The COVID-19 pandemic has thrown Canada’s business community into a state of uncertainty, as the vast majority of Canadian entrepreneurs continue to feel the impact of the pandemic. Many startups are being forced to cancel projects and lay off team members, while local innovation hubs are switching to a remote working model, and one hub is permanently shutting its doors.
Têtu said businesses have entered a new era where it is “survival of the digital-first and fittest.”
Though the news of the day might be alarming for Canada’s tech ecosystem, one CEO anticipates that the pandemic will be the push many businesses need toward digital transformation and that tech startups fighting to survive in the current period of uncertainty could soon see an explosion in demand for their products and services.
“It’s going to be a digital rush, because following this crisis, companies are going to rush to accelerate their digital transformation agenda,” said CEO of Québec City-based Coveo Louis Têtu. “As a result, the tech sector will greatly benefit.”
“Tech, in general, will emerge the winner,” he told BetaKit in a recent interview.
A veteran of the North American tech industry, Têtu co-founded Taleo Corporation, a leading international provider of cloud software for talent and human capital management. Taleo was named the 11th fastest growing technology company in the United States in 2004, later being acquired by Oracle for $1.9 billion in 2012.
Têtu is currently a chairman and board member for a number of organizations including, iA Financial Group, PetalMD, and Couche-Tard. He has been CEO and chairman of Coveo since 2008.
Coveo, founded in 2005, uses artificial intelligence and machine learning to build commerce products that use data to create personalized experiences through software services. Coveo creates products focusing on customer service intelligence, contact centre intelligence, and e-commerce in general.
BetaKit spoke with Têtu about why he thinks tech will emerge as the winner once the COVID-19 storm clears and how Coveo is adapting to this unprecedented moment.
A catalyst for obsolescence
Têtu acknowledged the gravity of the current situation and said there will certainly be losers due to the crisis. For many, he said, it will be for no fault of their own. Businesses in many industries have had little choice but to close shop for the time being, and have had to make tough strategic decisions as a result of COVID-19.
Beyond those businesses, Têtu said, COVID-19 could also be a “catalyst for obsolescence,” meaning for many businesses, pursuing digital transformation aggressively will be critical.
“Companies were on a digital crunch, and post-COVID it’s going to be a digital rush, meaning that the companies that can redeploy their workforce digitally, that can sell digitally, that can serve their clients digitally, are the ones that can continue the operations right now,” said Têtu “I’m pretty certain that this was a major wake up call.”
He believes Canadian businesses have entered a new era where it is “survival of the digital-first and fittest.” From a business perspective, he claimed COVID-19 will lead to the rapid acceleration of intelligent experiences in service, work, and commerce.
The companies that succeed, he said, will be the ones that invest in virtual customer service, commerce, and work, leverage data and AI to deliver competitive and modern experiences, and quickly adapt by moving online.
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Têtu used retail as an example, a sector that may have worked on a digital transformation timeline that extended over the next five years. He believes the COVID-19 crisis is going to force these businesses to compress that timeline into a few months, or risk ceasing operations, meaning the tech sector will soon be invaluable across a number of incumbent industries.
“The tech sector is going to be a very important sector, because at the tail-end of this crisis, in Canada in particular, we’ll need to invest massively in innovation, modernization, digital transformation, and innovation,” he said. “We can only do that to the extent that the tech sector remains very well alive.”
Coveo during COVID
Despite Têtu’s optimistic outlook on how COVID-19 may impact Canadian tech, he said Coveo is still taking the pandemic seriously and has shifted its priorities to adapt to the current situation. The company has created a framework to prioritize its needs, where employees are first, followed by customers, partners, the community, and finally, shareholders and their assets.
“Companies were on a digital crunch, and post-COVID, it’s going to be a digital rush.”
“Whenever you face any kind of situation, you always have to understand the frame of reference through which you will make decisions,” he said. “We believe that Coveo as a company needs to be a source of stability and security for our employees and their family.”
Beyond the demands of the here and now, Têtu said the company is also thinking strategically about how it will emerge from this and what Coveo will look like when it does. This led the company to significantly augment its investment in customer success and R&D, as well as ensuring its customers’ businesses are thriving.
“We’re not selling more than usual, but the signal right now is that we’re not necessarily going to be selling less,” he said.
Coveo works specifically in the area that Têtu thinks will explode because of the pandemic, so he’s bullish on artificial intelligence and data, workplace virtualization, cloud networks, or digital commerce. He forecasts that demand for products that service these pain points is going to “explode,” and that companies already working in these areas can get their balance sheets to work.
Governments helping sustain the ecosystem
Têtu said he’s satisfied with measures the Québec government has taken in supporting businesses and employees through the crisis. Québec, where Coveo is based, has been one of the hardest-hit provinces by the pandemic in Canada. The province earmarked at least $2.5 billion to help companies impacted and loosened terms on agreements with Investissement Québec.
As the federal and provincial governments are implementing support programs, many in the tech community have advocated for looser eligibility requirements, particularly so tech startups can benefit. Têtu said although he is generally supportive of the government’s actions, there are a few elements of government support that could be adjusted.
“I’m pretty Darwinistic in certain ways,” he said. “I don’t believe that the government should encourage failing business models. What I mean by that is if they were failing pre-crisis, they will be failing during the crisis and post-crisis as well.”
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Têtu proposed what he feels the government should do to determine whether or not to support a startup is to use an equity-based model. He said delegating those responsibilities to teams that understand how to invest money, and providing support on the balance sheet rather than “throwing money to people,” could prevent the government funding heavy losses and unproven business models.
BDC Capital has launched something similar to this with its Bridge Financing Program, which is meant to support venture-backed companies with matching investments. Through the program, BDC will invest alongside venture firms, accelerate more capital into General Partners in Canada, and increase its co-investment activity.
“When you don’t have a viable business model at a small scale, you’ll never make it up with volume,” Têtu said. “The government ought to be cautious, which is why I say I would do it… with equity as opposed to straight out writing checks.”
Image courtesy Coveo.