impetus for the shift will be the drive toward on line commerce. The Internet is becoming the central nervous system of a new global economy, the World Wide Web, a cornucopian mall. Taken together, they create a New Medium — the world’s largest and most accessible library, shopping mall, business market, museum, university, health information provider and entertainment vehicle.

As of 1997, online commerce totalled $8 billion dollars and included sales of everything from Cisco routers and Boeing aeroplane parts to natural gas and crude oil. Internet transactions had increased 1,000 percent in the short time between roll out of the capability and late 1997.

Also soaring is online financial trade. Charles Schwab & Co.—which holds a 35% share of online securities trading — reported 908,000 online trading accounts with assets of $66.6 billion. Online travel and software sales are climbing at an equally unparalleled pace led by Microsoft’s Expedia and an array of software suppliers. Billions of dollars in online mortgages were transacted in 1997. The World Wide Web makes every Internet user a possible Internet publisher and distributor, at radically reduced costs

Many observers believe that the rapid increase in the use of data networks and the growing ability to transmit voice over the Internet will mean "The Death of Telephony". Telephone networks have as their main purpose switching analogue voice circuits. Those networks are ill equipped to handle the extremely high volumes of traffic that characterize the world of the Internet.

"We have a revolution going here," says a Qwest VP. "We have 48 fibers running OC-192, that’s 10 gigabits per second, and each fiber can carry 8 to 16 WDM (wavelength division multiplexing) windows, and we can run four times as many fibers through our conduits. That means close to 30 terabits per second. We have no time for dinosaurs and museums around here."

That is not to say that those same observers see the inevitable death of the telephone company. The argument of importance is not which piece of technology hardware will supplant which as the dominant tool in the new economy but what all of the technology options taken together will do to the competitive landscape.

Businesses that survive these types of shifts, whether they be hardware related as in the case of telephone companies or business process related, are those that adjust. Businesses that thrive because of the shift are those that see an opportunity to capitalize, to innovate a new product or service, and get it to market quickly. They become the new drivers of the economy. They also become the new employers. They demand new skill sets from their workers and in turn produce new intellectual product.

A second fundamental force is becoming apparent in the information economy. The globalization of economic activity is the dominant paradigm for the next century. This new global economy reaches into the household budget, onto the factory floor, and into the office and the classroom.

Manitobans will feel the effects of this global competition in many of our traditional domestic markets. Two thirds of Manitobans (approximately 300,000) spend their entire working day dealing with information. In some way, over the next five years, all of these lives will be dramatically touched by the power that new information technologies bring to global competitiveness. Most information intensive jobs will be subjected to competitive pressures originating from elsewhere in the world. Many secretarial, clerical and administrative jobs will be eliminated by services or products provided by international companies.

Those of our businesses able to respond to the forces of digitization and global competition will survive, others will be lost. Many of our small to medium sized businesses will certainly be affected as they struggle to digitize and compete. But their struggle will be only part of the Manitoba picture. Service industries like education and health previously regarded as non-traded and therefore assumed to be above the effects of globalization will experience the global pressures of competition for their previously captive local markets. Our financial markets and commodity applications such as payrolls will be expected to compete for local market share against world-wide competitors as well. This struggle will be played out against the backdrop of a globalized service sector, including public services, that will be expected to operate in the context of reduced provincial and national regulatory autonomy.

The result is that Manitoba can expect an increase in the ratio of its imports to total provincial consumption. To offset this negative shift in the provincial balance of payments, Manitoba must increase its ratio of exports to total production if our local firms are to be sustainable. For firms to be sustainable they will need to address global market niches. Manitoba will need to show significant growth in the "value margin" of content and software production.

If we are to prepare for the substantive changes that are clear and apparent we must have an understanding of those areas of activity that will be most affected. We need to know where we might best place our planning efforts if we are to provide meaningful employment for literally a hundred thousand people.

New Media Contentis defined as data, text, sound, images or multimedia combinations thereof, represented in interactive digital format. The arrival of new media is rapidly forcing the transition from print to electronic publishing and along the way creating many new interactive multimedia information services.

The New Media Content industry is involved in four main activities. They create, develop, package and distribute content-based products and services.

The different segments of the industry include print publishing such as newspapers, books, magazines, corporate publishing; electronic publishing such as on-line databases, videotex services, audiotex services, fax-and CD-based services, video games; and the audio-visual industry such as television, video, radio, audio and cinema.

The new media content industry is the single most important sector, in both market value and employment, within the information industry at large. The content industry is expected to surpass other high value industries such as telecommunications equipment and services, computer systems and services, consumer electronics and the office equipment industry as the dominant supplier of new employment and economic growth. For Manitobans, the Content industry is important in the extent to which it will impinge on a very large number of existing jobs and either change them substantially or eliminate them entirely.

The New Media content sector is a crucial sector for Manitoba’s economy for at least three reasons.

In what ways will our local content industries succeed in exploiting the opportunities created by the emerging information economy? And, What conditions need to be present in the local economy to help spur our content industry? And, Will the government be able to strike a legislative balance between the privacy interests of Manitobans while still ensuring that our information-based industries remain competitive with other jurisdictions?

The Changing New Media Business Environment

The structural changes taking place in the information industry are occurring with unprecedented speed. No longer are print publishing, electronic publishing, film, video, and sound production separate entities as content is increasingly produced in digital form (see figure 2). Globalization coupled with deregulation is creating intense competition from international sources in what were previously national or provincial content markets.

These structural changes are having the following effects:

To this point we have referred to New Media content as a monolithic subsection of a larger information technology-based industry. We have indicated in a general sense its economic potential as the most important engine of that larger information industry. Now, let’s examine the individual components of the New Media content sector. By understanding the sector better, we can see how our local economy can focus itself on the future — and can capture the most valuable work of the information value chain.

Scope

Content-related activities cover a whole chain whereby value is added during the various steps from source material to end-user. Creators, developers and packagers of the 'raw material' fuel the chain. Distributors provide the on- and off-line delivery mechanisms allowing end-user access by a variety of terminal devices and networks. Figure 3 illustrates the relationships between developers, distributors and end users.

Market Size

The content industry is a big generator of revenue and jobs. Estimates for the U.S. in 1994 pegged the new media market and content industry at US$ 255 Billion, the telecommunications sector at US$ 160 Billion and the information technology sector at US$ 151 Billion. Estimates of the size of the new media content industry in Europe for 1997 show impressive numbers as well(see figure 4). Comparable numbers for Canada would be 10% of the U.S. numbers but still very, very large. Using this 10% factor further suggests that our Canadian market is approximately $25 Billion and our Manitoba market, about 4% of the Canadian market, is about $1 Billion. Our content industry is possibly our largest single source of employment. In fact, if the revenue and employment associated with information activities in other industry sectors are included in this analysis, content becomes an even more significant activity.

Content accounts for a major share of the total added value generated by the information value chain. Some private strategic studies estimate that at present the share that content development offers in the total of all value added throughout the value chain is around 48%. Distribution activities and end-user equipment generate some 38% and 14% respectively of total value added.

Due to increased competition and capacity in the distribution sector and wider availability of distribution channels and delivery platforms, the relative share of content in the information value chain is expected to grow even further. Recent market trends and various studies support this expectation (see figure 5).

It is estimated that Manitoba has about 50 strong, healthy, and entrepreneurial New Media companies providing Manitoba with some significant advantages:

World-wide markets and political forces are conspiring to generate a new design for educational institutions. Traditional institutions are facing enormous threats not only to their conventional business but also, in some cases, to their very existence. At the same time, they are presented with enormous opportunities for significantly changing their role in preparing people for productive careers and meaningful lives.

