Speech for the Business Development Bank of Canada on "business misadventures," presented to local entrepreneurs

You'll notice that I call it a talk. I call it a talk, because I'm not really sure that it fits into the other categories. It's not a speech. It's not a lecture. If anything, what I want to do today is tell stories.

But unlike the stories you grew up with, I'm going to give the moral of the story up front. All of our stories end up the same way.

Business people with drive and vision succeed, even when they are being unorthodox. Sticking to the old rules and the old ways of doing things is no guarantee of success.

That probably takes some of the suspense out, doesn't it?

There's also another theme I'm going to bring up, and it goes along with this idea of thinking unorthodox thoughts. By now, you've all read a million articles about how computers have changed the world of business. You might have thought none of this applied to you.

After all, if you make stained glass windows, the closest you'll get to a computer might be Quicken and a Web page.

But the New Economy isn't just about computers. It's about a way of business made possible because of computers.

Let's go back to that window maker with the Web page. Suppose that's you. You scan images of your work, upload them to a Web site, and somebody in Germany puts down a $5000 order. That's the New Economy at work. It means that your customers aren't just down the road anymore. They are around the world. If you're not exporting already, there's no reason you can't start.

But exporting is just another side-effect of the New Economy. The New Economy itself is knowledge. We're not just in the business of hewing wood and drawing water anymore. Canada is using knowledge to make and sell better wood products at lower prices than ever before. We've been using hydraulics in ever more powerful engines.

Every business has knowledge in it. Every business can be made better by applying knowledge to it. What we're going to talk about today, ultimately, is about knowledge, about ideas, about innovation.

And innovation isn't just high-tech.

Let me show you what I mean.

It's 1849 and Walter Hunt is broke. He starts playing with a bit of wire, and three hours later he has himself the very first paper clip. Think about this. Greater men than Walter Hunt had invented the steam engine, the factory, the telescope but it wasn't until 1849 that somebody came up with an idea as simple as the paper clip, an idea that ended up getting used in every office in the world.

That was innovation, but we're so used to thinking of innovative ideas as being ultra-high-tech, not even Walter Hunt realized the power of his invention. He sold away all rights for a meagre $400.

Couldn't happen these days, you're thinking?

It happens every day. It wasn't until the 1970s that somebody thought up the yellow sticky note. That somebody was 3M, and even then, 3M very nearly rejected one of its most famous products. Here's what happened.

A 3M chemist named Spencer Silver was playing around in his lab, working on polymers. And he found one polymer that did a pretty bad job of making things stick together. Since 3M is the company that brought us all Scotch tape, it decided that sticky stuff that didn't stick wasn't exactly in great demand.

But 3M lets its employees spend 15 per cent of their time on pet projects. It lets them play because unstructured play can bring out a lot of creativity. So Silver played and played and played. He loved his new polymer. He played with it for years, but couldn't think of any way to use it.

That's when God intervened. I'm not kidding. Another 3M chemist happened to direct his church choir. He was picking hymns, and he did what we all did in those days. He cut up pieces of paper and stuck them between the pages of the hymnal. When he picked up the book, the little papers all fell out. It gave him an idea.

But despite this divine inspiration, 3M still wasn't convinced. It wasn't until company secretaries started using the stuff that 3M knew it was on to something big. They hadn't invented a better paper clip, they had invented something that worked better than a paper clip.

So what can entrepreneurs learn from this? Think outside the box. A really astounding new idea will make you rich if it changes all the rules. Sticky stuff that doesn't stick? Maybe it's bad for Scotch tape, but it's terrific for Post-It notes.

In your businesses, don't simply ask yourself "How can I do this better?" Ask yourself "How can I change the way people do things?"

Breaking the rules is important because things change over time. Let's look at McDonald's. The great marketing juggernaut can do no wrong, right? Sorry. Believe it or not, McDonald's did its best to quash its most famous product.

When Ray Kroc bought a hamburger business from the McDonald business, he hit upon the perfect formula for the 1950s: do the same products the same way everywhere. A McDonald's hamburger in Des Moines, Iowa, is going to taste exactly the same as a McDonald's hamburger in Scarborough, Ontario.

But to do that, you can't have many items on the menu. If every franchise is going to cook the same way, you can't clutter the kitchen up with a lot of different things to do. McDonald's was in the factory-food business.

Occasionally, Ray Kroc experimented with desserts, but that was about all he tinkered with. And he wasn't about to listen to some dumb idea from a guy out in Pittsburgh, of all places.

