Ottawa Economic Numbers

From an economic contribution perspective, the 3Q08 Ottawa Economic Outlook from CRG Consulting  states that 75% of the local economy is tied to the presence of the Federal Government directly and indirectly.

From a raw jobs numbers and revenue generated locally perspective, the Ottawa City Economic Plan states that the top employers and earners for the city as of 2003 are as follows:

ottawajobs1

2006 census statistics for Ottawa provide a good view of population characteristics.  The following chart provides a view of population by industry sector:

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Ottawa Already Has an Innovation Hub – It’s Name is Tony Bailetti

It was great to see the article from Peter Kovessy of the Ottawa Business Journal today entitled “Innovation Hub in Stagnation”.  We need more public oversight, debate and analysis on how our local political leaders have and  are proposing to spend our tax dollars to spur innovation and economic growth for our region.

Relative to the Innovation Hub idea – there have been very negative public comments made about the plan  from Ottawa tech leaders and entrepreneurs right from the beginning. The father of local high tech, Denzil Doyle, was straight to the point:

It is discouraging to see the idea of an Innovation Hub being run up the flagpole. On a scale of one to ten, I would rate it at minus five as something that is going to solve the region’s high tech problems. About 20 years ago, we were told that if we invested in a life sciences technology park, we would grow a life sciences industry that would rival the telecom industry. We all know how that turned out. We seem to forget that Mitel started in the basement of an office building in Kanata and that a combination of its working capital and outside investment financed its real estate requirements thereafter. DY-4 started in a very ordinary building on Laperriere Ave – and so on.

Entrepreneur John Oligvie called it out:

I have spent a lot of time in Silicon Valley and in Boston and these two global high-tech centers have managed so far without building “innovation hubs”. This is discredited, “big government” thinking. Technical and business innovation can only be done by entrepreneurs, not by government. If you asked local VCs and tech entrepreneurs what they needed most in order to succeed, I doubt that anyone’s first answer would be “a big shiny new building”.

From my perspective, I have yet to talk to a local entrepreneur who is supportive of the Innovation Hub.  When it comes to high tech and innovation driven economic development – most do not feel the City of Ottawa is coupled into reality.

I personally believe we need to have less of our tax money being spent on “overheads” such as buildings and associated staff and instead direct the tax money to programs that directly support the needs of regional entrepreneurs and the important local economic development they produce.

People like Tony Bailetti and the Talent First Network are on the right track -

“To innovate effectively, small and cheap is big; big and expensive simply doesn’t work” says Bailetti. He adds: “What we need to drive massive innovation in Ottawa is many small innovation hubs like TheCodefactory, all linked to early buyers worldwide. Mechanisms that enable our innovators working anywhere in Ottawa to collaborate with early buyers at the start of the innovation cycle can produce significant benefits for our community.”

Tony Bailetti is one of the few people around that truly understands what it takes to foster innovation and deliver regional economic development.   His actions and results as one man have exceeded the results of any local organization or initiative when it comes to developing entrepreneurial activity and results for our region.  He is motivated by the desire to “Do the right thing” and “To make a difference” for his community and his students.   Tony is one of Ottawa’s (if not Canada’s) most valuable resources when it comes to economic development and technology innovation.

As an example – in 2002, Tony Bailetti ran an entrepreneurial training course called “Lead to Win”.   The course was free to the participants.  Of the 29 participants – over 50% launched a company in the Ottawa region.  The resulting entrepreneurial activity, innovation and  companies – launched by that one initiative, by that one manresulted in the creation of over 300 local jobs and the influx of over $90M into our local economy.

That is exactly the type of  community-based leadership and grass-roots economic development activity our governments should be encouraging, learning from and backing.

Ottawa already has an Innovation Hub and its name is Tony Bailetti.


Reflections on Second-Sourcing Manufacturing

I’ve had the opportunity over the last 20 years to look at second-sourcing manufacturing from both the perspective of a large telecom company, and the perspective of a system-based company start-up.   I took some time recently to capture what I learned on reflection -

Reasons for Second-Sourcing Manufacturing by Vendor:

  • Flexibility in pricing negotiations (leverage)
  • Flexibility in production volumes
  • Flexibility in production run priorities/intervals and prototype runs
  • Manufacturer disaster mitigation due to site problems (e.g. fire, flood, natural disaster, labor problems, transportation delays)
  • Manufacturer disaster mitigation due to financial strength (e.g. market conditions, sensitivity to a small number of customers)
  • May be required by customers of the vendor (e.g. particularly in case of large telecom customers or government)
  • Poor support or responsiveness by the manufacturer
  • Poor quality or process control by the manufacturer
  • There maybe government restrictions requiring products bought locally be made locally

Challenges associated with Second-Sourcing Manufacturing for Vendor:

  • Increased support costs associated with RMA, troubleshooting field problems based on source of card manufacture
  • Increased design cost for system to track and manage vintages according to source of card manufacture
  • Extra costs and effort required to vet, engage and manage an additional supplier
  • Extra costs for dual sets of component supply and obsolete stock
  • Extra costs due to yield problems (two bone piles)
  • Extra costs due to training manufacturer and fitting manufacturer for test and repair functions
  • Export restriction laws on specific technology
  • If off-shore – other complexities – language, timezones, shipping,  etc

Practical Considerations:

  • Most system developments have more then one single-sourced component on it (often from a small specialized supplier) – which is usually a higher risk then manufacturing line to the vendor and more difficult for the vendor to manage around (e.g.  no footprint compatible alternative components)
  • Manufacture and debug capabilities for specialized components can limit selection of potential manufacturers
  • Interval between production runs can be problematic for some manufacturers since the biggest customer tends to get the most priority on the lines
  • Off-shoring usually makes sense with system components with specific high volumes, limited assembly and test needs, and work best for builds with proven high yields and low technology complexity

Things a Manufacturer Can Do to Avoid/Preempt Second-Sourcing:

  • Establish method to assure vendor of long-term financial stability and business model on an ongoing basis
  • Present a disaster recovery/mitigation plan (e.g. second-site, cross-manufacturer agreement to protect each other)
  • Present a partner proposal to offer pricing flexibility that is fair to both manufacturing and vendor
  • Up-sell the cost and efficiency benefits of single-source
  • Offer to let them purchase equity in manufacturer
  • Offer to setup a preferred vendor agreement, e.g. commitments of volume in return for commitments of second site implementation, commitments to annual cost reductions over the life of the product build, commitments of turn-around time/priority
  • Offer to use their existing supply chain to leverage cost reductions on commodity components for the vendor
  • Offer to implement a Vendor-Managed Inventory program, where single-sourced high value components are held in Vendor-owned inventory at the manufacturer’s site,  but they are only sold to the OEM just before they are added to the assembly, which reduces the manufacturer’s inventory holding costs and reduces lead-time uncertainty for these big $ items.

If anyone has any other insights, let me know!