Canadian businesses lagging in adopting and using generative artificial intelligence

Canadian businesses are slow in adopting and using generative artificial intelligence (Gen AI) technology, according to a report by the Canadian Chamber of Commerce.

The report, “Prompting Productivity: Generative AI Adoption by Canadian Businesses,” underscores how Gen AI can help tackle one of the most significant economic challenges facing Canadian prosperity and standard of life – low productivity – while also exploring what is holding Canadian businesses back from adopting AI technologies.

“Gen AI is a generational opportunity to boost Canadian productivity at a time when our performance is steadily headed in the wrong direction. The time to prompt productivity and act is now,” said the report’s lead author Patrick Gill (photo at right) senior director of operations and partnerships at the Canadian Chamber of Commerce’s Business Data Lab.

Canada’s productivity has only increased 0.9 per cent annually over the past 10 years, the report notes. Canada is currently the second-least productive country in the G7.

Canada’s business investment per worker in non-residential structures and machinery and equipment has fallen back to 2004 levels. The total business investment share of Canada’s GDP has declined from its peak of 21 per cent in 2014 to 17 per cent in 2023, according to the report.

“Canadian businesses must innovate or die, and that means embracing Gen AI,” Gill said in a statement. “While adoption has begun in every industry, it’s likely not fast enough for Canada to be competitive on the global stage, especially since three in four Canadian businesses still haven’t tried Gen AI yet.”  

As Research Money reported last year, only 3.7 per cent of Canadian firms with five or more employees had deployed AI in their business in any capacity as of the end of 2021, according to a study by the Dais, a public policy and leadership think tank at Toronto Metropolitan University, found.

For companies with 10 or more employees, Canada ranked No. 20 out of 35 countries for AI adoption, said the study, based on analysis of data collected by Statistics Canada. Globally leading nations in AI adoption have more than double the rate of business AI adoption compared with Canada, with Denmark at 24 per cent having the highest rate.

Key findings of Canadian Chamber of Commerce report

The Canadian Chamber of Commerce’s report provides recommendations for both businesses and policymakers to accelerate Gen AI adoption in Canada. It examines and forecasts Gen AI adoption by Canadian businesses within the context of Canada’s productivity problem.

Among the report’s key findings are:

• Roughly one in seven Canadian businesses (14 per cent) are early Gen AI adopters, either using Gen AI or have plans to use it soon. AI adopters are found within every Canadian industry and region, but are more likely to be exporters, larger businesses, industries with highly educated workers or emerging enterprises.
• Early Gen AI adoption by businesses is highest in Ontario (18 per cent), not Quebec where Canada’s Scale AI global innovation cluster is based. British Columbia has the second-highest business adoption rate (15 per cent) of AI, followed by Nova Scotia (13 per cent), Alberta and Prince Edward Island (both at 12 per cent), Saskatchewan (11 per cent), and Quebec (10 per cent).

[Editor’s note: This finding differs from the study by the Dais, which found AI adoption is highest in Quebec, with five per cent of firms reporting adoption, while British Columbia, Ontario and Saskatchewan follow at four per cent, according to the study. Alberta, at three per cent, is below the national average. Manitoba and Atlantic Canada and the Territories have only two per cent of firms adopting AI.].

• Larger businesses are nearly twice as likely to use Gen AI than small businesses.
• On its current trajectory, Gen AI adoption by Canadian businesses could reach a “tipping point” (50-per-cent adoption rate across businesses) in the next three to six years – likely too slow to keep pace with global competitors.
• Depending on the rate of adoption, Gen AI could grow Canada’s productivity between one per cent and six per cent over the next decade.
• The factor of “trust” will be important for future adoption, with public interest and acceptance of AI likely being positively correlated with countries’ business adoption rates. Global IPSOS surveys reveal that Canadians are less knowledgeable and more nervous about AI than citizens of most other countries. In 2023, Canada ranked 29^th out of 31 countries in agreeing that products and services using AI had more benefits than drawbacks.
• Most businesses using Gen AI are predominately looking to accelerate content creation (69 per cent) and automate work without job cuts (46 per cent).
• Almost three in four Canadian businesses (73 per cent) have not even considered using Gen AI yet.
• Roughly three in 10 Canadian businesses cite hiring skilled employees and access to finance as top challenges they face in adopting new technologies, including Gen AI.
• It is recommended that Canadian businesses move fast to adopt Gen AI to gain a competitive advantage over global competitors. This means starting with small-scale pilot projects to validate the feasibility and impact of Gen AI before gradually expanding to larger initiatives based on successful proofs of concept, all while training and preparing employees for the adoption of Gen AI.
• Government can support Gen AI adoption by upskilling workers, setting adoption targets, tapping the private sector and, among other actions, ensuring regulation is proportionate and risk-based. Canada should look to Singapore as a leading example in maximizing AI’s benefits for the public sector with its mission-driven, “pilot and scale” approach.
• Set ambitious business adoption targets that are incorporated into the Minister of Innovation, Science and Industry’s mandate letter. Consider working towards a Gen AI business adoption rate of 50 per cent to be achieved between 2027 and 2030.

Global interest in Gen AI is high, the report notes. “Canadian businesses need to move fast to gain a competitive advantage over global competitors. With Gen AI so accessible and applicable for every type of business, there is little excuse for Canadian businesses to sit on the sidelines.”

The Canadian Chamber of Commerce report’s call for businesses to act echoes that in a 2019 report by Deloitte, which surveyed more than 1,000 businesses. Deloitte’s report found that 71 per cent of Canadian businesses have not started to use AI in any way, while Canada’s early adopters are struggling to scale their pilot AI projects.