That guy was Jim Delligatti. His dumb idea? The Big Mac. Delligatti was losing customers to Big Boy, and Big Boy was selling a double-decker hamburger with all the fixings and a special sauce. Delligatti wanted one too. It took a lot of pleading and a little lying, but in 1967, McDonald's sold its first Big Mac.

What's the lesson here? Ray Kroc changed the way we buy food. But he forgot that one good idea can't last a lifetime. So even after you've changed the world once, be ready to change it again.

That's certainly the story in the computer world. In the 1960s, computers were vast machines made by companies that were even more vast. Or, I should say, company, in the singular. IBM ruled.

But in the 1970s, some teenagers from the suburbs started getting together and playing with the first home computers. These were really primitive boxes that you had to program yourself, and today most of us have more electronic power in our cars.

One of these kids was Steve Wozniak. He and his friend Steve Jobs built the first Apple computers in Jobs' parents' garage. Nobody much cared. Hewlett-Packard laughed them out of the office. Xerox thought so little of these two kids that it happily showed them their top-secret computer project.

Jobs was impressed. While Xerox was bogged down in its own bureaucracy, Apple took the Xerox ideas and made the Macintosh.

But who cared about two computer geeks, right? Not IBM, surely. But the biggest computer company in the world discovered that two entrepreneurial nobodies were becoming multimillionaires, and in IBM's own business line.

So IBM made its own personal computer. And Apple took a pounding. But for IBM to beat Apple at its own game, it had to be like Apple. It had to small and scrappy and entrepreneurial. For a big sluggish company to do that, it had to contract out a lot of the process. And the guts of its computer system came from the guy who stabbed IBM in the back.

Meet Bill Gates. He started Microsoft out of a hellhole of a hotel in New Mexico, where the only other businesses were run by hookers and drug dealers. He was small and scrappy and entrepreneurial. But unlike IBM, even unlike Apple, Microsoft managed to stay that way. Gates wasn't going to let some computer geek stab him in the back.

Well, let's meet Marc Andreesen. It's 1993, and Marc is making a lousy $6.85 an hour working on a supercomputer project at the University of Illinois. In his spare time he creates the first Web browser for Windows. The Web? At first, Bill Gates couldn't care less about the Web. He was too busy working on Windows 95.

Not anymore. Today Andreesen is the mega-millionaire behind Netscape, and it's very possible that he will dethrone Gates.

What's our lesson here? Size doesn't matter. Look at these guys. Wozniak. Jobs. Gates. Andreesen. These are the kids we'd hire to rake our lawns. They're not born titans of industry. They're not old money. They're people like you and me.

And if they can do it, so can you.

Consider Ben & Jerry. In the late 1970s, they were two young New Yorkers who had just moved to Vermont. They were looking at ways of getting into the food business, so they took a five-dollar correspondence course in ice cream making. They soon realized that there was a lot of ice cream on the market, but there wasn't much good ice cream. It was all full of artificial ingredients and whipped up with air.

In other words, the marketplace had an empty niche and Ben & Jerry filled it. Their ice cream was so good they hired a pianist to entertain the long line-ups. But it wasn't just good ice cream, it was good ice cream from a very different kind of company. Ben & Jerry were known for donating lots of its profits to good causes, and for being all-round nice guys.

In other words, the way they did business was part of the marketing strategy. So our lesson here is two-fold. First, successful products dominate a niche in the marketplace. And second, your product is more than what you sell. It comes wrapped in a lot of image, which you can control.

You're never too old to hit it big, either. By the time Harlan Sanders was 40, he'd been fired from just about every job he'd ever had. Even the army dumped him. But he kept trying. He kept taking risks. He never gave up. Finally, he opened a gas station on the main highway connecting Florida to the American Northeast.

You know what comes next. Sanders started fixing up his bland chicken by adding 11 herbs and spices. Things looked up. He was making money. And then a new interstate bypassed Sanders' gas station altogether. But even though his customers were gone, Colonel Sanders didn't give up. He kept plugging away until he was 65.

That's when he started getting a rather unusual source of financing: his Social Security check. Sanders took another risk. He used his retirement money to franchise a chicken recipe hardly anyone was eating anymore. Crazy? Absolutely, but today KFC is everywhere.

The lesson we can learn from Colonel Sanders? Being an entrepreneur means having drive. It means taking huge gambles. And it means having faith in yourself. No matter how often Sanders failed, he knew he could succeed if he kept at it. He knew that something as humble as a recipe for fried chicken could make him rich.

So far, I've given you American examples. You might think there are no role models for you here at home. On the contrary.