The Law of the Telecosm and Moore’s Law are having their effect on the education sector. Previously captive local markets are able to look farther and to more educational options than ever before. Time and place are shrinking in importance for potential customers as they look to broaden their knowledge, skill sets and employability. Our local educational institutions less constrained by time and place as well are considering their opportunities in a global marketplace. At the same time, education providers from other locations are considering our local market as their potential. All potential customers are looking for cost-effective solutions to their education needs.

According to a recent article in Forbes Magazine,

"Four years ago, 93 accredited cybercolleges existed in the United States; today there are 762. One million U.S. students are plugged into virtual-college classrooms (compared with 13 million enrolled in brick-and mortar institutions), and some estimate that number will triple by the year 2000. New competitors from outside the academy are vying for a share of the growing market, and technology is removing the barriers to entry"

The following examples suggest the magnitude and scope of the digital learning opportunities that are presenting themselves:

New Education & Training Environments

Our colleges and universities are preparing themselves for the challenges presented by the digital age, recognizing the shift in demand, and responding in kind. However, the significant threat of educational opportunities unburdened by the requirements of time and place will challenge our ability to compete. Success will come with the creation of institutions charged with the task of supporting our intellectual capital, combining it with our business capital and focusing that capital on survival.

President Munitz of the California State University (CSU) suggests that the potential for intellectual capital to produce initiatives needs to be blended with the economic realities and needs of the new economy:

"More than 100 potential initiatives to advance CSU's mission were winnowed down to a "first wave" of 11 about to be implemented. Increasing the size and scope of nontraditional education delivery methods, including distance learning---instead of building new campuses and hiring new faculty---is now viewed as the optimal means to absorb the influx of new students. "If you look at different models for transformation and expansion"' comments Munitz, "the economics are profoundly in the direction of technology."

Eli Noam has pointed out forcefully that the Internet, digital libraries, e-mail, telephones, fax machines and air travel have made it easier for the faculty to establish stronger loyalties to national professions than to local institutions. He rightly points out that the move toward collective knowledge building is already happening. Our challenge is to focus that knowledge toward market goals.

Peter Drucker adds his suggestions regarding the future for the traditional institutional model:

"Thirty years from now the big university campuses will be relics. Universities won't survive. It's as large a change as when we first got the printed book. Do you realize that the cost of higher education has risen as fast as the cost of health care? And for the middle-class family, college education for their children is as much of a necessity as is medical care—without it the kids have no future. Such totally uncontrollable expenditures, without any visible improvement in either the content or the quality of education, means that the system is rapidly becoming untenable. Higher education is in deep crisis."

Crisis means that things will change. As Drucker points out, it makes little difference how futurists view the change. Change is upon us and things will become much different.

Noam and Drucker’s observations aside, it is clear that a college education will continue to be an essential credential for a good job. However, students will look to achieve that credential in vastly different ways. Many will come to their education from the context of employment. Others will choose a self-directed course of study. Still others will revel in the intense environment of a well-taught class.

The new education consumer will also have new demands. They will seek the knowledge and skill sets that allow them to compete on an international level. They will choose the service providers who offer flexibility, quality, and portability of learning. Educational value for money independent of time and place will become the watchwords. To service the new customers of education, institutions must respond to this most basic shift. The successful educational organization will resonate with these changes and will attract students and their employers in greater numbers than ever.

Consider the following:

Clearly, the role of the New Media content industry in the future of education is an important one. We are left however with two fundamental questions. How can we ensure that our Universities and College’s can respond to the education demands of the digital age, that their response is timely and that the product of that response can be exploited in larger markets? The answers lie in partnering business with education.

Why Education and Business?

If Manitoba is to succeed in (a) developing a globally competitive position in the future training market while (b) developing a digital education and training capability out of which we can compete for the long distance education/training market then our business and academic players must converge. Two strong arguments support this conclusion.

The first argument is that business needs the pedagogical strengths provided by the education sector. Innovation is at the heart of the new economy. The process of innovation and the process of developing innovators require idea discovery at their core but need much more to be successful.

New ideas and new classroom practices are only half of the innovation process. New ideas shift discourse and in turn shift the actions of those practising the discourse. While new ideas emphasize originality and novelty, they will not necessarily result in innovation by themselves. New classroom practices are drawn from new ideas and influence students to adopt new practices. While this step in the innovation process clarifies and integrates the principles of the new ideas, it does not necessarily result in innovation.

Innovation occurs at the point where new products and tools are created from the new ideas and classroom practices. The most successful ideas and practices are those that enable people to produce economically viable innovations in their own personal environments. And, ultimately, innovative products must be sold to ensure their economic viability. Markets must be tested, customers contacted, and new descriptions about people's roles and identities in the world developed.

The education sector traditionally values new ideas and new classroom practices highly. Business on the other hand, focuses on product development and market success. Taken together, the entire innovation spectrum is met by an education - business collaboration.

As more and more curricula development takes place within a business setting, the skill sets involved in the innovation process will become an important ingredient in the making of a quality educational product. The pedagogical skills that University and College professors have gained over many years of practice will become essential in any product or service aimed at the educational market.

A "business design" for universities suggests that in order to adapt to shrinking funding, basic research will be performed primarily by faculty with proven records of accomplishment. The classroom application of basic research will rise in stature because it will be directly tied to the teaching of competencies, which will be central to the new educational institutions. Academics will participate in more of the "productizing" of new ideas improving the quality of product content as a result. This contribution to an education/private sector partnership will be critical in developing course curricula and courseware. These types of skills will prove to be very important to any partnership that expects to succeed in a highly competitive educational world.

The second argument in favour of an academic/business partnership is that in the same way business needs academia so too academia needs business. Our education sector must build its product development and marketing capability if they are to meet the growing challenge from new on line education providers. Innovative programs and services that do not follow the traditional academic model need to be "productized" and pushed to market. The first programs will be the demonstrators that change attitudes and understandings. A business-like approach will be the result of this collaboration - a collaboration that has potential across a wide range of activities from computer and internet based training development to the development of more certificate-based courses, the placement of technology on campuses and even online universities.

The two major players in this seem poised with complementary goals. Educational administrators see it as a service to their students and a potential for larger markets; and private sector customers and content developers see the potential for improved customised training and increased business.

Add to this mix a strong New Media content sector and we have a home grown Education and Training Industry that can compete with new products and services. Educational institutions will grow, our fledgling new media industry will grow in support of the institutional response and business, education, and new media all will share in the benefits of the digital economy.

At a time when health industries and service providers are generally increasing their use of computer and telecommunication technologies, there has emerged a new and rapidly evolving technology-based market segment that is the Telehealth industry. Telehealth can be defined as the use of communications and information technology to deliver health and health care services and information to distant users.

The Telehealth industry is a direct result of the convergence of information technology/telecommunications, with health care and medical technology. Both the former and latter sectors are undergoing significant transformation, although each in quite different directions. The information technology sector is enjoying an accelerated period of growth, with rapid technological and regulatory changes, high employment and increased market opportunities. The health and medical technology sector, on the other hand, is experiencing a downturn, not only in Canada, but also in most of the developed world.

Early Telehealth projects in Canada and elsewhere were driven by the need to deliver advice, diagnoses, consultations or education in the context of traditional medicine and education, linking tertiary care institutions in more populated centres with front-line health care providers in remote and isolated communities.

