Editor’s note: This is the 22^nd article since May 20, 2026 in an ongoing series by Dr. Andrew Maxwell, the Bergeron Chair in Technology Entrepreneurship in the Lassonde School of Engineering at York University. Every week – and occasionally every other week – we’ll present a new article by “Innovation Doctor” Maxwell, in a series whose wide-ranging and incisive themes encompass: Canada and innovation policy; productivity and industry; innovation frameworks; AI and higher education; research and intellectual property; technology adoption; entrepreneurship and commercialization; universities and higher education; entrepreneurship education; and AI and the future of work. 

 The importance of creating more value-added products from Canada’s natural resources has been discussed for decades. So what’s stopping us?

Mélanie Joly, Canada’s Minister of Industry, recently raised the question at the Canadian Club Toronto, pointing to opportunities to turn more of our aluminum into products for packaging, automobiles and other industries. Successive governments have pursued industrial financing, procurement and manufacturing initiatives. Yet the challenge persists. Perhaps we have been addressing symptoms without fully understanding the causes.

Why don’t we turn more of our wood into furniture and advanced building materials, more of our oil and gas into petrochemicals and refined products, and more of our minerals into the materials needed for batteries and electronics?

The scale is striking. In 2024, Canada exported $17.4 billion in aluminum products; $11.3 billion, about 65 percent, was unwrought metal.

Forest-product exports reached $37.2 billion; lumber and wood pulp alone accounted for $16.7 billion, about 45 percent.

Crude oil exports were worth US$100.7 billion, illustrating the enormous scale of material shipped before refining.

The pattern also extends to critical minerals: in 2025, roughly 80 percent of their $50.6 billion in exports were primary or smelted and refined products, rather than semi-fabricated goods.

These categories are not identical, and primary aluminum and wood pulp are already processed. The point is not that Canada adds no value; it is that substantial opportunities for further transformation may exist across very different industries. Across these sectors, much of what we export is raw or lightly processed rather than converted into the higher-value products and systems it could enable.

What if there are common reasons we struggle to capture more of these opportunities? And what if we have been assuming that what makes us successful at extracting and exporting raw materials will also make us successful at developing higher-value products and markets? What if those assumptions are wrong?

That is an Innovation Doctor question: before prescribing another solution, investigate the root causes. I want to examine three possible, interconnected barriers – innovation capabilities, investment structures and market connectivity – and ask whether our upstream strengths sometimes make downstream innovation harder.

Could our success be part of the problem?

I want to be careful here. Canada’s resource industries are not short of innovation. Quite the opposite. Oil companies use sophisticated geological models, drilling technologies and production systems. Mining companies improve extraction and processing. Forestry companies invest in automation, productivity and new technologies. These are considerable achievements.

But much of that innovation improves an established activity. The company usually knows its customers, understands the production process and can calculate the value of an improvement.

Imagine an aluminum smelter trying to reduce energy consumption. The problem is visible. The costs are measurable. The company can investigate root causes, test alternative technologies and assess whether the improvement justifies the investment.

Now imagine the same company considering a new aluminum-based product for an unfamiliar market.

Who would buy it? What problem would it solve? Why would customers switch from what they do today? The engineering might be straightforward, but the commercial challenge could be enormous.

These are different innovation journeys. Some begin with a recognized operational problem and seek a better solution. Others begin with a technology or resource and must discover a valuable application. Still others begin with a customer problem or an opportunity that existing solutions do not address. None is inherently superior, but they call for different evidence, decisions, capabilities and routes to adoption. Expertise in supplying a resource does not automatically translate into expertise in designing unfamiliar products, creating demand and stimulating adoption.

Our success in upstream resource industries may have created assumptions about capabilities, investment decisions and markets that do not necessarily travel well downstream.

Innovation requires different capabilities

There is a difference between implementing an improvement and discovering an opportunity. Improving a known production process demands technical expertise, operational discipline and problem-solving. Developing an unfamiliar product or market may demand the ability to recognize an unarticulated problem, identify the people experiencing it, understand their “Jobs to Be Done,” generate alternatives, test assumptions, manage ambiguity and stimulate adoption. These are innovation capabilities, not simply extensions of production or sales capabilities. What if our success at solving known operational problems has left us less practiced at discovering problems and markets we do not yet understand?

Consider the distinction between a painkiller and a vitamin. A painkiller addresses a problem someone already recognizes and is motivated to solve; a vitamin may provide a genuine benefit without creating the same urgency.

Improving an aluminum smelter’s energy efficiency is closer to the first case: the organization already experiences the cost and can calculate the benefit. Even then, implementation disruption, stakeholder interests and organizational resistance may prevent adoption.

An unfamiliar downstream product could also be a painkiller – but for whom? The producer may not yet know what customers are trying to accomplish, what alternatives they use, or whether the benefit is compelling enough to change behaviour. Manufacturers, distributors, purchasers and end users may each have different reasons to embrace or resist it.

Recognizing the need, creating awareness and building a persuasive case for adoption require more than conventional sales skills: they require listening, customer discovery, understanding decision-makers and the ability to help unfamiliar users change what they do.