Let me tell you about a Montreal-area farmer named Arthur Sicard. Like most farmers, Sicard had a real problem in the winter. He had to take his milk cans eight kilometres to Montreal in a horse-drawn sleigh. If the roads were covered over in snow, his milk would go bad by the time he finally struggled into market.

People had tried other snow removal machines before, most of which just pushed the snow out of the way. You can imagine how well that works after a good January snowstorm.

But Sicard was looking at thresher one day, when the idea hit him. Don't push the snow away. Chew it down, suck it up and spit it out. Sicard had stumbled onto the snow blower. It took him 20 years to work out all the bugs, and his neighbours laughed at him the whole time.

He who lasts last laughs in the Bahamas, I suppose.

The nature of snow was both a problem, and a solution, for another Quebec entrepreneur. In 1922, in the little town of Valcourt, Joseph-Armand Bombardier rung in the New Year by driving his brand-new snowmobile through town. Nobody took it seriously, least of all Joseph-Armand.

The snowmobile was just a toy until 1934, when Joseph-Armand's son was stricken by appendicitis in the middle of a winter storm. His toys were in pieces in the garage. The boy died. After that, Bombardier worked in earnest. Today, Bombardier is as well known for its subway cars as for its Ski-Doos.

What is the lesson here? It's not just that Canadians can hold their own on the entrepreneurial stage. It's that adversity can be an inspiration. All Canadians know the problems that snow causes. But Sicard and Bombardier saw those problems as opportunities.

The last story today is about the light bulb. We all know this story, right? Thomas Edison working away at his lab in New Jersey, trying idea after idea until he finally finds a way to electrify the world. Pretty inspirational stuff. Except ... it had already been done, by a pair of Canadians.

So why aren't Henry Woodward and Matthew Evans in every history book? In a word: financing.

They made the first incandescent bulb at Morrison's Brass Foundry, here in Toronto. It was an amazing breakthrough, and in some ways, it was better than the electric bulb that Edison stumbled over a few years later.

But the investors of the day just didn't think it was worth the risk. After spending $20,000 of his own money, Evans just gave up. Woodward went to England. Edison, on the other hand, caught the interest of a consortium that coughed up $50,000.

Of all the stories I've told here today, this one is the saddest, because it is also the most instructive. Why did Woodward and Evans fail to commercialize Canada's most important invention? For a couple reasons.

First, as we've seen, they couldn't get the financing they needed. I'll get to the second reason in a minute, but I want to talk a bit about financing, because it's still a problem today. When you have a brilliant technological idea, the way Woodward and Evans did, you have to keep pouring money into R&D and market development before you see a dime of profit.

But it's hard to borrow that money, because bankers need assets. And companies based on knowledge often lack the tangible assets required to raise or secure capital. For these companies, the most valuable assets aren't always on a shop floor. They're as likely to be between the ears of each of the employees.

Many of our best businesses are held back because their ideas are better than their bank accounts, and because many lenders think of property as bricks and mortar, rather than as words and concepts and formulae.

For these companies, value lies in their technologies, their competitive advantages and perhaps even their track records. Not very tangible stuff.

Now then, a little while back I said there were two reasons we don't remember the Canadians who invented the light bulb. One was that they couldn't get the financing.

But the other was that they just didn't know enough about the electricity business. One was a medical student and the other ran a hotel. Independent studies on small business all point to a common conclusion: the main cause of small business failure is not lack of funding, it is lack of managerial skills and experience.

Good entrepreneurs have a knack for this. Steve Jobs was a wizard at Apple. Thomas Edison ran an assembly line of innovation. But these are skills you can also learn.

I notice that the majority of people here are women, so I want to talk a little bit about women entrepreneurs. In fact, I even have a story about a woman entrepreneur who, you may be surprised to hear, was also Canadian.

Her name was Florence Graham, from Woodbridge, Ontario. The name "Florence Graham" may not ring any bells, but you have probably heard of her store on New York's Fifth Avenue. Graham founded Elizabeth Arden.

"Elizabeth Arden" is like Aunt Jemina or Betty Crocker. No such person has ever existed, but everybody thought that Graham was Arden!

I like Graham's story for a couple of reasons. First, the Elizabeth Arden business was built on knowledge. As a woman at the turn of the century, she was stuck working as a bookkeeper at Squibb Pharmaceutical. But what really interested her were Squibb's labs. Ever since she was a kid, Graham had liked cooking up beauty potions in the family kitchen.

