1. From Electronic Commerce to the e-Economy – Strategies for a Digital World
Catherine Peters Industry Canada ITS 15th Biennial Conference September 4-7, 2004

2. Electronic Commerce to e-Economy Outline of Presentation
The Growth Story
ICTs, Productivity and Growth
The Internet as a Platform
e-Business Networks
Canada’s Place in the World
Canada’s Digital Economy Report
Broadband Gaps
e-Business Deployment
Canada’s Challenges and Strategy Response

3. The Growth Story
“Many countries that improved growth performance in the 1990’s did so because they have been able to get fundamentals right; they had created an environment that could take advantage of the new technologies and business opportunities when they emerged”
The New Economy Beyond the Hype,
The OECD Growth Project, OECD, 2001

4. ICT-Intensive Economies led Economic Growth
The Growth Story
ICT-Intensive Economies led Economic Growth
This this growth in productivity has led to improved standards of living.
The story is not, however, just about how the ICT sector has grown. It is about how ICTs have stimulated productivity, trade and investment in all sectors of the economy.
Source: The Sources of Economic Growth in OECD Countries, OECD, 2003

5. Historically, Technological Innovation…
ICT Productivity and Growth
Historically, Technological Innovation…
Steam Engine
Started First industrial Revolution – Mechanized factory-based mass production
Railroad, Postal and Telegraph communications
Changed the way goods and services were produced and distributed as well as the mobility of people, creating the first national economies
Electricity
Propelled the growth of industrialized economies by the enhancement of production capacities and productivities and the proliferation of a vast array of household goods and services
Internet and ICT Networks
Alters market structure and industrial organizations, similar to the previous impact of railways and electricity
…has fuelled rapid economic growth

6. ICT-based Innovation ICT Productivity & Growth
Source: The Sources of Economic Growth in OECD Countries, OECD, 2003

7. Consequently, as networks spread and as computers and artificial
ICT Productivity & Growth
Networks enhance Productivity Growth
The productivity derived from Metcalfe’s law is inherent in the economics of networks, meaning that value gained from the operation of such networks exceeds the sum total of utility to the individual participants
Moore’s law, combined with the networking of computers, produces a further range of benefits as a result of the convergence of network externalities with the massive growth of computer processing power;
Consequently, as networks spread and as computers and artificial
intelligence becomes more and more pervasive in industrial processes of all kinds, these positive externalities can be captured throughout the economy.

8. “Everything we ever said about the Internet is happening”
Andrew S. Grove, Intel Corporation
The Internet as a Platform

9. Internet Usage Races Ahead
The Internet as a Platform
Internet Usage Races Ahead
In Millions of Users
Sources: * ** Computer Economics, June 2002

10. People are Well Connected to the Internet…
The Internet as a Platform
People are Well Connected to the Internet…
Source: World Information Technology and Services Alliance, Digital Planet 2002, February 2002

11. Businesses Also Well Connected
The Internet as a Platform
Businesses Also Well Connected
Businesses with Internet Access and Web Site, 2001
(Percentage of businesses with ten or more employees)
Source : OECD, Measuring the Information Economy 2002

12. e-Business Networks
The use of ICT by businesses is directly linked to innovation and the transformation of business processes.
“Technological innovations can disrupt not only systems and business models, but also organizational cultures. Creative destruction indeed.”
Robert Bruner 2001

13. E-Business has Entered the Economic Mainstream
e-Business Networks
E-Business has Entered the Economic Mainstream
The Economist, May
“E-commerce will continue to change every kind of business, offline as well as online…”
Business Week, May
“The Web players new assault should keep the productivity gains coming.”