While these activities remain prominent, one of the most important trends in the Telehealth industry today is that of integration of the various applications over one network or in a series of interconnecting networks, as in regional or community health information networks. Today, Telehealth systems can be employed in many different settings by different users — researchers, specialists, nurses, home care workers, pharmacists, general practitioners and patients — and can be designed to span a range of health care applications to meet different needs using a variety of technological combinations.

Canada’s Experience in Health Telematics

The Current State of the Industry

Telehealth projects five to ten years ago in Canada were mainly driven by remote consultation needs (telemedicine) or distance health and continuing medical education (CME). But today only 30 percent of Telehealth projects are based on telemedicine. Most new start-up projects are concentrated on integrated health networks, only one component of which may be telemedicine.

In June 1997, more than 300 Canadian companies were active in the Telehealth business, of which 121 had registered themselves in Industry Canada's Canadian Company Capabilities database. These Canadian Telehealth companies are either very large, such as computer manufacturers and telecommunications carriers, or small, such as software developers, consultants, R&D and other service providers. Many businesses are new: 20 percent of the companies were created in 1997. Employment in private sector Telehealth companies is estimated at around 1700 people, mainly highly skilled professionals and technicians. The combined estimated annual revenue of these 121 companies is $330 million. The industry is growing quickly: projected sales potential is $1 billion a year by 2000, with employment at 5000 people.

Profiles of Telehealth companies in Industry Canada's database show that 30 percent depend chiefly on Telehealth business. For companies whose primary sales activity is reported to be Telehealth products and services, their annual sales per company are in the $1-5 million range and they average 20 to 25 employees. For this group, their combined sales are at least $130 million. Taking into account the Telehealth sales of other companies whose primary business is in other fields, the Canadian Telehealth industry amounts to a minimum of $330 million annual revenues. While many Canadian companies are too small or too inexperienced to bid successfully on larger projects in Canada, it is expected that some recent Canadian public initiatives will help stimulate the industry and improve technological capacity of Canadian companies.

Challenges, Issues and Barriers

By almost any measure, the Telehealth industry in Canada, even in its oldest and best-known form - remote telemedicine - has remained until recently a subsection of health services. The industry has been characterized by a small devoted set of pioneer researchers and practitioners operating in an environment dependent on government subsidies and research and development (R&D) grants. As late as January 1996, the field was still very small and had not grown much since its origins some 30 or 40 years ago.

Despite proliferation of new applications, the size of Canada's Telehealth industry is relatively small and undeveloped. This state of affairs may be attributed to a range of barriers and major issues confronting the private and public Telehealth industry.

In the near future, the Telehealth sector faces two major challenges: increasing demand and advances in technology.

Increasing Demand

Several market drivers are influencing demand in the industry:

The following advances in technology place new pressures on modern Telehealth activities:

For the health care professional, this new era has its challenges as well. Health professionals at all levels need to keep pace with a growing number of new discoveries, developments, techniques and practices. The penetration of the electronic health record and the electronic or computerized patient record, faster access to information even before it is published, and more versatile desktop multimedia tools all produce unmet educational and training needs. At the same time as the technology offers a more efficient means to keep up-to-date on developments in health it also demands more effort to stay current. Traditional employment patterns and means will never meet those demands. Telehealth networks can facilitate distance education and telelearning.

Care Provider and Patient Challenges

Some of the challenges faced by the industry if it is to grow out of its infancy include:

The world market for Telehealth systems and services is expected to grow dramatically over the next decade. In the developed world, the most important growth area is expected to be in the home care market, where a range of devices and technologies can be substituted for services traditionally delivered in hospital settings, or by visiting home care workers. In the United States alone, more than US $26 billion was spent on home care in 1994. Canadian provincial government budgets for home care alone amounted to close to $1.5 billion in 1995-96. The U.S. National Association for Home Care projects a 13-percent annual growth rate in home care to 2005. In Canada, home health care has expanded by more than 15 percent annually over the past five years. With closures of hospital beds and reduced in-patient stays for operative procedures, Canada's future growth rate for home care is expected to be at least as rapid as that in the U.S.

Growth of this industry depends on a number of factors. Close partnerships are required between the customer/purchaser/user and system or service providers, and between content and technological system developers. In many countries like Canada, these entities are located in separate public and private domains, but good working examples exist where the best of both sectors partner successfully. The best telehealth projects and sites combine expertise of health users together with the best suppliers of technological innovations.

The prospects for growth in Manitoba’s telehealth industry are positive. Many new Canadian telehealth companies are being created and more are identifying telehealth as one of their activities, but too few of these enterprises are known to potential purchasers and too little is known about Canadian telehealth capabilities in general. Foreign markets need to become familiar with Canada's competence if Canadian suppliers are to participate fully in the growing global market. Public sector institutions and resources assisting in export market development will need to be focused even more in the future to assist Canada's telehealth industry to capitalize on market opportunities.

Much of the basis for recent growth and prospects for future growth in the telehealth sector are tied to the struggle in heath care to maintain quality care in the face of shrinking budgets. Canada spent an estimated $75.2 billion on health in 1996, or $2511 per person, representing 9.5 percent of the gross domestic product. A decrease of 0.6 percent was recorded in 1996, which is the fourth consecutive year of decline in spending.

Canada's health care expenditures do not include special budgets for telehealth. However, a brief overview of telehealth systems available on the market today indicates there are many telehealth applications that can - and increasingly are - facilitating or substituting for conventional health care procedures. Current Canadian telehealth projects are valued at an estimated $500 million. Provincial and federal governments will spend another $500-750 million on telehealth sites and projects over the next three to five years.

A good deal of the goods and services contained in the budgets for these projects are supplied by imports either purchases from abroad or products distributed through Canadian subsidiaries. At the same time, Canada's emerging telehealth industry has reached annual sales levels of at least $330 million, made up of revenues from projects and programs in Canada plus substantial export activity.

Telehealth development is closely linked to the development and penetration of information and telecommunications infrastructures. Many challenges, however, have to be resolved in Canada and in many parts of the world before the telehealth industry can experience significant growth. A clear role exists for the public sector and private industry together to address the challenges of the information economy.

Business Challenges

The industry is fragmented. Market distribution channels are absent and every firm entering this field does so at more than normal risk since there are few published market studies. A business case for the adoption of telehealth systems is very difficult to make from scarce resources.

Though a majority of the Canadian telehealth companies claim to be exporters, few are exporting telehealth products and services. In part, this reflects underdeveloped marketing capacity, including lack of familiarity with overseas markets and with foreign distributors for telehealth products. In addition, the shortness of the track record of many Canadian companies means a lack of knowledge abroad of much of Canada's telehealth capability.

While there is a demonstrated need for turnkey, trouble-free telehealth systems, very few companies are capable of providing such services. Stable financing is difficult to find for both private and public industries. Several smaller companies have either sold controlling interest or have struck viable partnerships with U.S.-based and overseas companies. Though this has advantages, it does mean fewer made-in-Canada technologies and products.

The federal government in its February 1997 Budget announced the creation of a health transition fund. Provincial governments may use the fund to help launch pilot projects such as improved approaches to home care. Fewer than 10 percent of Canadian telehealth companies are offering products and services in home telecare.

The new Canadian marketplace is expanding from national to global horizons and its economic base is shifting increasingly from resources to knowledge. These trends are causing Canadian industries to readjust their business approaches. Government must respond with new tools to help these industries adapt and innovate. Both government and the private sector must develop and perfect the ability to address competitive challenges and respond to opportunities.

Manitoba faces challenges similar to those faced across the country. At the same time, Manitoba is presented with significant opportunity. As with the rest of Canada, our industry requires new tools that will make them competitive.

