New articles on entrepreneurial cultures and ecosystems

To absolve my guilt about not blogging more, I'll simply say that it's been a very busy year. The results of that busy year are now coming to fruition with two of my new articles on entrepreneurial cultures and ecosystems coming out in the past few weeks. First, I just published an article in the Journal of Economic Geography on regional entrepreneurial cultures and mentorship. This is work that came out of my dissertation that looked at the origin of entrepreneurial practices. I was interviewing entrepreneurs in Ottawa and Waterloo, Canada, and saw huge differences in both the number of entrepreneurs who had mentors. The difference was only seen looking between the two cities: it didn't matter if they were high-growth of lifestyle entrepreneurs or serial vs first time firm founders.

Table 1

The reason for this was the relationship between each city's local culture and the shared culture of 'tech entrepreneurship' — the general feelings and understandings about entrepreneurship created by the global business media and entrepreneurial communities. That later culture sees mentorship as a real important part of the entrepreneurship process, but the importance of mentorship differs within different regional cultures based on a variety of factors.

So, how do we understand the complex interplay of local and non-local cultures? I argue that the work of Pierre Bourdieu can be very useful. Bourdieu talks about fields — ordered systems of social rules and relations — and habitus, people's internalised understandings of how fields work. Entrepreneurs are embedded in both their local field as well as the more global field of the technology entrepreneurship community. Entrepreneurs have to be very skilled at navigating the often conflicting norms found within different fields.

The paper is very conceptual and tries to build a model of entrepreneurial culture from a Bourdieuian perspective. The main take away is that instead of talking about if a place has an 'entrepreneurial culture' or not, we should be better concerned about the different types of fields entrepreneurs are embedded in and how they understand their overlapping position in them. This stops culture from being some monolithic, deterministic force and helps us understand it as a more nuanced context that contributes to entrepreneurs' own practices.

The second article, in the International Journal of Innovation and Regional Development, is an empirical peek at how Edinburgh's entrepreneurial ecosystem works. It reports some early work I did on the role of different entrepreneurial support programs that operate within Edinburgh's entrepreneurial ecosystem.

I think there are two important findings in this paper. One, Edinburgh has a huge number of different public and private programs designed to support high-tech entrepreneurs. I counted somewhere around 45, but that's a very conservative estimate. While I think Edinburgh is at the high end of the number of programs for a city of it's size, it's clear that most communities don't have just one program but a whole network of programs that work together to support entrepreneurs. This is echoed in a recent study of St. Louis by researchers at the Kauffman Foundation in Entrepreneurship and Regional Development.

What all these programs actually do

Second, I didn't see much competition between these programs. While they overlapped to s0me extent in the types of support they provided (see figure above), they were generally able to specialise in different industries and stages of the entrepreneurship process, handing off entrepreneurs to different programs as their needs changed. This creates a pipeline that entrepreneurs can enter and ensures that they are supported throughout their journey.

World Weary Waterloo Waits and Wonders: When Will RIM's Worries Wane?

First, apologies for the lack of posts here. Since the last post, I've moved my entire life to Edinburgh and started a new job in the University of Edinburgh Business School. I've started an experiment in using Tumblr to make short comments on interesting articles about culture, entrepreneurship. I'll eventually find some way to integrate the two. Second, thing going well for Blackberry (ńee RIM). Losses of almost a billion dollars in the last quarter, reports of planned layoffs of 40% of the workforce, disappointment and delays on new products, this has not been a great week for the Beleaguered Smartphone Company©.

At this point, it seems likely that recovery is unlikely at best and that RIM (sorry, not calling it Blackberry) will cease to be an independent company at some point in the near future. This may take the form of a complete selloff to a private equity firm or someone in the smartphone industry or the spinoff and selling off of the remaining profitable areas (Blackberry OS, BBM and the cafeteria?).

The question for me, even on the other side of the Atlantic is: what does this mean for Waterloo's entrepreneurial ecosystem and culture? While the 4500 cut jobs will take place around the world, there's no debate that many, if not most, will be in Waterloo.  RIM, along with the University of Waterloo, are seen as the twin pillars of the region's entrepreneurial community.  The presence of a home grown startup that became a global force is a vital narrative in the community: it shows the possibilities of entrepreneurship and the potential rewards of leaving a stable job for the risks of starting your own company.

As I've said before, Ottawa after the collapse of Nortel is the easiest comparison, but I don't think Waterloo will suffer the same fate. After Notel began it's long decline, there was an initial exodus of skilled workers out of the region in search of other jobs. Other highly skilled engineers stayed in the region due to family ties or the fact that they actually liked living there (?!). These people looked for jobs where they could and turned to entrepreneurship, mostly as small time consultants, when they couldn't find a place in another big company or the government.