Her business expanded from Fifth Avenue until her red doors opened up around the world. At one point, Fortune magazine called her the most successful businesswoman in the United States. Which brings me to the other reason I like the Elizabeth Arden story. Graham didn't just rely on Canadian markets for her fortune. She went straight into the belly of the beast, succeeded in New York City, and expanded relentlessly around the world.

The Elizabeth Ardens of today aren't just restricted to beauty potions, though. In fact, a recent survey of Canadian women entrepreneurs found that one-third of self-employed Canadians are women. Compare that to 1975, when only a fifth of self-employed Canadians were women.

In particular, it found that women are moving headlong into the New Economy. If those computer geeks had been building Apple and Microsoft today instead of in the 1970s, they would have had plenty of women competing with them.

Canadian women have established high-technology, knowledge-based enterprises and they are making them grow. They have often jumped onto a volatile global stage, undeterred by strong competition from well-established players.

Diana Groffen is the executive director of the Women's Enterprise Society of British Columbia, and she explains why women are doing so well in the economy. She says that they have, and I quote, "the fresh perspective that new players often bring to traditional paradigms."

We've talked a lot today about entrepreneurs, about people with vision and drive, about people who use new knowledge to conquer world markets.

I'll bet you see a lot of yourself in these stories. And hopefully, you see more of yourself in the stories of the successes, rather than the failures!

I've mentioned the study on women entrepreneurs, but there is also a survey of 547 business leaders who manage innovative, knowledge-based or high-growth companies, many of which are exporting.

Let's see how much you have in common with these successful businesspeople.

First of all, they work hard. Very, very hard. They put in 50-to-70-hour weeks, and 40 per cent of the respondents say their work day regularly cuts into their evenings. Sixty per cent usually work at least one day on the weekends.

Four out of 10 respondents took seven days of vacation or less last year. However, of those who managed to take at least a week off, nearly half stayed in almost permanent contact with their company or clients and another quarter kept in touch occasionally.

In fact, about half of these leaders are working hard enough to risk their health, missing out on the minimum exercise recommended for good health. They also get an average of a little less than seven hours of sleep a night. More than one quarter of the leaders sleep only six hours a night and 13 per cent sleep less than six hours. However, Sleep/Wake Disorders Canada recommends that adults sleep between six and eight hours a night.

It's risky to put your own health on the line this way, but this is a risk-taking crowd. Despite the stress and strain of running their own businesses, on average they are happy with their lives. They are in control.

On the business side, the average small business in the New Economy has an average of eight more full-time employees than it had a year ago. When asked about the success of their companies, the business leaders we talked to most often credited the quality and competence of their employees, followed closely by customer service, the quality of products and services and the leader's passion for work.

More than half of these leading companies depend on exporting for an average of a quarter of their sales. We also noticed that the more a company exported, the more it sold and the more profit it made.

So, in a lot of ways, the poll we did confirms what we heard in these stories today. Entrepreneurs are different. They are highly motivated, have almost boundless energy and are everywhere at once. They know how to get things done and how to transmit their deepest convictions to everyone around them.

They are totally committed to their projects and develop a lifestyle that puts them in a very different category from the average person. They are risk takers. They don't count their time or effort and often put it all on the line, even their health.

In fact, even though we hear mostly about the big companies, of the nearly one million businesses in Canada, 99 per cent of them have 100 or fewer employees. It is the small businesses that generate over 40 per cent of economic output. It is the small businesses that create 90 per cent of new jobs in Canada.

Everywhere you look, small companies are finding the new markets, spotting new challenges, and positioning themselves to benefit from the New Economy.

From coast to coast, there are literally thousands of inspirational stories about people just like you who have gambled on their own ideas and won. And they did it by working hard and using their heads.

You don't hear those stories often enough.

Today, I've told you a few stories, stories from the past.

But as I leave you, I want you to think about your own stories, the stories of the future. Because the great thing about business is that anybody can be tomorrow's Conrad Black. Gillette was founded by a man who literally wanted to rule the world as CEO of an international communist corporation. Kellogg Corn Flakes cereal was invented by a man who wanted a product that would dampen our wild sex drive.

Those men may have been crazy, but they were visionaries, too. So, like I said, tomorrow's captain of industry could be anybody with vision, drive and an appetite for risk. That's even more true today. A knowledge-based economy rewards your ideas instead of your connections and your inheritance. A knowledge-based economy makes it easier than ever to sell to anybody anywhere.

I have one last story. Jean Baptiste Say was a 19th-century French economist. He described entrepreneurs as the people who shift economic resources from less profitable activities to activities that yield higher productivity and returns. I want you to think about that. And now I want you to go out and write your own stories.

Go forth and live happily ever after.

Thank you.