As technologies reduce the barrier of distance, the challenge of seizing the opportunities of the new age is not merely provincial but global in nature. The new technologies are truly creating an arena independent of jurisdictions and boundaries. With this new reality comes an ever more pressing need to align provincial strategies with the world-wide movement toward a global information society.

The need for people to use the power of the Internet, to create its content, and to service and maintain it should be obvious. It now becomes our responsibility to provide for the appropriate education and training that will materially affect what skills are taught and how the teaching is done at every level from grade school to university and college so we can compete on a global basis. The utility of the Internet to Manitoba will depend on the abilities of businesspeople, medical personnel, educators, scholars, government employees and ordinary individuals to take advantage of the rich and varied resources available through the system and to place their resources for sale alongside the other products of the digital age. People with a high level of technical and managerial education must staff the organizations that create, package, communicate and sell information through the Internet. Clearly, the networks themselves will require trained engineers as well as expert technicians for service and support.

If we are to provide for knowledge-based work for the youth of Manitoba, our beginning lies with ourselves. We alone can and must create and grow companies in the emerging information-based economy. Start-ups, by definition are small, and as such, our experience in the near term will be to support many small companies as they struggle to gain a foothold. That experience, however, does not preclude the objective of developing at least one major player in each of the industry sectors we attempt to build. A size in the range of 200-300 employees should not be beyond the pale.

Broadly speaking, two technological paths are open to Manitoba when striving for meaningful job creation in the digital economy. While neither of the paths is mutually exclusive, we must choose the best path within which to concentrate our efforts.

We can choose to pursue opportunities in the production and manufacture of microelectronics. Industries such as: multi-chip modules, ball grid arrays, thick and thin film circuits, advanced ceramics, surface mount technology, wire bonding, wireless communications, flat panel displays, and advanced packaging are very visible and for some regions, very successful representations of the information-based economy. These industries are also the ones that require significant comparative advantages to succeed.

As is well documented, the microelectronics sector is highly competitive, global in nature, requires a highly trained workforce, and demands hundreds of millions of dollars in investment just to begin. In addition the sector is subject to wide swings in demand and rapid technological obsolescence. Survival depends upon globally connected networks, a cadre of world-class R&D specialists and tremendous market savvy.

Larger centres such as the Ottawa region or "Silicon Valley North" as it is often called are used as predictive models for locations such as Manitoba when discussing the potential windfall of the microelectronics industry. Very fundamental differences between our two regions suggest the comparison may be premature. The Ottawa region has a history of technology-based employment and a concentrated population. It is home to several large companies that operate globally and are staffed by high-priced technologically adept executives who understand the international marketplace. As well, smaller support companies have located or developed close to and in support of the larger companies. In short, Silicon Valley North is endowed with advantages that Manitoba has yet to develop.

Manitoba has neither large microelectronics companies nor a complement of executive talent nor a viable web of small companies that can network in a manner that replicates the activities of much larger organizations. In fact, attempting to build a "Red River Silicon Valley" plays to our weaknesses not our strengths. Our comparative advantages lie elsewhere.

While Manitoba does not possess the ingredients for immediate success in the microelectronics sector, we do possess the ingredients to make the second path successful. The world-wide demand for information-based services is growing. We can build upon our skills and community demands for those services.

Our provincial government, private sector companies, and not-for-profit sector spend hundreds of millions of dollars annually on education and training, health, new media applications, and commercial purchases. With an effort, and working as a community, we can encourage local entrepreneurs to build applications for us that act as the foundation for those entrepreneurs to market their know-how to the world. There is a triple advantage to such an approach — we get applications that benefit the local economy, local businesses get applications that make them more competitive in their own industries, and Manitoba gets new jobs and industries. Our competitiveness is derived from our ability to collaboratively leverage these advantages.

Underlying the assumptions in this report is the belief in the folly of the first path and the potential and necessity of the second. We need and can develop entrepreneurs to leverage our community demand for local services and applications and to use that demand to capitalize on the information economy.

Our challenge is to create the conditions necessary for success and to duplicate those conditions to the extent required for the industries in which we elect to compete. As concluded above, we need to start from the beginning with the development of small firms but doing so requires that we develop strategies in three essential areas.

There is no intent to be comprehensive here. For example, we know that Fredericton as just completed a "Knowledge Park" to house small IT/digital companies and the St. Mary's University has just opened an facility valued at $18 million designed to deliver digital-age education. Covering 77,500 square feet, the building includes 13 multimedia classrooms, four new computer labs, and 1000 Internet access ports. And so it goes as each region and city adopts it own solution to creating viable jobs in the digital economy.

The Concept

The Quebec government expects their new information technology development centres to entice new knowledge economy companies to locate and develop in communities of shared interest. Favourable office space and high-speed connectivity will also attract existing companies seeking to develop new media projects with significant economic spin-offs for Quebec.

Of the three sites under development, by far the largest will be the new multimedia center planned for the historical section of Montreal. The site will be called Cite du Multimedia, or Multimedia City. The new centre will be built in an area of abandoned industrial space that is to be renovated and networked. Expectations are that the complex could grow as large as a million square feet.

A consortium of city and provincial agencies and private companies will oversee the project while the city will retain ownership of the land and buildings. http://www.techweb.com/

The Rationale

"As a province, we have to take leadership in the new economy," said Jean Louis Tremblay, a spokesman for the Quebec Finance Ministry. "These are aggressive measures. The economy is changing very quickly, and the government is taking the lead."

Given the dynamism of the new knowledge economy, the Quebec government believes that to be successful, they must move quickly and forcefully to capitalize on emerging opportunities.

The Method

The aggressive measure of choice for the Quebec government is the use of tax credit incentives. New Media companies will be eligible for tax credits equal to 60 percent of an employee's annual salary, up to a maximum of $25,000, for each new job created until June 1999. After that, the subsidy will be set at $15,000 for each new job created until 2008.

The tax credit program is directed toward New Media development positions such as designers, programmers, and technicians not for administrative or managerial positions. In exchange, companies must sign a lease for space in one of the new development centres.

The Quebec government is also providing a temporary financing program to help companies raise capital by granting amounts equivalent to the tax credits. In total the government is prepared to spend up to $360 million over the next 10 years. They expect to create 10,000 new jobs.

Early Returns

Montreal's economy is undergoing a renaissance, not in large office towers or in signs of new construction but rather in the lofts and basements in Old Montreal and other unexpected locales.

According to newspaper reports, new and existing knowledge economy companies are lining up to become part of the Cite du Multimedia. Multimedia production firm Cognicase announced its intention to create 2,000 software development jobs in Montreal over the next five years. The expansion will more than double their current workforce of 1500 employees. The Quebec government is providing about $30 million to help fund the expansion.

ACT (Alliance Commerciale Technologique) has announced plans to locate in the Cite du Multimedia as well. ACT is a new media services company boasting annual sales of $15 million some 95% of which come from foreign markets. Of its 170 employees, 80% are engineers and their average age is 30. Its wide range of innovative services includes CATIA Solutions, originally created by the French aerospace firm Dassault, a computer modelling, virtual assembly, simulation and rapid prototyping software application used by aerospace companies world-wide.

Metaphoria Entertainment is a small multimedia company whose most recent achievement was to conceive, design and build the Portugal telecom pavilion for Expo 98 in Lisbon. The pavilion is the most popular at the World’s Fair using state-of-the-art virtual reality technology to take visitors on an exploration of the ocean floor. Metaphoria will be locating in the new Cite.