Waterloo can expect a different kind of exodus. It's proximity to Toronto (an hour on the 401) means that people can stay in Waterloo but become highway warriors and work in offices in Mississagua or Oakville. It's not a pleasant drive, but it's doable. Many major companies like Microsoft and Google already have large Toronto offices and will look to scoop up some of RIM's talented engineers. We're already seeing reports of smaller firms opening up Waterloo offices, I'm sure with the hope of picking up laid off cell phone engineers and programers as well. 

It's also likely that many of the region's economic development programs like Communitech, will try to help the recently laid off workers become entrepreneurs. The logic is seductive: take the experienced human capital of RIM workers, combine it with the social capital and experience of the region's talented entrepreneurial mentors, and help create new, high-tech businesses.

However, it's a mistake to see this as the Great Hope of economic recovery. RIM is an interesting beast: it's a major part of the discourse and legend of Entrepreneurial Waterloo (along with the Mennonites and the Germans), but the company itself seems to discourage entrepreneurship. I can only think of one spinoff from RIM, KIK Messenger, and RIM sued them! Similarly, very few people leave RIM and start their own firms. In my extensive interviews in the region, I only heard of one person who did so (the aforementioned KiK). This is to say that people who have been working at RIM may not want to be entrepreneurs. They want to be people who design high quality cell phones and messaging infrastructure that works a lot of the time, and leave the dirty work of actually running a company to someone else.

The same thing happened with Ottawa and the ex-Nortel workers. The dreams of seeing startups escape the bloated caucus of Nortel like so many baby spiders in a nature documentary never happened. But the region kept on promoting this kind of entrepreneurship without a second thought.

If Waterloo wants to make the best out of a bad situation, they need to figure out a way to help the soon-to-be laid off RIM workers. Entrepreneurship training is a big part of this, but it's not the only part. The community should be working to convince other high-tech companies to take advantage of this situation and open local offices to snatch them up. The local government needs to work with its provincial and federal counterparts to try to encourage Canadian firms in the region to expand their operations to take them on. Despite the region's celebration of entrepreneurship, it shouldn't see entrepreneurship as the only way forward.

Wither Waterloo?

Research in Motion is not a healthy company. It makes a product no one particularly wants for a price no one particularly wants to pay. The reason for the company's decline will no doubt be chronicled in a thousand MBA case studies, but I imagine at the end of the day it will simply be a tale of complacency in the face of change, over-confidence in the face of challenge, and stagnation during the punctured part of punctuated evolution of the mobile device market. But, I'm not the guy to talk to about that. I don't know from management. But I do know from regional development, and especially the role of small firms and entrepreneurship in regional development. The major question amongst nerds like me is that if RIM does implode, if it either dies a quick natural death (unlikely), or if some corporate raider takes advantage of its low share price to acquire the company and strip it for assets (likely), or it slowly shrinks over a period of several years until it's simply another has-been (99.9% chance), what will happen to Waterloo?

Christine Dobby, Mark Hartley and someone called "Financial Post Staff" think that it'll be good times! Waterloo, as you must know if you're reading this (since I'll likely be the only reader and I know this) is what you might call an 'entrepreneurial hot zone.' There are a huge number of small software startup firms in the region and these firms are all desperate for workers. I intervened around 30 entrepreneurs, investors, and economic development officials from the area as part of my dissertation and almost all of them mentioned the difficulty of hiring skilled workers. This was in part RIM's fault: they would suck up all the best workers, leaving slim pickings for the rest of the region's economy.

Ottawa is the model for this. When Nortel Networks died its slow death throughout the past decade, there was always the hope that the thousands of workers laid off from the company's Ottawa HQ would enter the local tech market, either by working for other local firms or by starting up their own firms. The former plan didn't end up working out because most of Ottawa's software economy was based around the TelCom sector, whose decline in 2001 had sealed Nortel's fate. Just as a massive labor pool of highly trained engineers was available, there was no one looking to hire. The entrepreneurship thing didn't really happen either. Nortel employees were used to working in a very large firm, many of them did not want the lifestyle of an entrepreneur. It's hard to accept 100-hour workweeks for no salary when the federal employee who lives next door is out by 4:30, get's a month's vacation and *gasp* has a pension. What entrepreneurship did exist was really an outcome of people who loved living in Ottawa but who needed to create jobs for themselves. These were largely small consultancies that will never grow or produce jobs.

I predict Waterloo will have a similar experience (few laid off workers joining the local labor force or starting local firms), but for different reasons. Waterloo's technology economy is far more diversified than Ottawa's. So it's not that no one will be hiring. It's just that there is a complete mismatch between the skills and expectations working at RIM and the skills and expectations of working for a small firm. Small firms pay less, offer fewer benefits, and expect workers to be far more flexible in what they do and how they do it. Not everyone thrives in such an environment, especially if they've spent a good deal of their career in a large, hierarchical company like RIM. One of the chief complaints I heard from entrepreneurs in Waterloo regarding employees was that it was hard to find workers who could work successfully in small firms.

