William Polushin is founding director of the Program for International Competitiveness at the Desautels Faculty of Management, McGill University, and President of AMAXIS, an international business and operational development services firm. The Competing to Win blog series can be found here.
In my last entry, I cited value as one of those words in business that stands out among the rest in the minds and hearts of owners, entrepreneurs and managers. In our increasingly competitive and integrated global economy, innovation is another word that carries significant weight and meaning - but not just for the for-profit element of our society.
Policy makers, academic and research institutions, industry and trade associations, and think tanks -- across Canada and around the world -- are also investing considerable time and resources to better understand, develop, employ, or manage innovation in order to facilitate competitive advantage, productivity growth, and/or economic expansion either for themselves or their respective communities.
This past week, I had the privilege of hosting a seminar at McGill - in collaboration with Industry Canada, Foreign Affairs and International Trade Canada (DFAIT), the Institute for Research on Public Policy (IRPP), Canadian Manufacturers and Exporters (CME), and Business Development Bank of Canada (BDC) - to share the results of the Survey of Innovation and Business Strategy (SIBS). SIBS is a joint project of Industry Canada, DFAIT, and Statistics Canada that was launched in 2007-08 to better understand the market and policy factors that encourage or discourage the adoption of growth and innovation-oriented business strategies.
Over the period 2007-2009, 6,233 enterprises across Canada, with at least 20 employees and $250,000 in annual revenues were surveyed, representing 67 unique industries. While the sample excluded micro and smaller enterprises - which are the majority of businesses in Canada - the survey provided useful insights into business strategies and practices in Canada that determine business innovation.
Key findings of the survey are as follows 1:
- Most enterprises report product positioning, rather than cost leadership as their long-term business strategy.
- International markets are strategically important, as half of all manufacturing enterprises in Canada reported having some business activities outside of the country.
- Between 2007 and 2009, 5 per cent of enterprises relocated abroad and 10 per cent outsourced business activities that were initially performed in Canada. (
The most frequently displaced business activity was production of goods, mostly to or from the U.S. and China.)
- Although a majority of enterprises indicated that their principal market is local, competition intensity is strong in Canada, as most enterprises reported facing numerous competitors, including multinational enterprises.
- Manufacturing enterprises in Canada primarily respond to new competition by changing product prices.
(High-tech manufacturing enterprises are also likely to respond by adopting new technologies and introducing new innovations.)
- Approximately two out of three enterprises in Canada, and four out of five manufacturing enterprises, report having innovated during 2007–09.
- The introduction of an innovation by an enterprise often required changes to some business activities and may occur in conjunction with other innovations.
- Most manufacturing enterprises in Canada acquired advanced technologies by purchasing them off-the-shelf, but customization and development of new technologies are also important.
- Uncertainty and risk, lack of skills, and internal financing were reported as the most significant obstacles to innovation by enterprises in Canada.
While this information is interesting in itself, the challenge now for government, business leaders, and representatives of civil society is to take these insights and formulate policies and strategies that will enable Canadian enterprises to better compete and create wealth on a sustainable basis.
As the following chart illustrates, while there has been an appreciable increase in spending by the federal government on science and technology, and by corporate Canada on research and development since 1997 (although business R&D expenditures have been slipping since hitting a peak in 2006), there has not been a parallel increase in productivity growth in our country.
Said another way, we’re seeing marginal to low returns on the employment of our human, capital, and natural resources. At the company level that means earnings aren’t being optimized. At the country level that translates to minimal to moderate increases in our standard of living over time.
Either way, the message is clear. If we want Canadian enterprises that are globally competitive, and if we want our national prosperity to increase (not just in absolute terms, but relative to the United States and our western industrialized peers), real change is required in our innovation ecosystem and how we compete. The path to Canada: A Nation of Traders is by no means simple.
In my next blog, I will build on my discussions on value and innovation, with a specific look at global value chains.
If you are interested in reading the complete survey report - Business Innovation and Strategy: A Canadian Perspective - please go to www.ic.gc.ca/eic/site/eas-aes.nsf/eng/h_ra02143.html.
1 Annette Ryan, Chief Economist and Director General, Economic Research and Policy Analysis Branch, Industry Canada