Canada Left Out of BCG Study on SMES – Really?

Canada Left Out of BCG Study on SMES – Really?

Microsoft Corporation recently commissioned the well-respected Boston Consulting Group (BCG) to conduct a three year long research study around the use of technology in mid-sized companies.  BCG has been consulting with corporations for over 50 years, and is a leader in the field of helping organizations increase efficiency and uncover new opportunities.  You can find the link to the full report at the end of this article.

The focus of the Microsoft sponsored study was to understand the correlation between the use of advanced information technology by mid-sized firms, and their growth as measured by increased revenue and number of employees.  The advance technologies include things like cloud based services, online, social, internet, and process automation tools used to increase employee productivity.

The BCG study interviewed over 4,000 Small and Mid-Sized Enterprises (SMEs) in five countries (U.S, China, India, Germany and Brazil), and extrapolated their findings to estimate growth in GDP and employment by country if more mid-sized firms became technology leaders for those and ten other countries (Australia, Turkey, Netherlands, Mexico, France, Japan, South Africa, UK, Kenya, and Russia).   In these 15 countries, SME’s employ an average of 54% of their country’s workforce, and are responsible for an average of 43% of the country’s Gross Domestic Product.

Not surprisingly, the study made a very compelling case for the adoption of advanced information technology by these SMEs, pointing out that Technology Leaders increased revenues by 15% over other firms, and created employment twice as fast!  In the five countries interviewed, they estimated that SME’s could generate up to an additional $770 Billion in combined revenues and create 6.2 Million new jobs if more SME’s adopted advanced technologies. To get to these numbers BCG assumed that 15% of Technology Laggards and 30% of Technology Followers became Technology Leaders (the methodology and descriptions are in the full study).

I’m no statistician, but let me take a shot at calculating what a similar transition would mean for Canadian companies and Canada as a country.

In doing my research, I think I see why Canada was not included in the research.  The numbers are not easily available.  For most purposes Canada considers SMEs to be under 50 employees, but for some studies they use less than 100 employees.  Other countries use less than 100 employees, and the report used less than 500 employees.  (I can see why the BCG study took 3 years!)  But, here goes!

Fun facts that are related:

ReferenceDate
Total Canadian Employees7.7 Millionhttp://www.ic.gc.ca/eic/site/061.nsf/eng/02805.html

 

2012 Industry Canada Survey
Employed by Companies < 500 employees6.92 MillionSameSame
% Employed by SMEs89.9%SameSame
Canada GDPUS $1.821 Trillionhttp://www.tradingeconomics.com/canada/gdp

 

2012
GDP per CapitaUS $35,992SameSame
GDP from SMEs with <50 Employees27%http://www.ic.gc.ca/eic/site/061.nsf/eng/02812.html

 

2011
Total German Employees40 Millionhttp://www.gtai.de/GTAI/Navigation/EN/Invest/Business-location-germany/Business-climate/labor-market-availability.html

 

German GDPUS $3.4 Trillion2012

OK, I won’t bore you with the calculations, but here is my best shot along with the reasoning:

If 27% of Canada’s GDP comes from companies with under 50 employees, I assume 15% to come from companies with between 50 and 100 employees, and another 18% to come from companies with 100 to 500 employees.  That makes Canada’s GNP from SMEs (for the sake of this project) = 60% of the total GNP number.  That happens to be in line with Australia, Netherlands, France and Germany.  So, it is a pretty safe assumption.  That makes Canada’s SME related GDP =  US $1.09 Trillion.

So, if Germany is the closest of the five surveyed countries, and we use their increase in jobs (1.7%) and GDP (4.4%) percentages for Canada………………………..

Through using advanced technologies, Canadian Small and Mid-sized Enterprises could add 129,000 jobs, and $79.8 Billion to the GDP!!!!  It sure sounds like it makes sense to me!

Here is the link to the full report:  http://bit.ly/1jsyemW

I’d love to hear if I missed something, or if you have a different view.  kdeininger@formverse.com