But you know where there are high-tech jobs in large organizations? Just down the 401 in Mississagua and Toronto. Microsoft, Google, IBM, Intel, they all have offices or campuses in the GTA that are a reasonable commute from Waterloo. Not a nice commute, the Queen's Express Way is pretty much the worst stretch of highway in North America, but a reasonable commute none the less. Unlike ex-Nortellers in Ottawa, former RIM employees won't have to uproot their lives to find a similar employment situation. They'll just have to drive eest to suburban Toronto's plentiful office parks.

RIM's decline will hurt Waterloo, a lot. I think that as a whole, the entire regional economy is resilient enough to survive this. They have great institutions, institutions like the University of Waterloo and Communitech that will always do a great job of attracting talented people to the region and encouraging growth. And I think it is critical that the region try to support former RIM employees' local endeavours, from joining existing firms to starting their ow. However, it's clear that simply having a large pool for very skilled workers isn't an economic panacea. These workers can't simply be slotted in to existing job openings. It will be an ongoing process, one that will have far more failures than successes.

That thing they said woud happen just happened

I don't want this to turn into a RIM blog, the world already has enough disaster blogs. But, RIM just announced that they'll lay off 2,000 workers, out of a total workforce of 19,000. There is no word on what jobs are being eliminated — developer or lawyer — or where the lost jobs will be (have been?) located, but considering that the bulk of RIM's workforce is in Ontario, it is not a large leap to guess that many engineers and developers in Waterloo will get the axe. The question immediately turns to how these layoffs will affect the city of Waterloo. As I've said before, Waterloo isn't completely dependent on RIM in the way that Armonk is dependent on IBM,  Redmond with Microsoft, or getting away from high tech, as Bentonville is with Walmart. It's not a one horse town, but it is a town that had a really big horse that pulled a lot of....economic development plows (I'm starting to regret this metaphor).

From my perspective, the concern isn't that if RIM declines, Waterloo  becomes a new economy version of Hamilton, Ontario, a city who's primary industry (in Hamilton, that was the steel industry) left for greener pastures. Waterloo has a great deal of resilience, in both it's high tech and traditional industries. The main concern is making sure that the talented people who are laid off are able to stay in the region, by either getting new, local jobs or starting their own company. Waterloo's talent pool is deep, but talented people can swim to where ever they want. Most of the time, they don't because moving is pretty painful. But a lost job presents an opportunity to try out another city.

So, with that in mind, here are a few crazy ideas to try to keep the most talented people in the region, in the region.

  • RIM should donate several thousand dollars for every employee laid off to Communitech, the local economic development agency. Communitech is going to be crucial for both re-skilling (it's a terrible word, but it's the only word that works) for entrepreneurship, or, if the stories about working at RIM are true, de-program them in the hopes of successful reintegration to society.  This isn't a cure all, but OCRI in Ottawa did see some success during Nortel's collapse. The key is to remember that no everyone wants to build the next RIM. Some people just want to run a consulting firm that will pay a decent salary without sucking up all their time.
  • Given RIM's difficulty in attracting app developers, it might not be a bad idea to try to convince laid off programmers or developers to become full or part time app developers. No one knows the ins and outs of the blackberry environment better than someone who has been diving in it for years. One would hope that RIM has been conducting market research that shows potential niche applications that have a sizeable potential market. Of course, selling $1 or $2 apps will not equal a RIM salary, but app production provides a nice way to bide your time and hack while living off what is hopefully a very big severance check.
  • The idea of a Grave Dancer Fund is interesting, but I'm not sure I think it'll work. Then again, I'm a terrible investor, all my money is tied up in a 1.5% savings account because I think CDs are too risky an investment. The idea here is to create a venture fund that specifically targets people laid off from RIM: get in on a ground floor that's so low there's magma seeping in. However, these layoffs are happening soon, in the next 2 months soon. Is that really time for people to get over the shock of losing their jobs, find a product, start prototyping it, and do all the other things startups need to do? It has the potential to work, but it also has the potential to subsidize some very long post-job vacations.