Prima Telematic is a leader in the field of automatic speech-recognition technology. It integrates computers and telephones to improve the link between customers and corporations. It employs 52 people has annual sales of $7 million and will soon take up residence in the same area as ACT, Metaphoria and others.

The TELUS Centre will provide professionals with specialized education and career development programs using traditional and digital delivery methods. The TELUS Centre capitalizes on trends in telecommunications and education as well as the emerging expectations of corporations and individuals for "just-in-time" learning. The aim of The TELUS Centre will be to meet consumer demands for customized and accessible learning opportunities. It will have instructional and production computer laboratories, digital library resources and capabilities for multimedia global communications.

To be housed in The TELUS Centre is the Institute for Professional Development (IPD). The institute will be comprised of partners, clients and providers who are dedicated to research, development and delivery of professional education, workplace learning and alternate learning systems. It will offer clients consulting services, needs assessment, curriculum development, program development, evaluation, coordination, networking, knowledge management, relationship marketing and research capabilities.

SuReNet offers high-speed access to digital networks, promotes innovative research opportunities, accelerates growth of advanced network applications, and advances the speed of business transactions. SuReNet has proven especially beneficial for technology-based enterprises like the Sudbury Neutrino Observatory (SNO), the Northern Centre for Advanced Technology (NORCAT), the North Eastern Ontario Regional Cancer Centre (NEORCC), and Neureka Research Inc.

Together the community created the Sudbury Technology Centre. The STC is to be located in an older building in the downtown core. It will:

In total, the Centre will involve a private/public sector investment of $8.9 million. The partners expect that the investment will pay dividends towards diversifying the economy of the Sudbury region for decades to come.

Mayor Jim Gordon, who is also Chair of the SuReNet consortium, puts it all into focus when he states, "the telecommunications industry is the critical engine of economic growth in today's information age." By establishing SuReNet, in the heart of North-eastern Ontario, Sudbury has successfully positioned itself so that it is part of the new knowledge-based economy."

To achieve their mission, the Alliance, as expected, works to improve tourist services, security and sanitation services, economic development, transportation, and streetscapes. However, the Alliance has also identified the expansion of New York’s downtown Information Technology District as a major area of development activity. They want their downtown renewal to be "totally wired".

This slogan typifies downtown renewal in New York. Their Downtown Information Technology District is rapidly becoming the heart of their "Silicon Alley". Hundreds of high-growth information technology companies call the south end of Manhattan home. These firms are quickly emerging as some of the City's prime economic generators, creating jobs and innovative products, and serving as pioneers in revitalizing New York’s downtown.

The magnet for the new IT District is the New York Information Technology Centre, a 400,000 square foot building which serves as a central gathering place for industry events, education and celebrations. Expansion in the area is being spurred by the development of over 100,000 square feet of pre-built, Internet-ready, space for small and emerging IT companies.

Landlords and service providers are encouraged to create specialized facilities and services for the industry, and to use the Alliance as the hub for the full complement of programs and services that knowledge-based companies require.

The Alliance, in conjunction with New York’s local government has chosen aggressive tax incentives as its method of choice to spur knowledge economy development in the downtown. Tenants who locate in the District can cut their property taxes in half and virtually eliminate rent tax. Companies new to the district can expect electricity costs to be cut by as much as 50%. Owners of District buildings receive substantial benefits for converting to residential or mixed uses.

Sponsored by the Alliance, NYC's Economic Development Corporation, and several Downtown landlords, the Plug’n’Go program provides affordable, pre-built, Internet-ready office space in six Downtown locations for growing information technology companies. Rent in Plug'n'Go buildings is capped at $16 per square foot for the first year of leases, and office space as small as 1,000 square feet is available

Electronic Resources

ITD companies receive access to significant electronic resources. The District’s electronic network creates an actual and virtual 24-hour, 7-day community by serving as the central, interactive information hub. Their Extranet is an idea exchange, collaboration space, and information and network conduit. Users can download beta copies of software for evaluation; discuss favourite places and products; look for temporary help to meet upcoming deadlines, seek out used equipment and review bulletin-board postings on events, exhibitions and late-breaking news.

As well, their Extranet houses an Internship Posting Service where announcements of internships and responses are exchanged. Viewers can respond directly to announcements and students can respond immediately to postings that fit their skills and interests. A search capability is also provided for people looking for New Media related employment.

Cyber Corner is designed to provide the district with a forum for exchanging advice and ideas and for learning more about each other. The Cyber Corner website features new technology tips, discusses products and trends, and produces a regular series highlighting a different district company.

The ITD Company Directory is a searchable database of the district’s technology companies. By having available and publicizing a searchable list of IT companies the ITD highlights the growing importance of the information technology industry for the local economy and creates new business opportunities for district members. Equally important, it keeps members informed of upcoming industry events, news, business development seminars, and other relevant information.

Seminars

The ITD Business Development Seminars provide companies with important business contacts as well as substantive information and advice. The seminars draw upon neighbourhood expertise in an effort to promote local, strategic partnership opportunities. Seminars offer free advice to IT District companies from leading experts on intellectual property rights and legal information, marketing, accounting, access to venture capital, banking services, and training services.

The Alliance in conjunction with The New York New Media Association invites business people to ITD Business Development Seminars hosted by the New York Information Technology Centre. Some examples of presentations include:

At the same time, knowledge economy activities emerged as a promising new industrial growth area. Pittsburgh saw an opportunity and took advantage eventually offsetting many of the jobs lost in manufacturing during the 1980’s.

While Pittsburgh currently boasts its share of large Fortune 500 companies, the region's technology based industrial development and their job recovery has been dominated by small firms. These firms have more than doubled since 1979.

Technology based industries such as information and environmental technology have contributed significantly to Pittsburgh’s economic growth through hiring, training, and producing knowledge products for local national and international consumption. Additionally, technology based companies have improved the competitiveness and economic viability of the area’s manufacturing and service industries by providing locally produced high quality technology solutions.
 

Their goals include:

Pittsburgh learned early that knowledge economy services and a more international orientation would translate into job creation. They are planning now knowing that in the future their regional economic success will increasingly depend on their ability to educate and provide skills for the workforce as well as their ability to attract people with high levels of education and training.
 

Profile of Pittsburgh's Software Industry

Pittsburgh is recognized as one of the leading software development centres in the US. More than 450 software firms employ a workforce of approximately 25,000 people in the region. The city has been ranked among the top 10 software development regions in the United States. Let’s review some of the factors that help Pittsburgh retain its role as a leading software development centre.

Regional Strengths and Assets

The Software Business Forum (SBF)

Formed in 1994, SBF is the Pittsburgh High Technology Council's most visible and largest industry group. It is a forum that facilitates the economic growth of southwestern Pennsylvania's existing software companies. The SBF also supports the development of new software companies and encourages the relocation of other software companies to the region.

SBF is a business interest group focused on the specific commercial and technological needs of the region's software development industry. The mission of SBF is to sustain a permanent business forum for southwestern Pennsylvania's software industry, and to:

The Task Forces of the Software Business Forum

To ensure that the Software Business Forum (SBF) serves the most pressing needs of southwestern Pennsylvania's software industry, the group created three task forces to focus on priority areas: promotions, programming/events planning, and policy issues. As SBF evolves, additional task forces will be created to support its growth and expansion.

Promotions Task Force (PTF)

The Promotions Task Force mission is to promote the development and growth of software companies in western Pennsylvania, both within their membership and to the world-wide business community.

The Promotions Task Force has been organized into three subgroups, each charged with its own objectives:

The programming task force’s mission is to create a portfolio of activities and programs that provides educational opportunities between peers and between experts and executives, facilitates the development of peer relationships, and promotes the region's software industry.

