If commerce and marriage are not that different from each other, since they both require intimacy and value exchange, Canada is on the road to a divorce, according to a new study led by a business consulting firm.

The Impact Group study concluded that the gap between "technology and commerce skills is a significant impediment to Canada's future prosperity in the global-knowledge economy.”

Toronto-based Impact Group publishes Canada's Top 100 Corporate R&D Spenders List.

The study's authors, Impact Group president Jeffrey Crelinsten and former CEO of Gennum Corp. Doug Barber, interviewed 30 CEOs of nascent companies. The greenhouse firms were either early stage - spending three to 50 per cent of revenue on research and development (R&D) and less than $3 million annually - or startup, those spending more than 50 per cent of revenue on R&D.

Jeffrey Crelinsten

Crelinsten and Barber asked the CEOs about data they uncovered in an earlier study done in March, which showed that between 1994 and 2001 of the 6,000 Canadian companies examined, only 14 moved to the more stable position of R&D leader - spending between three and 50 per cent of revenue and more than $3 million on R&D.

The most recent study found less quantitative data but more troubling reasons behind the numbers. A disconnect exists between technical and commerce skills, the authors report, and many companies rely too heavily on R&D and not enough on marketing and customer relations.

"Half the CEOs we interviewed said they almost went bankrupt because they burned their cash on R&D," says Crelinsten. "One business admitted to spending nothing on marketing and another business had a great business plan but they didn't talk to any customers."

Crelinsten credits Canada for possessing a strong tech culture but a weak commerce culture, and says the problem begins with education.

"The notion that firms must tap ideas from our post'-secondary institutions to create a technology or product through R&D and then commercialize it, must give way to a more customer-focused model that values broadly educated people with technical and human skills," he says.

Crelinsten adds that he too often sees graduates who are technically brilliant, but inadequate in business.

Even specialized education faces criticism. "An MBA is really a technical degree," Crelinsten says. "These graduates know how to analyse, but they don't know how to run a company. Universities and colleges have to face the fact that they're not training students properly."

Barber says the root of the problem lies in the academic approach. As objective knowledge trumps subjective teaching methods, areas such as commerce become dehumanized and made objective.

Echoing that finding, the study concluded that CEOs of many R&D-intensive companies lack experience in commerce.

"People can be fantastically technical, but be very weak in dealing with others," Crelinsten says. "After all, many of these companies emerged from a tech culture, even though they said they would like to focus on commerce now."

Johann Tergesen

From that inexperience is born the desire to make money through quick grow-and-sell strategies, Crelinsten says. "Many entrepreneurs are in a rush and don't want to wait 20 years to grow. They're content to grow to $50 million and sell the company, then go and sail a boat.

"Now that's fine, and all the power to them, but if everyone does that then we're never going to get large companies headquartered in Canada," he says.

Crelinsten blames venture capitalists for one misdeed that cripples Canadian commerce. "Going public is onerous and takes away tax credits," he says. "Being public and small in Canada is horrible and venture capitalists are selling these CEOs a line and not looking out for the customer."

The study found that only nine of the 30 interviewed companies were profitable and those nine have remained private.

Barber recalls hearing CEOs complain about the effects of going public. "They told me: 'We went public too early and we had too much money in the beginning.' Essentially, there was no money from customers. CEOs became too distracted by focusing on the dollar.

"There are many dollars looking for investments, but there is an expectation of return, so in a sense commerce is not the top priority then," Barber says.

One of the interviewed CEOs is smarting from going public. "We don't get our cash credits back and it's frustrating," says Johann Tergesen of Burcon Nutrascience in Vancouver.

Tergesen also agrees with the study's weak-commerce conclusion. "So many companies are run by a science-oriented management team. It's fine and well to throw millions to a budding technology, but will that commercialize it? You need to match it up with a market-driven team."

But hiring talent may not suffice, says Barber, who believes an attitude adjustment is needed to shift the focus from complacency to action.

"We live in a country where the world comes to us because of our natural resources. We are less customer-centric as a result, and think we can do everything for everybody, thus spreading ourselves too thin," he says.

A solution the authors suggest involves voicing these frustrations to politicians. "This can't be a summit, it has to be one-on-one," Barber says.

"It has to be a candid and frank forum," Crelinsten says, "so politicians can hear what these entrepreneurs have to say."

Tergesen is skeptical on how effective that approach can be, however. "I met with government officials and I never got anything out of it at all. Later on, I just realized I had to do everything myself."

The study's authors also found that mentoring was strong in theory, but poor in execution. "When we asked the CEOs if they would've listened to a mentor three years ago, most said 'probably not,' " Barber says.

Since the entrepreneurs were fiercely independent and did not like being told what to do, Barber says effective mentoring should involve more questions than instructions.

(David Silverberg can be reached at silverberg@businessedge.ca)