Canada Has An Innovation Problem?

Canada is a vast country with ample resources, however political and economic machinery in this country are not open enough to create true and genuine marketplace for disruptive ideas. Cultural, artistic and intellectual innovation form the foundation of innovative economies.

No nation can stay competitive and economically advanced while stagnating culturally and intellectually. Innovation requires taking risk and being open to new ideas. The biggest obstacles in the way of innovation in Canada are regressive and closed institutions. The Canadian market in some major sectors is uncompetitive and divided between a few oligopolies. For instance, the telecom sector is one of the least competitive among the developed nations.

Canadians consistently pay more for goods and services compared to American. However, lack of competition is not only harmful for consumers, in the long term, it is damaging to businesses as well. As fat profit margins at home, creates little incentive to innovate and expand globally. From global business recognition Canada ranks unfavourably compared to its peers; the few Canadian success stories of the past are either long gone, or ailing.


One must not forget that innovative ideas require change in attitude toward risk taking and openness. Proper education is fundamental to creating an independent, open minded and entrepreneurial generation that dares to think different than the establishment. One particular problem is the lethargy of the establishment. It is frustratingly resistant to change and innovation. Abundance of natural resources have provided a safety shield for outdated institutions to continue their oligopolistic dominance. They resemble the past more than the future. Trouble is, that among the OECD countries Canada is among the top (behind Australia) in its dependence on extractive resources.

Only one to two per cent of existing Canadian business can be described as innovative; when it comes to innovation Canada ranks 15 among 16 developed countries. This puts us behind Australia (which is struggling with lack of innovation and over dependence on extractive economy as well).

Furthermore, even after decades of extracting resources Canada has failed to produce a single globally recognizable brand; to put that in perspective Royal Dutch Shell revenue in 2014 was 421 billion dollars vs. 51 Billion for Suncor (the biggest Canadian petroleum firm at the time). Few shining examples of innovation have either failed or are in serious trouble. Nortel is long gone and the failure of Blackberry to innovate fast enough in the face of competition, has reduced it to a shadow of its former past. One of the last standing giants, Bombardier is astonishingly neglected and loathed by many in this country. While it has suffered from mismanagement, its troubles are also rooted in unfair competition in aerospace industry.

We must teach the next generation to aim high and dash for gold at the global scale.

It is important to note that most innovative products of recent times are not only technologically advanced but have strong cultural and emotional aspect as well. In other words, they are not just mere one dimensional gadgets. The most successful and valuable companies of our times are all deeply rooted in innovative industries (Apple, Google, Facebook), or reinventing an existing one (for example what Tesla has done with automotive and space industries). California, which is home to a great share of innovative firms, has moved from deficit to surplus in part thanks to the IPOs of a number of big IT firms and the concentration of tech high earners.

However, it is a moot point to create a Silicon Valley North. Many countries have poured vast amount of public money into ambitious tech project with little to show for it. It can be argued that instead of being focused on the outcome (establishment of successful tech startups) we should create the environment that lead to it, namely the exchange universe, which allows for interaction and collaboration of innovative minds and remove red tape and barriers to market and capital. Education system plays a pivotal role in this. It should do a lot better in cross disciplinary education and fighting the conformism and entrenched mediocrity. Innovation is the product of curious minds, while mediocrity is the result of conformity. Therefore, to escape the cycle of underperformance, we must create a culture that celebrate success and value risk-takers, innovators and intellectuals.

We must teach the next generation to aim high and dash for gold at the global scale. There is no refuge from the force of connected global economy; best proof is the Uber and its impact on transportation market. Every industry and sector is going to face their Uber moment; unfortunately, most Canadian businesses are not going to fare well when faced with the tsunami of innovation. Innovation and lack of it should be the topic of national discussion and high on the agenda for the elites and politicians. However, it should be noted that the top down approach to innovation may not yield the desirable result.

There is no magical crown corporation that can suddenly jolt the country into the high gear. Innovation can neither be imported nor taught. It is the result of exchange and collaboration, and requires risk taking. Culture of excellence and continued improvement, concentration of diverse and non conforming innovative minds, friendly regulatory environment and easy access to capital are fundamental to innovation. Here, government can play an important role by investing in cities and infrastructure (great minds flock to cities with good infrastructure) and reducing regulatory burden. Imagine Uber’s chances of ever starting up in any major Canadian cities.

It is worth mentioning the tale of a once ambitious Canadian startup; about the same time Tesla was moving ahead with its plan to disrupt the automotive industry there was a small and innovative Canadian company called Zenn motors. It produced a small electric car and got approval to sell them in the U.S., unfortunately Canadian regulators thought differently and initially barred ZENN from the Canadian market (it took Al Gore’s intervention to change the government’s mind), soon it released its talents and shut its production. This clearly demonstrates the shortsightedness and risk averseness of the establishment, the timidness that killed Avro Arrow and deprived this country from its chance to become a global leader in aerospace industry is entrenched and still active.

To break the cycle of mediocrity we need to have a candid national dialogue, Canada is endowed with great resources and is home to a great and diverse pool of talents. We need to find a way to remove obstacles and create the environment for cross pollination of ideas to allow innovators, artists, intellectuals and entrepreneurs to continuously challenge and disrupt the status quo and transform the society toward the future.

Mehrdad Loghmani 


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