The Programming Task Force has developed its own objectives. They include:

The Policy Task Force’s mission is to act as a resource for policy information, maintain industry visibility and interest in relevant legislative issues, and serve as the industry's voice on such issues.

The Policy Task Force has developed specific objectives as well. They are focused on the following activities:

As Montreal, Sudbury, New York, and Pittsburgh have found, focus is the result of conscious, planned activity. In each case two complementary initiatives were chosen. The first takes the form of designating a building or a group of buildings where companies can come together surrounded by others that will supply support mechanisms. Institutions that provide capital, research, managerial and technical education and training, assistance to entrepreneurs, and market information are vital to these small firms.

The second initiative takes the form of the structural support mechanisms required to produce a "community of interest". In each example, the community created a representative council to plan, structure, and evaluate the development of and interrelations within their new knowledge services industry. These councils create goals and opportunities and produce measurable results in the areas of communications, promotional, and marketing strategies. They also focus efforts on addressing the community’s national and international competitiveness.

What seems clear from the above examples is that both a central location and strong representative administrative structures have been present in situations where a region has successfully developed a knowledge services industry. For Winnipeg, this information is vitally important if we are to move ahead with building our own successful knowledge services industry.

The vertically integrated independent corporate system has dominated the industrial geography of the Western world. Typically, the system is associated with capital-intensive industries such as oil, finance, telecommunications, machinery, automobiles, and value-added agriculture. Equally as typical, these traditional integrated corporations tend to internalize most local supplies of skill, technology, and other resources. They rely on few links to the social, institutional, and technical fabrics of the regional setting in which they find themselves.

Some examples of network-based systems are widely recognizable. Small-firm industrial districts in Italy specialize in traditional industries such as shoes, textiles, leather goods, furniture, and ceramic tiles. In Germany, Baden-Wurttemberg is known for its mix of small and medium-sized makers of machine tools, textile equipment, and automobile components. Similar flexible industrial clusters have been identified in Denmark, Sweden, Spain, Los Angeles and in Waterloo Ontario. The successes of Japanese industries are similarly attributable, at least in part, to network organizational forms.

While each of these variants of network systems reflects distinctive national and regional institutions and histories, their localized social and productive outputs depend heavily on informal information exchange as well as more formal forms of co-operation.

Our clustered and networked firms will serve and collaborate with local and global customers, suppliers, and competitors. Information-based firms, in particular, are highly international. However, the most strategic relationships are often local because of the importance of timeliness and face-to-face communication for rapid product development. Through the building of a network-based industrial system, we can reinforce the globalization of our productive capacity while at the same time advancing the dynamism of our own locality by linking it to similar regional clusters elsewhere.

As was touched on earlier, our future and our beginning are both tied to innovation. What follows is a detailed description of how, through the development of an Innovation Corridor and supporting digital economy activities, we can take our first step toward a shared future characterized by a new network-based industrial system.

Drawing on the experiences of Montreal, Sudbury, New York and Pittsburgh, a new model industrial system is proposed where New Media content activities converge with existing education, health telematics and other services to create a locale for innovation and to act as a vanguard for other industrial combinations.

Individuals will move between and within industrial sectors: from new media, to course development, to health telematics or from database development and analysis to aboriginal art. They will move from established firms to start-ups, and vice versa. And they will move from technologist to venture capitalist, from consultant to university to business and back. Careers in the information economy do not take place by design, but are emergent and negotiated between ever changing individuals and employers.

This continual shuffling and reshuffling tends to reinforce the value of personal relationships and networks. In a cluster where walls between companies and institutions are porous, few would presume that the long term relationships needed for professional success would be found within any particular entity. A steady stream of trade shows, technical conferences, and informal social gatherings will need to be maintained to extend the professional networks that characterize much larger companies.
 

Consider also the increasingly diversified fabric of external relationships and supplier infrastructure that will surround cluster companies. That fabric will allow cluster members to specialize in activities adapted to their unique skill sets. In contrast, traditional firms, relying on traditional systems and structures, seek technological self-sufficiency and internalize as many operations as possible.

A final added advantage is the ease with which new firms form. Many more technical paths can be pursued than would be possible in either a traditional large firm or a region with less fluid social and industrial structures. Most companies or stable regions pursue a single technical option and, over time, become increasingly committed to a single technological trajectory. A network-based regional economy like the one being advocated can generate and pursue a rich array of technological and organizational alternatives.
 

The model being proposed here will be no guarantee of success for all involved. Companies will go bankrupt. However, in a culture that encourages risk-taking and exchange of information, failures should contribute to a process of collective learning.

We should not be unduly discouraged by the thought that our loose arrangement of companies might not be as efficient as their much larger competitors. There is considerable evidence that such arrangements can make up for such a loss by their ability to innovate. Too much discipline makes a company unable to respond quickly to true innovation.

For us to develop a meaningful cluster group, community-based action is required. Our new specialist companies will need to rely on the external provision of a wide range of collective services that spread risk and pool technological expertise. Institutions that provide capital, research, managerial and technical education, training and assistance to entrepreneurs and market information are vital to the firms in our new networked industrial system. Community involvement is required to provide these collective services. We must realize as well that the firms will have little incentive to provide such services individually-or to ensure their continuation during downturns-because of their relative small size and their inability to capture the benefits of their investments

These collective services can be provided by private actors, by the public sector, or by a combination of the two. The particular form and content of these services will vary according to the nature of our local economy. Success is dependent upon the degree to which the services are tailored to our specific needs.

The schema being proposed here is to have two layers of responsibility above the level of the individual firms occupying the sector. The first would be at the director level.

The Executive Director will also need to communicate with regulatory officials and with the up reaches of government . Emerging industries often face delays and red tape in gaining recognition and approval by regulatory agencies if they offer new approaches to needs currently served by other regulated means. On the other hand, government policy can put an emerging industry on the local map almost overnight as is the case with the movie industry where substantial tax incentives have resulted in orders-of-magnitude increase in employment in that industry.

A very important area of responsibility for the Executive Director will be to guard against defensive moves by entities threatened by the advent of one of our emerging industries. Given the massive and pervasive changes taking place in the information economy many traditional industries will be threatened by new ones. Industries such as Universities and Colleges will be threatened by producers of a substitute product and labour unions and professional associations especially those acting on behalf of teachers and medical professionals will act to protect their members against new demands. Traditional distribution channels like libraries will be challenged by new technologies. All have ties to traditional products and services and many will prefer the certainty of dealing with the familiar. A well thought out communication effort will be required to help protect the value of innovative ideas.
 

There is one area of responsibility that will be particularly easy for the Director and his/her staff. Standards will need to be established and used in the creation of cluster members’ products and services. Being small but active players, our clusters need to adopt the standards of the industries within which they participate. Fortunately many areas of future activity will be those where there are open systems---that is systems whose standards are public so that anyone can connect to them with their own suite of products or applications. While this will encourage us as new entrants, we will be forced to differentiate our products while competing within a common industry standard. Alternately, cluster members will focus on only those elements of the product in which they have specialized skills, purchasing all other product components from sources external to the company but not necessarily to the province.

In a few years, after the initial start, the director can turn their attention toward looking for spin-offs where technologists leave the more established companies to start new ventures that in turn will produce new ideas and new niches to explore and harvest.

Finally, the Executive Director will take as solemn responsibility the building of a co-operative, collegial environment among cluster members. The Director will act as liaison between individual firms, and work toward a sense of community that will distinguish the cluster from loose groupings like industrial or technology parks.