Deloitte’s report called on company leaders across Canada to take action, stating: “To help Canada fulfill its potential for world leadership in the adoption and deployment of AI, Canadian businesses that don’t already use AI need to adopt it, and those businesses already using it need to scale up their AI deployment.”

Which Canadian businesses and organizations are using AI the most?

Canada’s information and cultural industries are the greatest user of AI in producing goods or delivering services over the last 12 months, according to a new report from Statistics Canada. Nearly 21 per cent of businesses and organizations in the sector used AI.

The next-highest sectors using AI were: professional, scientific and technical services (13.7 per cent of the sector); finance and insurance (10.9 per cent); and administrative and support, waste management and remediation services (10.5 per cent).

The sectors using AI the least were: government agencies (0.1 per cent); agriculture, forestry, fishing and hunting (0.7 per cent); and accommodation and food services (0.9 per cent).

Of all private sector agencies, 6.2 per cent used AI, compared with 6.2 per cent of non-profit organizations serving businesses, and 4.6 per cent of non-profits serving households or individuals.

Government agencies used AI the least (0.1 per cent) of all businesses and organizations included in StatsCan’s report.

Treasury Board President Anita Anand said Ottawa is developing a new AI strategy for federal government operations. The intention is to make government operations more efficient and improve services for Canadians, while also improving capacity for science and research, Anand said Monday, May 27, at a meeting of AI experts in Gatineau, Quebec.

Government intends to consult broadly in the coming months before unveiling the strategy. There is no deadline for producing the strategy.

Based on the StatsCan report, the urban-rural divide in the use of AI is evident,  with AI use in urban areas being 6.2 per cent, compared with 3.3 per cent in rural areas.

Use of AI doesn’t appear to be causing job losses, based on the StatsCan report. Of the sectors using AI the most, 79.2 per cent of the information and cultural industries reported that the impact of AI use on total employment did not change. This category was 89.8 per cent for the professional scientific and technical services, 91.2 per cent for finance and insurance, and 95.2 per cent for administrative and support, waste management and remediation services.

The sectors using AI the most said the extent to which AI has reduced tasks previously performed by employees was mainly “small” to “moderate” and, in some cases “to no extent.”

Of the sectors using AI the most, the information and cultural industries reported the greatest increase in total employment (17.6 per cent of the sector) from using AI. In this sector, 37.6 per cent of businesses and organizations said they trained current staff to use AI, while 12.6 per cent said they hired staff trained in AI.

In the professional, scientific and technical services sector, 41.7 per said they trained current staff to use AI, compared with 56.6 per cent in finance and insurance, and 7.9 per cent in administrative and support, waste management and remediation services.

PrairiesCan invests more than $3 million to boost AI adoption by businesses

Last week, Prairies Economic Development Canada announced a $3.125-million investment in the Edmonton-based Alberta Machine Intelligence Institute (Amii) for a project that will see the institute working with up to 30 small and medium-sized businesses based in Alberta, Saskatchewan and Manitoba over the next three years. The funding is aimed at empowering Canadian companies to embark on or accelerate adoption and use of AI.

Amii, one of Canada’s three federally supported centres of excellence under the Pan-Canadian AI Strategy, will provide tailored support to up to 30 Prairies-based SMEs. Leveraging its expertise and success in working with companies and organizations from a variety of sectors, including health, energy, agriculture, and manufacturing, Amii will guide companies as they harness the power of AI to enhance their operations, improve decision-making and unlock new opportunities for success.

“This investment is a significant step towards driving innovation and growth in the prairie provinces,” said Cam Linke (photo at left), CEO of Amii. With the support of PrairiesCan, we can equip small and medium businesses with the tools and knowledge they need to leverage AI effectively, compete in an evolving market and position the region as a leader in AI-driven innovation.”

On May 22, TECHNATION, a Mississauga-based technology association, launched its inaugural A14 Canada Summit in Ottawa, an annual event that brings together industry and government for discussions on how to accelerate responsible AI adoption in Canada.

“AI’s potential is infinite, but Canada still lags in AI adoption. Accelerating responsible AI adoption across all sectors will require a bold commitment and call to action for government and industry collaboration,” said Angela Mondou, president and CEO of TECHNATION.

At the summit, Ashok Krish, global head at AI cloud advisory and consulting firm Tata Consultancy Services, headquartered in Mumbai, India, highlighted key findings from its recently published AI for Business Study, which explores the transformative power of AI for business.

The Tata Consultancy Services Thought Leadership Institute conducted the double-blinded study, of approximately 1,272 senior executives with profit and loss responsibilities in 12 industry sectors across 24 countries in Asia, Europe, Nordics, Latin America, North America, and the United Kingdom/Ireland, with respondents having annual revenue of $5 billion to $100 billion.

Highlights of the study include:

• 54 per cent of executives believe AI’s impact will be greater than or equal to the internet, while 59 per cent believe AI’s impact will be greater than or equal to that of smartphones.
• 57 per cent are excited or optimistic about AI’s potential impact on their business.
• Nearly three-quarters of them also recognize the need to make changes to take full advantage of AI.
• 72 per cent currently reworking or planning to rework their business strategy or operations.
• 59 per cent of corporate functions have AI implementations in-process or have completed AI projects.
• 34 per cent of corporate functions are planning AI implementations.
• Only 20 per cent of corporate leaders say they are well-positioned to leverage AI to their strategic advantage.
• 65 per cent of companies think human strategic decision-making and creativity will remain essential to their competitive advantage.
• 69 per cent of companies are more focused on using AI to spur innovation and increase revenue than on lowering costs and optimizing operations.

According to the study, strategic challenges for businesses adopting and implementing AI include:

• Security and privacy
• Ethical and responsible AI use
• Lack of IT readiness  
• Talent development and training 
• Cultural shifts

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