14. E-Commerce Exceeding Expectations$-
$1,000.0
$2,000.0
$3,000.0
$4,000.0
$5,000.0
Worldwide
E-Commerce
(U.S. $Billions)
1999
2000
2001
2002
2003
2004
2005
1999 Estimates
2002 Estimates
Note: Charts reflect "Internet Commerce", a subset of electronic commerce that includes the purchase or trade of goods and services via the Internet / World Wide Web, but excludes financial services' transactions
Source: International Data Corporation, 1999 and 2002

15. Larger Business and Economic Revolution Underway:
e-Business Networks
Larger Business and Economic Revolution Underway:
Supply chain transformation (B2B)
Virtual firms
Offshoring & outsourcing
Reshaping of the consumer marketplace
Impact on industry competition
Development of new electronic marketplaces
Renewal of Public Services
Source: Restructuring value chains: Impact of the Internet, EBIP, WPIE 2002

16. Organisational Change Critical to Make ICTs Effective
e-Business Networks
Organisational Change Critical to Make ICTs Effective
ICT capital becomes more effective if a company is organised to exploit it
This takes additional investment
US$1 investment in ICT require US$9 of complementary investment
Fundamental transformation of the conventional business process
“We know that it’s a real business transformation because it survived the economic downturn.” Alice M. Rivlin, Brookings Institute
Source: ICT & Business Performance, OECD

17. Firm-Level Benefits from e-Business
e-Business Networks
Firm-Level Benefits from e-Business
Reduce costs
Increase transaction speed and reliability
Improve management capabilities
Develop or improve collaborative capabilities
Create interdependencies
Manage customer relations better
Create more added value
Source: Restructuring value chains: Impact of the Internet, EBIP, WPIE 2002

18. The Digital Economy in Canada

19. Canada’s e-Report Card: 2002
Canada’s Digital Economy
Canada’s e-Report Card: 2002
Progressing Rapidly
>>
> II
<
Falling Behind
Progressing
Paused
e-Business Readiness
Growth & Acceleration
Investment & Image
>
Venture Investment
Businesses Online II
>
e-Business Talent
>>
>
Tax and Regulatory
Consumers Online
>
SME Adoption
Privacy and Security Practices II
<
e-Business Supply
e-Business Brand II
Source: Fast Forward 4.0, Growing Canada’s Digital Economy, Canadian e-Business Initiative (CeBI), May 2003

20. Canada’s Digital Economy
E-Business Benefits are Captured by Canadian Firms, but 50% of SMEs have not Adopted an IBS*
Satisfaction with Internet Business
Solutions (IBS) Investment,
as % of Respondents
Size of Cost Reductions and Revenue
Increases Due to IBS Investment
Don’t know
Highly satisfactory
Satisfactory
Neither satisfactory
or unsatisfactory
Unsatisfactory
Increase in
revenue
Decrease in
cost of goods
sold
Decrease in
sales and
general
administration
expenses
Highly unsatisfactory
Source: The Canadian e-Business Initiative, Net Impact Study Canada, The SME Experience, November Based on 398 Canadian enterprises with full-time employees. *Net Impact Canada IV, 2004.

21. Uneven e-Business Deployment

22. Online Business Activities in Canada - 2000-2002
High Business Connectivity, but Low Adoption Rates of Advanced Online Activities
Online Business Activities in Canada
Percentage of firms
Size of firm also matters.
Source: Survey of Electronic Commerce and Technology, Statistics Canada, April 2003.

23. Not All Sectors Are Capturing the Benefits
Uneven e-Business Deployment
Not All Sectors Are Capturing the Benefits
Six leading sectors account for 80% of all Canadian Internet Sales
Private firm sales were $18.6 billion in 2003
Leading e-Commerce Sectors are: Wholesale Trade, Transportation and Warehousing, Manufacturing and Retail Trade – 67% of sales
e-Commerce Sales by Industries 2003
Wholesale 24%
Retail 11.4%
Manufacturing 13.5%
Transport & Warehousing 18.5%
Other 20%
Professional Services 5.8%
Finance & Insurance 6.8%
Last year (2001?), those sectors accounted for 74% of total E-Commerce sales
Source: Survey of Electronic Commerce and Technology 2003
Daily April 16, 2004, Statistics Canada