The second level of responsibility lies with our community’s public and private sectors.

The Power of Vision

If we are to compete, we need to bring within the power of a shared vision, as many associations, government departments, educational institutions and private firms as we can. Literally hundreds of policymakers, entrepreneurs, executives, consultants, and educators need to become engaged in ongoing efforts to enhance Manitoba's collaborative advantage. Collectively these industry leaders and professionals would promote and manage change as the community moves toward the New Economy

Capitalizing on innovation in the new economy requires three pillars, education, government and business, to work together. These three pillars need to foster the attributes necessary for the success of any economic initiative — good access to educated workers, high quality of life for workers, efficient transportation infrastructure and a critical mass of related companies to drive further growth.

The most critical attribute of the three, however, is an educated workforce. The success of innovation and the growth of our community’s new industrial structure is fuelled by an educated workforce. Without the people with the appropriate education, no cluster/network-based economy can grow.

Our shared vision must be to develop a culture that encourages risk and accepts failure, a culture that is prepared for fast paced change and growth. The "cluster" culture will need to be one of change. Peer pressure and social expectations among our community leaders will need to support risk taking and job uncertainty. The velocity of information in the digital economy and specifically in our clusters will be very high - much higher than in the rest of Manitoba.

The culture of rapid change required by the digital economy is exactly appropriate for start-ups. An archetypal start-up could be formed by a group of friends and/or former colleagues with an innovative idea unable to fully realize that idea in their current workplace. They would draw up a business plan, seek funding and advice from local venture capitalists themselves former IT people and entrepreneurs, and then rely on an expanding circle of university researchers, consultants, and specialized suppliers for additional assistance in starting the new enterprise.
 

The private sector should lead. It must promulgate a strategic vision for our community’s industrial competitiveness in the on-line world and strengthen our international links with peer organizations. The sector can begin by benchmarking the innovativeness and global competitiveness of individual industries, sponsoring entrepreneurial mentoring schemes and demonstrating consumer confidence in our new products and services. The sector can help the cause additionally by promoting more vigorously its own products such as online.mb brands. The sector needs to champion Manitoba development and design capabilities both domestically and internationally and actively promote a climate of consumer trust and confidence. As a model user, private industry must implement on-line services and ensure Manitoba firms are seen as innovative early adopters.

An important role for the private sector is the creation of industry associations to promote world's best practice and encourage innovation. These associations can prepare cost/benefit case studies detailing on-line business success. They can implement industry training and skills development programs to create digitally literate managers and personnel and work to attract specialized skills from out of the province. And, they can develop funding arrangements to avoid seeking endless government subsidies.

The private sector can also play an important role in providing an expanding network of specialists and service providers to facilitate the start-up process. Initially cluster companies will be involved in new media, developing education and training material and working on health telematic applications. As these companies begin to flourish we can expect talent to flow from the client organizations to the entrepreneurial companies. People movement of this sort will bring new insights to the start-ups and will strengthen the trusting ties between the producer of new products and services and their customers.

Service providers specializing in the problems of the information and technology industries—lawyers, bankers, market research firms, consulting companies, public relations companies, and electronic distributors—will also need to play a role. They will be expected to have or develop experience in the realities of the technological world and can do so through local technology companies.

The eventual success of clusters would mean that many of Manitoba’s leading law firms would need to specialize in areas that were important to technology firms, such as intellectual property, licensing, incorporation of start-ups, and trade law. Like the market research and venture capital firms, lawyers would frequently broker services. Like the clients they serve, the style of law practised would need to be informal, practical, results oriented, flexible and innovative, and keyed to high trust business relationships.

One warning overshadows all of this potential. Our traditional bugaboos must be avoided. Our fear and mistrust of private sector driven initiatives, our tendency to shift blame to government or consumers and our desire to push narrow agendas or self-interest will only get in the way. When the private sector is working at its best it is self-regulating. Success here depends upon promoting the world's best market codes of practice, slamming examples of market malpractice and developing collaborative relationships with consumers.
 

Government must play a constructive and facilitating role. The Manitoba Innovation Network believes it is important for government to identify what it should do and where it can add value in the interests of the community.

Eight Roles for Government

Issues raised by the impact of the information society cover a broad range of areas such as employment, culture and taxation usually addressed by separate ministries and agencies. The necessity for co-operation and co-ordination of positions and policies could emerge as one of the biggest challenges for governments in the coming years. The challenge to government is as daunting and potentially exciting as is the challenge to industry, education, health care and all other economic sectors. Change is required. Innovation is the watchword.
 

Educational institutions then are critical to the success of our new clusters. Courses will need to be developed that offer important advantages to small companies that seek to attract top talent but are unable to provide the continuing education and training needed in a fast-changing environment. We will need to dramatically increase the supply of state of the art IT graduates in Manitoba. Our universities and colleges must orient themselves to become important centres of research in the fields of new media, databases and course design. Some of the current programs promoting research collaboration between individual faculty, departments and outside companies may prove to be very helpful as models. Success will depend upon how effective we can be in creating world-class research and skill set development in the niche areas in which we elect to compete.

To keep pace with the New Economy research institutions must:

Because of its size and prominence among educational institutions within the province, the University of Manitoba must strengthen its role in supporting technology-based industries by building a "community of technical scholars". Such a community would be composed of a strong university sensitive to the creative activities of the surrounding industry and engaged in ongoing research of a relevant nature and in industries using highly sophisticated technologies.

In a united manner we should use our collective strengths and growing reputation to establish important academic and government contacts which, in turn, could be used to attract federal contracts for both university labs and local firms.

Three institutional innovations that have been tried elsewhere warrant consideration on the part of our educators.

Manitoba needs to cultivate strong regional or industry based loyalties to unify the members of our technical community. We can do this by blurring social and professional identities and by adopting practices of open exchange of information. Among other things, we need to create social gathering places so that it becomes a common practice for our technologists to get together to gossip or discuss their views of markets or technology. Our associations must reject oppositional policies and concentrate instead on providing support services and networking to create a broader culture of collaboration in the region.

Our Chambers of Commerce, Biz organizations, Rotary clubs, the Manitoba Advanced Technology Alliance (MATA), the Manitoba Business Council etc. need to become the catalyst for face-to-face networking. Firms who are members of the cluster community will also need to commit financial resources, time and expertise. Co-operation between industry and government through our associations needs to be stressed and needs to become the norm for local business and government activity.

MATA and the Chambers can play a particularly important role by providing services to assist the management of new technology firms. These organizations can sponsor seminars and educational activities and encourage the exchange of ideas and information including management training sessions on subjects ranging from finance and technical marketing to production and export assistance.

It is unlikely that we will receive much attention from national associations in a manner that will address our particular needs. We will need to look to local associations such as MIN, CIPS and MATA to sponsor trade shows, co-ordinate standard-setting activities, and organize education and research programs for the small firms in industries that are technologically sophisticated and fast changing.

Many of our firms will depend upon trade shows for survival. To overcome this disadvantage, annual trade shows of a national nature such as Techquest should be held to enable the exchange of technical ideas, expand the range of professional contacts, and provide opportunities to socialize with industry colleagues. Volunteer members of CIPS and MATA could organize technical symposia, dinner meetings, information seminars, and conferences to inform members of research and technological advances and to promote interchange between their members, customers, capital providers, and end users.
 