The future of RIM and the future of Waterloo

Research in Motion, the maker of the venerable BlackBerry cellphone has had a hard time as of late. Another disappointing quarter has left their shares at a 5 year low, and speculation about their future has already started, with rumors of buyouts and declines swirling around. This is a continuation of their annus horribilis which has already seen the lack-luster launch of the Playbook which was supposed to revitalize the company's cutting-edge image, but didn't. But this post isn't about RIM's market opportunities or new strategies. I don't have a clue about this; In full disclosure I'm writing this on a Mac Mini, with an iPad (*sigh, iPad 1) and iPhone 4 charging next to me. What I do want to think about is what a declining RIM means for the future of entrepreneurship the Kitchener-Waterloo region. Startup North got the ball rolling on this topic yesterday. They argue that while RIM has pumped maybe 100 million dollars into Canada's entrepreneurial economy over the past several years, through acquisitions and and venture investments, Google has done the same amount in only the past 12 months. Furthermore, most of RIM's acquisitions have been located in Toronto, not Waterloo. In terms of pure dollars and connections with startups, RIM has very little happening in Waterloo. Though its headquarters is located there at it employs thousands of developers and engineers locally, to a lot of entrepreneurs' it's essentially a blackhole that sucks up all the talent. There are very few, if any, spinoffs from RIM. One of the local startups that is in anyway associated with the BlackBerry ecosystem is Kik, who made a pretty damn popular instant messaging system for the Blackberry. But, they're now they're being sued by RIM. While Kik now supports iOS and Android, they've left the BlackBerry behind. If anyone knows about other spinoffs from RIM, I'm all ears.

(I should add that my PhD dissertation focuses on the local social and cultural factors that underpin high-tech entrepreneurship in Canada. As part of this research, I've interviewed dozens of entrepreneurs in Waterloo, with a specific focus on their relationship to RIM)

I wouldn't say that RIM is hurting local startups. Many of the entrepreneurs I've talked to have said that they often see RIM senior execs at Communitech (the local economic development group), and that they give out advice and are generally nice people. I mean, this is Canada after all. RIM also helps startups indirectly as well. A lot of the entrepreneurs I talked to — from bleeding edge microchip designers to graphic designers working out of their basements — said that just being associated with RIM by being located in the same city is an advantage. I would argue that much more than the University of Waterloo, RIM has been the main reason why Waterloo is now synonymous with high-tech.

If RIM continues its decline and becomes a mere Nokia or Motorola, Waterloo's image will be tarnished. If RIM can no longer take on the cream of UW's co-op crop, Waterloo's imagine will decline and fewer of the world's best computer scientists will come to the city. Other startups like SandVine and Desire2Learn show that Waterloo is more than just RIMtowne, and the continued presence of Google and Microsoft in the region prove that the city is and will be one of the hubs of raw computing talent in Canada, if not the world. But, a declining RIM and the continued rise of startups in Vancouver, Toronto and Montreal might sap talent from the region.

However, back over at StartupNorth, there was the thought that maybe RIM's coming layoffs will be a boon for entrepreneurship in the region. This is what happened in Ottawa. As Nortel died its slow death, the laid-off engineers and developers started their own businesses, creating a renaissance of entrepreneurship in the city. That's true, but it's also not. It's true that even as Nortel slid into nothingness, entrepreneurship grew in the city (see figure)

But, the bulk of these firms were little IT consulting shops set up not by entrepreneurial world killers who wanted to take on Cisco, but by older engineers who didn't want to move. They had houses with mortgages (and this was not a fantastic time for selling your house), they had kids in schools and husbands and wives with local jobs. Leaving Ottawa just wasn't an option for some people. And Ottawa is a pretty great place to be an IT consultant. Some of them went straight back to consulting or contracting for Nortel, and over time many of them starting working with the federal government.

But many of these firms are very successful, they're not the kinds of firms that lend themselves to regional economic development or growth. They don't make products, so their revenues only grow with their billable hours. They don't hire many people, and they're not great platforms for new entrepreneurs to hone their skills. Rather, by and large they are lifestyle firms that generate a good income for the owner, and maybe a few other employees. Not that there's anything wrong with this, only that this isn't entrepreneurship in the way that many people imagine. Afterall, these weren't died in the wool entrepreneurs, these were workers at a very large company who were suddenly laid off. They want a nice comfortable life, they're not necessarily willing do 18 hour days or 100 hour weeks any more.

Waterloo is less of a great place to be an IT consultant. Sure, if RIM lays off people, it'll need to bring on contractors, but there are few other big players in the region that need large amounts of IT outsourcing done. Certainly, there's no federal government presence like in Ottawa. There is just not a whole lot of room in the local economy for a lot of small IT shops.

So, what will happen if RIM continues its decline, leading to large layoffs of highly skilled developers and engineers? The majority will find other jobs locally, no doubt of that. Google, Microsoft and the rest would love to scoop up that talent for their mobile divisions. Some of the younger and unattached ones will leave for greener pastures: Toronto, Vancouver, Montreal, San Francisco or Boston. This will be the biggest loss for the community. But those who do stay will may create their own startups. But the vast, vast majority of these will be lifestyle firms with very little growth potential. I will be very surprised if out of, say, a 500-person layoff from RIM, if even one truly innovative startup will result.