Cancellation of the Canadian Digital Adoption Program

Lessons to be learned by the failure of the CDAP program to deliver intended results

The Boost Your Business Technology stream of the Canadian Digital Adoption Program (CDAP) was recently canceled after spending just a tiny fraction of billions of dollars planned. As it was a singularly ineffective funding program it will not be missed, but both the existence of the program and the lack of communication around its sudden cancellation speak to the gulf that exists between Canadian innovators and the agencies that seek to support them.

Under this program, Canadian companies with between $500,000 and $100,000,000 in annual revenues in one of the previous tax years and between 1 and 499 employees could apply for a grant worth a flat $15,000. The money was to be spent hiring a consultant to assist with adoption of digital technologies. After this, the business was eligible for a loan from BDC for up to $100,000.

The ineffectiveness of this program relates both to the lower bound on revenue required for eligibility and to the flat amount of funding available. Once a company has $500,000 in revenues, a $15,000 grant is nice to have, but hardly game changing. At the $100M upper end of the revenue scale it’s rounding error on a balance sheet. Combined with the complexity of the application process required to access it, the value of the grant was barely worth the time needed to apply at the low end of the spectrum, and not even close at the high end. It comes as no surprise to me to learn that the program did not even reach 20% of its overall grant target, and only 10% of its loan target. It was obvious just from reading the eligibility requirements that very few companies would bother to apply.

In spite of the predictable disinterest of eligible companies, the program did briefly create a cottage industry of consultants eager to help businesses apply for it. It is directly responsible for the largest body of spam emails and cold LinkedIn outreach I received in my role as CEO of Northern Nanopore, beating even SR&ED in terms of the number of consultants trying to get me to use their services.

The existence of this program in this form, and the suddenness of its cancellation once its ineffectiveness was understood, speak to a problem that is ubiquitous in Canadian innovation policy: a lack of communication between the agencies that administer these programs and the stakeholders and businesses they seek to support. I do not have any visibility into either process, but if stakeholders on the industry side were ever consulted during the construction of the program, it is clear they were ultimately ignored, or the program would have looked very different.

There is a desperate need for transparency around the decisions that lead to both the creation and cancellation of programs that aim at support Canadian businesses. In particular, forward guidance on where the savings that will arise from unspent funds budgeted for the CDAP will be reallocated is conspicuously missing from communication around the program cancellation.

While the cancellation of an ineffective program is generally positive, I can only hope that the failure of this program is taken as an object lesson in the importance of incorporating feedback from the intended recipients of the benefits of a program in the process of designing it, and, more importantly, of ensuring that feedback survives the committees that follow. (Looking at you, SR&ED reform).

By far the most important lesson to be learned from this is that one size does not fit all. No funding program should try to provide the same flat grant to companies spanning almost 3 orders of magnitude in economic scale. Within that spectrum is an enormous range of challenges that require a more nuanced approach to address. Billions of dollars in support for Canadian business could go a long way, but it requires that the expenditures be guided by people who understand the challenges that need to be addressed, and that those expenditures be targeted to the specific context of the organization they aim to support.

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Update 2024/03/25

A few weeks after publishing this post I was contacted by ISED and provided additional numbers on the CDAP program that give more context on the reason for its cancellation. The core point of my post remains unchanged: lower bounds on revenues for grant eligibility are a hindrance to support for companies in their most vulnerable stages and that grants that are tiny relative to the minimum income requirements and do not scale from there are unlikely to have much long-term impact. However, it appears I was too hasty in my assumption that the cancellation was due to lack of interest.

The 20% of total spend figure quoted above was accurate to the total cash spent as of the time of writing, but did not fully capture the total funds committed under the program. Taking into account both funds spent already and funds that are committed to funded projects but which are not yet paid out, the total for CDAP BYBT amounts to $494M. Another $221.9M was committed or spent under the Grow Your Business Online stream.

The cancellation of the program for new application intake followed a 40% reduction in the overall budget of $1.4B that led to the full commitment of available funds early this year. BYBT has already funded about 19,000 grants, with another 14,000 remaining committed on the books and barring further cuts should finish spending in March 2025.