As successful entrepreneurs reinvest their capital in promising local start-ups, they will create a new and different kind of financial institution. These venture capitalists will bring technical skill, operating experience, and networks of industry contacts - as well as cash - to the ventures they fund. If need be they could become unusually involved with their ventures, advising entrepreneurs on business plans and strategies, helping find co-investors, recruiting key managers, and serving on boards of directors. Our venture capitalists would tend to be entrepreneurs who have created and built a company and then sold their interest to someone else. When problems occur with any of their investments, they can step into the business and help out.
 

Consumer and community groups need to facilitate those new relationships by:

Our success depends on building a robust community of shared interest. At the focal point will be the cluster’s executive director who will act on behalf of cluster members in managing cluster activities, lobbying governments, representing interests to venture capitalists and selling products to industry partners and consumers.

Perhaps more important than the executive director, community groups must expect to play a significant role. Governments must look to build a clear strategy inclusive of local service providers. Our private sector firms must take up a "Buy Manitoba" mantle first and must look to mentor start-up companies as they struggle for market share. Educational institutions must join forces with each other and private industry to create the educated workforce required for the next century.

The community effort does not stop with our large institutions either. Business organizations must plan to provide needed professional development resources to new cluster members. Venture capitalists must develop funding/professional support relationships and mechanisms which captialize innovative ideas and support entrepreneurs as they get their ideas to market. Finally, community groups and consumers alike must trumpet the quality and usefulness of Manitoba products and services.

To realize this vision, our community will need to establish a tradition of glorifying entrepreneurial risk-taking and competitive individualism in the technical industries being fostered. Such heroes would be successful entrepreneurs who have taken aggressive professional and technical risks — the "garage tinkerers" who created successful companies. These entrepreneurial heroes would be celebrated for their technical achievements.

We will know that the cluster community/innovation corridor idea is successful when it is distinguished by the speed with which technical skill and know-how becomes diffused within it. Our region's social and professional networks operate as a kind of meta-organization through which technologists, in shifting combinations, organize technological advance and individuals move between firms and projects without the alienation that might be expected with such a high degree of mobility. The cluster community and its networks, rather than individual firms, become the locus of economic activity.

Examples such as Montreal, Sudbury, New York and Pittsburgh demonstrate the ways in which other communities are working together to develop their particular vision of what their region’s knowledge services industry might be like. These communities are recognizing that highly focused specialist companies need to rely on external sources of collective services to spread risk and pool technological expertise.

As Montreal, Sudbury, New York, and Pittsburgh have found, focus is the result of conscious, planned activity. In each case two complementary initiatives were chosen. The first takes the form of designating a building or a group of buildings where companies can come together surrounded by others that will supply support mechanisms. Institutions that provide capital, research, managerial and technical education and training, assistance to entrepreneurs, and market information are vital to these small firms.

The second initiative takes the form of the structural support mechanisms required to produce a "community of interest". In each example, the community created a representative council to plan, structure, and evaluate the development of and interrelations within their new knowledge services industry. These councils create goals and opportunities and produce measurable results in the areas of communications, promotional, and marketing strategies. They also focus efforts on addressing the community’s national and international competitiveness.

What seems clear from the above examples is that both a central location and strong representative administrative structures have been present in situations where a region has successfully developed a knowledge services industry. For Manitoba, this information is vitally important if we are to move ahead with building our own successful knowledge services industry. The following conclusions and recommendations are derived from the knowledge that if we are to be successful in the digital economy, we must develop a Made in Manitoba solution that departs significantly from the traditional relationships, methods and cultures that have become a hallmark of Manitoba business.

Private Sector partners must use their buying power and business networks to provide important information and support to Corridor members. Our industry partners must:

Since most Corridor member companies will be small, they are incapable of forming strategy on a regional basis. Corridor stakeholders can provide this service while at the same time advancing the collaborative nature of our regional industries.

To be sure, a move to the Manitoba Innovation Corridor will not be an easy one. Our institutions and culture will be difficult to change. Our industrial system is the product of historical processes that are not easily imitated or altered. However, the first step is for the community-at-large, and particularly our politicians, managers and policymakers to overcome their current view of the firm as a separate and self-sufficient entity. They need to recognize that innovation is a collective process as well as an individual one. Adopting a business model that breaks down the institutional and social boundaries that divide firms will represent a major challenge. One, however, that is decidedly less daunting than the challenges faced by other regions in Canada and the remainder of the world who are confronted with the same challenges as Manitobans are.

Ultimately, the mission of the Manitoba Innovation Corridor will be to "create a comparative advantage for Manitoba by building a collaborative, community network through transforming Manitoba from a province of entrepreneurs into an entrepreneurial province."

Due to fierce international competition, the microelectronics industry has become highly globalized. In order to continue to compete, most U.S. microelectronics suppliers must sell to all major markets, both domestic and foreign. On some products, profit margins are so slim, that only through global sales, can a supplier leverage the profits to remain in business. In certain other cases, the markets are so few, such as in semiconductor manufacturing equipment, that in order to survive firms must sell domestically and abroad.

In the face of such extreme competition, microelectronics manufacturers must develop unique market niches. Sometimes being the first to introduce a new product is the only advantage the manufacturer can be assured will translate to profit margins. For others however, maintaining unique technological approaches is possible, though not as common. Certainly there is the distinction of whether the manufacturer is targeting the high-end technology markets or competing based on price-competitiveness in the lower-end technology applications.

What remains true for all companies is that to stay in business, companies must generate enough monies to invest in their futures related specifically to: (1)research and development to develop the next generation of equipment or (2) capital equipment to make the next generation product.

Demand for microelectronic products is driven by the growth of the overall electronics industry. Increased sales of electronic components are a direct result of higher sales in the following: computers, telecommunications equipment, automotive products, instrumentation, medical devices, audio and video equipment, and other electronic products. In a similar relationship, demand for semiconductors, in turn drives the market for semiconductor manufacturing equipment; and demand for printed circuit boards pushes the PCB production equipment market. This overall dynamic is viewed by some industry analysts as a food chain of technology, with all parts of the chain being inter-related for supply and demand considerations.
 
 

There is of course a risk associated with the openness of these partnerships. Competitive advantage may be passed on to other firms. There is no way of avoiding these possibilities. The best thing that can be said is that this risk needs to be assessed in light of the greater advantages of developing a co-operative relationship

The elaboration of inter-firm supplier and community networks will reinforce the advantages of locating in the Corridor even as the competition for locating knowledge-based firms heats up. Firms will locate or expand in the Corridor to become part of its social and technical networks and to take advantage of our low costs. Geographic proximity allows firms to monitor emerging technologies closely and avoid being caught off guard by unanticipated breakthroughs. It provides the advantage of speed, as local firms will learn about market changes before others do. And it will facilitate the solution to the complex technical problems that knowledge-based companies and their suppliers typically face:

What are the mechanisms required to build trust and prevent our new firms from becoming inward-looking organizations?

First, the broadest possible cross section of Manitoba’s business community must be assembled and seen to be participating. Organizing frequent seminars, open houses, receptions, conferences and informal meetings will go some way to demonstrating commitment among Manitoba stakeholders. At the same time, these events would offer technological insights, business contacts, information about competitors and market reports. These events would be designed to bring local managers, analysts, and media and university representatives together to promote "matchmaking and deal making" between different parts of the industrial community and to provide a forum for the discussion of trends in the region and in the technology industry.

Second, trust can be built if participants see mutual benefit accruing to each and joint benefit accruing to all beyond any benefit that would be realized taking the go it alone approach. For small start-up companies, the following would be particularly important:

Within the bounds of a trusting collaborative environment we will be able to speed the pace of new product development and improve product quality and performance. By close interaction with suppliers we can create opportunities for valuable feedback while avoiding the cost and risk of becoming a large vertically oriented system.