Sometimes the challenge goes further: the product performs a job in a way that has never been possible before, so there is no existing product market to measure. I encountered this firsthand in research associated with the original BlackBerry. It was not a smartphone; it was a two-way pager. One-way pagers already existed, but Mike Lazaridis’s technology made two-way messaging possible. How could we forecast the market for something that did not yet exist?

We approached the question through “Jobs to Be Done” – the outcomes people are trying to achieve, rather than their job titles or a forecast based on an existing product category. Our research identified service technicians and doctors as groups who could see an immediate use for two-way paging. That provided an initial basis for proceeding, although the eventual market was much larger. We had not forecast demand accurately; we had found evidence of a need worth serving. This is a different kind of evidence from calculating the savings from a known production improvement.

Are Canadian companies really risk-averse?

A similar distinction applies to investment. The assumptions and decision-making processes that support successful investments in upstream resource production may not be appropriate for downstream innovation, where markets, customers and returns are often less predictable.

We often hear that Canadian businesses are reluctant to invest in innovation because they are risk-averse. I’m not convinced that explains what we see.

Consider an oil company willing to spend millions drilling an exploratory well, knowing it may find nothing. That is hardly an organization unwilling to take risks.

Yet the same company might hesitate to invest a much smaller sum exploring an unfamiliar technology or developing a new product market.

Why?

Because it knows how to evaluate drilling opportunities. Historical data, geological models and accumulated experience help it recognize the relevant risks and estimate their probabilities. The outcome of an individual well is not known, but the organization has established ways to evaluate and manage that kind of risk.

An unfamiliar downstream venture presents something different – not merely a greater amount of risk, but multiple connected uncertainties. We may not know whether customers recognize the need, how adoption will happen, which channels or partners are required, or whether the business model will work. Worse, we may not initially recognize all the questions we need to ask. Unlike the risks of a familiar drilling program, these uncertainties cannot simply be assigned reliable probabilities from past experience.

Recognizing unfamiliar uncertainties is itself a capability; so is managing ambiguity through listening to users, customer discovery, prototypes, experiments, partnerships and progressively stronger evidence. Developing awareness and stimulating adoption for a solution that people have never used may require entirely different skills from improving an established product or production process. An investment process built to compare well-understood risks may be poorly suited to funding that learning.

Consider the investment committee asked to approve a new product before anyone can produce a credible market forecast. Its demand for numbers may be entirely reasonable for an established business – and premature for an emerging one. The alternative is not to abandon financial discipline, but to fund learning in stages: modest commitments to identify users and test assumptions, followed by larger investments as the evidence improves.

There is a deeper structural issue. Investors often buy shares in a resource company because its established risk-and-return profile fits their portfolios. Their expectations shape internal hurdle rates, performance targets and capital allocation. A new business whose customers, capabilities and economics are still uncertain may be unattractive within that framework even if it could create substantial value for a different group of investors. A company can find it difficult to serve both investment propositions through one corporate structure.

Alcan’s 2005 spin-off of its rolled-products business as Novelis is a useful illustration. Alcan pointed to the different business characteristics of primary aluminum and downstream rolled products, and to the advantages of allowing investors to value them separately. Regulatory commitments associated with its Pechiney acquisition were also part of the context. Novelis was an established business, not a speculative startup, so the separation does not prove that Alcan rejected innovation. But it raises a revealing question: if even two established aluminum businesses benefited from distinct investment structures, how much harder might it be to finance an entirely unfamiliar value-added venture inside a traditional producer?

The customer gets further away

Market connectivity presents a third challenge. In resource production and processing, the people who understand the problems are often close to those developing the solutions. Engineers can observe operations, talk directly to users and experiment with improvements. But as companies move downstream, their potential customers become more distant, often operating in unfamiliar industries or consumer markets. The people who understand these customers’ needs are no longer necessarily the people developing the technology.

What if our familiarity with established buyers and supply chains makes us less likely to recognize the needs of customers we have never served? This distance makes it harder to identify opportunities, understand what customers are trying to accomplish, and develop solutions they will actually adopt. Proximity is not guaranteed upstream, nor is distance inevitable downstream. The challenge is building connections with the people who can reveal needs, test assumptions and help a new product reach its market.

A production engineer can often observe a process and speak with its operators. The designer of a downstream product may be several industries away from the eventual user, who may not even know that a new solution is possible. This is why market connectivity is more than having a sales channel: it means building relationships that reveal needs, inform design, test willingness to adopt and expose the barriers between a promising invention and its productive use.

When strengths become constraints

Our understanding of what makes a business successful is shaped by experience. We develop capabilities, investment criteria and market relationships that work, and eventually embed them in our routines. We become increasingly effective at what we already know how to do. But what happens when the next opportunity demands different evidence, different people and different decisions?

