Ottawa-Gatineau, Ontario-Quebec

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Ottawa and Gatineau are cities on the opposite banks of the Ottawa River, with English-speaking Ottawa on the Ontario side and Gatineau in French-speaking Quebec Province on the other. Together, they form a metropolitan area of over 1 million people. In addition to language, one more thing distinguishes Ottawa from its sister city: since 1867, it has been the capital city of Canada.

As with other national capitals, the main business of Ottawa has long been government. Total Federal government expenditures have risen from C$16 billion (US$14bn) in 1970 to C$158 billion (US$134bn) in 2001, though a growing economy has actually reduced Federal spending as a percentage of GDP. While most of that spending is distributed across Canada's vast land mass, the nation's capital naturally benefits. Today, 13% of the current labor force of Ottawa-Gatineau consists of Federal government employees.

But, like the capital region of other nations, a strong government cluster has also attracted businesses that depend on government policies and spending decisions. Canada's telecommunications industry, once state-owned, is headquartered in the region, and defense, security, software and life sciences companies have found good reason to locate offices and research facilities there. Current employment in the region's more than 1,800 high-tech companies is equal to 11% of the total labor force, even after the technology bust at the turn of the last century.

Besides being prosperous and dynamic, Ottawa-Gatineau is a nice place to live. It enjoys a beautiful natural setting at the junction of three rivers and boasts the lowest cost of living of any major North American city. It was ranked sixth in the world for quality of life by the Swiss firm Corporate Resources Group, and a cross-Canada survey recognized the region as the best place to live and work in the nation.

Ottawa 20/20

Given this situation, the region's political leaders could be forgiven for resting smugly on their laurels. But they have done nothing of the kind. In 1999, the City of Ottawa formed The Ottawa Partnership (TOP), a group of public and private-sector leaders who advised government on growing and sustaining the local economy. In 2001, the area completed a political reorganization that united a regional government body and 11 urban and rural municipalities, including both Ottawa and Gatineau, into one local government structure. As part of that process, the new government published a plan called Ottawa 20/20. Its goal was to establish a unified planning, zoning and development scheme that would see the community through the next 20 years as its population increased by as much as 50%. Following a performance review of the first five years, the government recently published a detailed plan for 2006-2009 focusing on economic development, equality and privacy issues. With an overall goal of making Ottawa-Gatineau an "Innovation Capital," priorities include workforce skills development, improving knowledge sharing among businesses and citizens, linking innovation more effectively with the marketplace, strengthening entrepreneurship and upgrading marketing.

Behind these priorities are two primary challenges to the region's continued success. Research by The Impact Group in Toronto, in collaboration with H. Douglas Barber, co-founder and retired CEO of Genum Corporation, one of Canada's most successful high-tech firms, shows that Canada suffers from a "commercialization gap" compared with its neighbor nation to the south. Canada is strong in research and development and has some world-class technology companies like Nortel and Mitel, but Canadian business generally lags American business in bringing technology innovation to market. According to Dr. Barber, the key to the problem is the relative inability of government, compared with the private sector, to understand customer needs and innovate competitively to meet them. Statistics from Industry Canada reveal that, in 2000, 68% of funding for R&D came from government and related sources while industry contributed 32%. This is nearly the reverse of the US, where industry spent 67% of each R&D dollar and government spent only 33%. This relative lack of customer centricity and commercial competence tends to produce technology-based enterprises that cannot afford the marketing or R&D needed to succeed.

The other challenge has to do with the region's unique mix of urban and rural areas. In urban areas, 94% of households and 100% of business and government facilities had access to broadband in 2003, whereas availability in rural areas was about 2%. Lack of broadband infrastructure posed a severe constraint on further development outside the existing urban zones.

Changing the Culture

It may be ironic to ask government to tackle a commercialization gap caused by an excess of government over private investment. But Ottawa-Gatineau is pursuing several creative approaches to changing the culture of innovation in business. Leading by example, the city has put dozens of services, from pet registration to utility bill payment, online. A SmartCapital program completed in 2003 introduced a collaborative online catalog of the resources of major universities, institutes and libraries in the region. An Entrepreneurship Center offers assistance in starting and growing companies, and connects them with local venture capitalists. More than 2,400 clients started businesses in 2004 alone, and they created more than 7,800 new jobs and C$205 million (US$174m) in new investment. Annual venture capital investment in the region has grown at an average of 50% per year since 1995, peaking at C$1.35 billion (US$1.15bn) during the technology boom and settling to a more sustainable C$250 million (US$212m) since then. Government, business and academia now collaborate on workforce development programs ranging from math tutoring for talented low-income children to analyzing skills gaps and working to fill them.

Meanwhile, government spurred the formation of a volunteer group, the Ottawa Rural Communities network (ORCnet) to build awareness about broadband and aggregate demand in rural areas. Through workshops, communities meetings and work with the telecom sector, ORCnet helped service providers build a business case for extending broadband into low-density markets. To sweeten the pot, local government put C$1 million (US$850k) into a public-private partnership that is investing C$3 million (US$2.5m) in a network build-out scheduled for completion in autumn 2007, which is expected to largely close the urban-rural broadband gap.

Ottawa-Gattineau has targeted life sciences, which already employs 11,000 people, as well as wireless, VoIP and green technologies as its best hope of future growth as the Innovation Capital. With over 78,000 people employed in high-tech already, the region looks forward to having a technology labor force larger than its Federal labor force, and to seeing privately-funded innovation become the primary driver of its economy.

ICFF-Ottawa_small.jpgPopulation: 1,148,785

Labor Force: 686,000

Websites: ottawa.ca/en | www.gatineau.ca

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