Survey shows majority of Calgary business owners believe energy industry won't rebound
Business owners in Calgary starting to think of ways to adapt to new reality
A new survey shows seven out of 10 local businesses believe the energy industry has undergone a fundamental shift and will not bounce back as it has in the past.
The annual "confidence" survey included about 700 local businesses in a cross-section of industries. It's usually conducted by Calgary Economic Development (CED), but this year included the Chamber of Commerce.
Some of the results weren't a big revelation to chamber president Adam Legge or Mary Moran, CEO of Calgary Economic Development, they told the Calgary Eyeopener on Monday. But the longer range view of the economy was more of a surprise, along with the thinking that it's time to look at new ways of doing business.
"Not surprisingly, we found people have been hit pretty hard in the economy this past year," said Legge. "That's the biggest drop we've seen in a number of years in terms of the confidence in the economy, what's happened to their business."
The majority of respondents believe the Alberta and Calgary economies will not return to previous levels because the economy has fundamentally changed. Notably, the opinions of energy and non-energy sectors were quite different.
"There was more positive response from those outside of the energy industry than those inside the energy industry, quite significantly," said Moran.
"We know that about 70 per cent of them feel strongly that 2016 is going to be a bit better for them, but in the energy industry, it's down to about 60 per cent of them feel it's going to be a better year this year than last year," said Moran.
Not like the good old days
Though there are a few exceptions, Legge says few businesses are biding their time waiting for oil prices to return to the good old days.
"I think a number of companies are still sitting back and crossing their fingers, waiting for the price to come back, but the large majority of people are saying that's not going to happen."
Moran said there's a realization that innovation and diversification are essential, something that traditionally has not been a strength of the local economy, said Moran.
"I think it's a much bigger shift than we'd like to admit, and I think that even though innovation happens here, I would say that we don't necessarily have a strong culture for it and I don't just mean in the energy industry, I mean across the community," said Moran.
Turning point
"If you look at the intense market share war that the energy industry is in, they realized that not only do they need market access, they need to contain cost, but they also need to innovate and I think that's the turning point for this energy industry at this point," Moran said.
For that to happen, she says, there needs to be stronger links between institutions such as post-secondary schools, the private sector and government organizations.
"We have to have the right policies in place to ensure we're attracting capital that we can invest in innovation and we also have to have the right programming available so people can learn how to be real entrepreneurs," said Moran.
"We have a very science-based population, and although we do have some entrepreneurs, I would say it's remarkable how little marketing and sales skills there are in this economy," she said.
When the energy industry is riding high, companies tend to forget business basics, such as target marketing and expanding their customer base, because it's been too easy for so long.
"We had a product that the world just bought regardless of what the price was," said Legge.
"That's not normal, so now we're getting to a place where we actually have to operate like a savvy, sophisticated group of businesses in a global market that really has changed fundamentally."
The new normal
"We want people to start thinking that if this is the new normal how do I find new customers, how do I make new products, how do I look to new countries and markets?" said Legge.
"We have world-class companies in this city that do oil and gas really well, so let's find out if they can do geothermal, can they go to a new country, can they take an existing product or technology and tweak a little bit and sell it to a new industry," he said.
That doesn't mean the economy is going to bounce back overnight, but businesses exploring new avenues, such as food production, renewable energy, or robotics, need to be willing to take a few risks and be patient with economic success.
"If we begin to think about saying 'the world has changed,' there is huge opportunity coming in terms of the technologies that are being advanced, in a growing global population," said Legge.
"Alberta is blessed with agricultural resources, Canada is one of the only exporters of food for the growing population, that should be forefront for our strategy … We have brilliant people and savvy companies in this community, there is nothing that should be stopping us. It's just a matter of saying we have to do this, as opposed to saying well, we'll be OK when the price comes back."