There may be a broader spillover effect: the expectations, assumptions and capabilities formed in successful industries do not stop at company boundaries. The industries in which a country succeeds influence which skills employers demand, what universities teach, which projects investors understand, and what counts as credible evidence. We become skilled not only at the activities we perform, but at educating and rewarding people to perform them. If we prize process optimization while giving less attention to opportunity recognition, customer discovery and adoption, we may reproduce that imbalance across the economy – not just inside resource companies.

This is the logic of a competency trap: success reinforces familiar choices, even when unfamiliar alternatives deserve attention. It is also the paradox of core capabilities becoming core rigidities. The skills and routines that created competitive advantage upstream can become constraints downstream. This is a hypothesis worth examining, not a verdict on every Canadian resource business.

A company may be exceptionally good at identifying the root cause of a refinery problem, calculating the return on an equipment upgrade and delivering the project. That does not mean it has the same skill at discovering an unfamiliar customer need, financing uncertain learning, or persuading new users to change their behavior. Nor does it mean the company must acquire every capability itself.

Could that same spillover shape the policies intended to create new industries? The consequences extend into policy. Governments understandably consult successful businesses about the barriers they face. Those businesses can describe the support they need to improve processes, develop technology and expand existing markets. But who speaks for the entrepreneurs, future customers and industries that do not yet exist? If the people at the table represent today’s strengths, policy may inadvertently reinforce them rather than develop tomorrow’s capabilities.

Could partnerships change the equation?

One possibility is to assemble what an opportunity requires rather than assuming the original resource producer must provide everything. Partnerships can bring complementary technical knowledge, patient investment, customer understanding, distribution channels and trusted relationships. This is especially relevant when Canada is trying to diversify international trade relationships.

Consider the difference between asking, “How can we sell more Canadian aluminum here?” and asking, “What problems are manufacturers and designers here trying to solve – and could Canadian capabilities help?” The first question begins with our existing product. The second begins by listening for an opportunity. Both have a place, but they are not the same journey.

Saskatchewan’s AGT Food and Ingredients offers an instructive example. Murad Al-Katib built a business that went beyond growing and shipping pulses, connecting Canadian production with processing, food ingredients, logistics and international markets. Its relationship with Turkey’s Arbel Group brought market connections and capabilities; AGT later acquired Arbel. In 2019, Al-Katib and investment partners including Fairfax Financial took AGT private, explicitly connecting the ownership decision to the company’s longer-term integration and value-added strategy. This was not simply a producer deciding to manufacture more. It involved assembling capabilities, partners, markets and financing around an opportunity.

That does not mean an aluminum producer should become a lentil processor – or that a resource company must create every downstream business itself. The question is who is best placed to recognize an opportunity, and what combination of skills, market relationships and investors will make it viable. Sometimes the resource producer will lead. Sometimes it will be a customer, an entrepreneur or a partnership. The wider economy needs enough capability to make all of those possibilities real.

A different prescription

My response to calls for more Canadian value-added production is “Yes, and.” Yes, look for the opportunities. And, ask why decades of ambition and policy have not consistently translated into the businesses we hope to create.

What if the familiar call for more investment is itself based on the wrong diagnosis? If the barriers involve unfamiliar innovation capabilities, investment processes designed for known risks, and distance from prospective customers, then urging existing firms to invest more may be insufficient. We may also need to build capabilities in people, support experiments that reduce uncertainty, create connections to users and partners, and make room for investors whose expectations fit the journey.

Canada’s resource strengths are achievements to build on, not shortcomings to apologize for. But perhaps our next opportunity is not simply to make more products from the materials we already export. It is to develop – and reward – the capabilities to recognize unfamiliar opportunities, understand what customers need, invest in learning and build businesses that can earn adoption. If there is a need for an independent innovation expert to challenge these assumptions, help identify paths forward, and speak on behalf of businesses not yet created, I’ll put my hand up.

The references below should reinforce this article’s distinctive argument: success can create constraints, organizational capabilities can become rigidities, and innovation requires discovering opportunities and stimulating adoption – not simply improving existing technologies.

Research and sources informing this article

1. March, J. G. (1991). “Exploration and Exploitation in Organizational Learning.” Organization Science, 2(1), 71–87. Explains why organizations become increasingly effective at exploiting existing strengths, sometimes at the expense of discovering new opportunities.
2. Leonard-Barton, D. (1992). “Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development.” Strategic Management Journal, 13(S1), 111–125. Supports our central proposition that the capabilities responsible for past success can become obstacles to future innovation.
3. Levitt, B., & March, J. G. (1988). “Organizational Learning.” Annual Review of Sociology, 14, 319–338. Introduces the organizational-learning perspective underlying competency traps and the persistence of established practices.
4. Cohen, W. M., & Levinthal, D. A. (1990). “Absorptive Capacity: A New Perspective on Learning and Innovation.” Administrative Science Quarterly, 35(1), 128–152. Particularly relevant to our argument that innovation depends on capabilities to recognize, understand, and exploit unfamiliar opportunities—not simply on technical implementation.
5. Natural Resources Canada (2025). 10 Key Facts on Canada’s Natural Resources – 2024. Provides the official evidence for the $383 billion in natural-resource exports and their 53-percent share of Canadian merchandise exports in 2024.

R$