24. Broadband Gaps
"The broadband problem is particularly frustrating because it is the one piece of the physical infrastructure of computing that is limiting a 'miracle environment' of new applications thanks to ever-increasing computer speed, power and video-display capabilities."
Bill Gates, September 2001

25. Worldwide Internet and Broadband Use Continues to Grow
Broadband Gaps
Worldwide Internet and Broadband Use Continues to Grow
Broadband and Internet use, world, millions
700
10.7%
Broadband as % of Internet users
Internet
600
7.4%
Broadband
500
4.0%
400
1.4%
300
0.3%
200 0% 0%
100 0%
Of course, these numbers are simply a Canadian phenomenon.
Worldwide, internet use, and broadband use, continue to grow.
1995
1996
1997
1998
1999
2000
2001
2002
Source: ITU

26. Canada is Well Positioned . . .
Broadband Gaps
Canada is Well Positioned . . .
Broadband subscribers per 100 inhabitants
Top 10 Countries End of June 2003
23.2
14.8
14.5
13.1
12.3
11.6
11.4
10.8
10.7
9.8
. . .To Adopt High-Speed
* Ethernet LANs, two-way direct satellite, fibre to the home, and fixed wireless.
Source: OECD, ICCP Broadband Update, December 2003

27. Broadband Gaps
Broadband Deployment
Market problems – business case for deployment nonexistent in rural/remote areas, in particular in low density countries such as Canada, Australia
Relevance for community development and digital divide
Relevance for business and delivery of public services
“Broadband, or what they call high-speed Internet, is critical in making our high-speed economy even more productive… The goal is to be ranked 1st when it comes to per capita use of broadband technology. It’s in our nation’s interest. It’s good for our economy.”
President George W. Bush, Speech at the Department of Commerce,
June 24, 2004

28. The growth of e-Business requires Broadband platform and service deployment and availability
Investment in E-business Development
Investment in Broadband Infrastructure
“The deployment of broadband services would help spur the growth of e-commerce and vice versa. The future is very bright for both.”
Bruce Mehlman, U.S. Dept. of Commerce, Aspen Institute Summit, August 2002
“Several applications, such as broadband and e-commerce are still in their early stages and may have a large potential for future growth.”
Meeting of the OECD Council at Ministerial Level, Seizing the benefits of ICT in a digital Economy, 2003
Creating Economy-wide Platform for e-Business
Access for SME’s
Greater Availability, Affordability
Virtuous Circle
Sector-wide deployment
Increased Capability of Networks
Profitability
Increased Sustainability
Generating Revenue Streams for Infrastructure Investment

29. The economic, social and cultural potential is enormous
Advanced networks are the key to productivity growth
Existing businesses need them in order to grow
New businesses become possible with them
ICT is a major industry in its own right
Advanced networks can deliver social programs
Healthcare
Education
Government On Line
Advanced networks offer new cultural opportunities
HDTV
Interactive video
Internet radio
Online specialty television

30. The e-Economy Agenda
Centre Canada’s economic strategy on the contribution of networked-based information technologies
Accelerate the rollout of broadband infrastructure
Build a world-class intelligent infrastructure
Ensure that Canada continues to have the world’s best legal and policy environment for innovation
Strengthen stakeholder partnerships and cooperation
Develop sectoral-specific strategies for industrial e-business adoption, particularly among SMEs
Remove cross-border and inter-jurisdictional barriers that inhibit the global spread of e-commerce and its benefits

31. Canada’s e-Economy Targets
Reach levels of SME e-readiness comparable to the United States
Continue to lead all G8 countries in access and availability of broadband networks
Upgrade all industrial and resource sectors and supply chains to North American best practices for employing e-solutions and conducting business online
Bring the education and health sectors to the top rank in technology use and innovation
Rank #1 in terms of the speed, size, functionality and intelligence of advanced networks

32. From Electronic Commerce to the e-Economy – Strategies for a Digital World
Catherine Peters Industry Canada ITS 15th Biennial Conference September 4-7, 2004