Expert panel urges more business innovation

Starting to rest easy because of the recent bounce in your stock portfolio? Hold on a minute. An expert panel with a long term view says don’t be distracted by boom or bust.  Focus instead on the fundamentals of corporate strategy – like business spending on innovation.

In its recent report, Innovation and Business Strategy: Why Canada Falls Short, The Council of Canadian Academies once again highlighted Canada’s productivity disadvantage. It traces the problem to weak multifactor productivity (MFP) – ineffective use of labour and capital in the economy compared to competitors. Put simply, lagging productivity growth is due to shortcomings in the way we invest in new technologies, enhance work methods and implement new forms of business organization.

Why are Canadian businesses – with notable exceptions –  innovation followers and not leaders? Five structural and cultural factors are pinpointed:

1. A rich commodity endowment and extensive foreign control position businesses “upstream” in the industrial value chain, too far from customers who create the motivation for innovation;
2. The domestic market is small, geographically fragmented and offers little reward for innovation risk;
3. Technology start-up companies face tough challenges in bringing new ideas to market. The causes –  a weak venture capital sector, under-capacity in technology transfer and embryonic innovation clusters;
4. There are gaps in business management and entrepreneurial education and policies for commercializing research; and,
5. Canadian business lacks ambition to innovate.

While  there is no innovation deficiency in the DNA of Canadians, the Council warns that the hyper-competitiveness of global markets demands transformation in business strategy.  The prescriptions:

• increase investment in machinery and equipment, particularly ICT;
• provide public policy incentives for export, particularly for products that are downstream on the value chain;
• improve the climate for new technology ventures, particularly for early stage financing and entrepreneurial mentorship; and
• make strategic choices to invest in sectors that play to Canadian science and technology strengths.

It would be silly to ignore the wrenching dislocations caused by recent insolvencies in traditional industries. But, as the Council suggests, there is a fundamental need to address long-standing features of Canadian business practice that impede new and better ways of creating value.

To read the Council’s report, go to http://www.scienceadvice.ca/innovation.html or click here to download the PDF.