Canadian firms must take a global approach to managing, implementing innovation

Conference Board of Canada report

The Conference Board of Canada (CBoC) has released the first of several metrics-based reports on firm level innovation showing that only 15% of firms take a territory-market expansion approach to innovation. The finding is critical as report after report indicates that Canada's innovation performance is middle-of-the-pack and weakening, primarily due to poor business innovation. A global approach is widely considered to be more effective than a predominant focus on technology or the North American market

Entitled The State of Firm-Level Innovation in Canada, the report is the second in a series produced by the CBoC's Centre for Business Innovation (CBI), a five-year project examining various facets of firm-level innovation. It's based on a comprehensive 2012 survey which 628 Canadian firms completed, generating a rich data set that will serve as the basis for several reports. It has already been the focus of a business innovation summit in Toronto last February.

The findings indicate that approaches and attitudes toward innovation vary according to company size, age and sector. For instance, smaller companies report that lack of funding is the most prevalent challenge to innovation, while larger firms cite corporate culture and fear of risk as the major impediments.

"Firms tend to place the highest importance on pursuing and assessing product, service and technology platform innovations. A lower percentage of firms are also pursuing customer experience and business model innovations, while market expansion, organizational, and cultural innovations are considered less important by most firms," concludes the report.

"The surprising finding in the CBI survey is that the next most quoted sources for financing innovations (after internal) are the federal and respective provincial government, with banks being a distant fourth source of innovation financing. The fact that governments appear to be a more often used source of innovation funding than both public financing institutions and private capital points to a critical issue for many firms in Canada, and a major challenge for Canada." — The State of Firm-Level Innovation in Canada

"We've got to get it (the data) out there. We don't have a lot of time … Companies tend to have weak commercialization and marketing capacity while they're strong on technology and product development. We uncovered where the commercialization challenges are," says Bruce Good, CBoC's executive director of CBI. "The audience for these reports is anybody running an organization of any kind, size and industry that wants to grow through innovation. I'm amazed at how few companies actually use metrics to measure innovation progress which could be a significant message to policy makers."

weak collaboration culture

In another key finding, the report found that 53% of responding firms do not have any collaboration agreements. It also noted that few firms cited lack of access to third-party research institutions and universities or inadequate business partners as challenges to innovation, which it interprets as the result of a "weak culture of collaboration in Canada".

Another important finding is the source of funding which companies identify as their most important. While the most cited source (internal) is commonly acknowledged, Good says he was surprised that the importance of federal and provincial funding ranked above institutional, venture and angel funding, particularly for smaller firms.

"Several decades ago, funding institutions played a much greater role but they drew back following the telecom and dot com busts and never returned," he says. "Some of venture capital and angel funding also disappeared and went to more attractive jurisdictions. There's also a language problem. Having innovators and financiers talk about innovation is a real issue."

Good says the current federal government is "doing a good job" encouraging business innovation "with the tools they have" and points to the $400 million venture capital commitment, some of which was allocated to the Business Development Bank of Canada.

"BDC is a CDI member and will benefit from our research and hopefully firms will start using the tools we encourage," says Good.

He says CBoC has been pleased with the work of the CBI and may consider renewing it. More surveys are planned for both 2014 and 2015, which may take slightly different slants "depending on where our research goes".

"We may go deeper into measurements of performance and see if companies adopt tools for measuring innovation," says Good. "Several actions are needed in the areas of metrics, skills and tools to boost internal innovation capacity."

CBI pursuing academic support for research

While CBI has substantial backing from its corporate members and some individuals, the original intent was to seek academic backing for its research. It lined up nine institutions to support its bid for a Business-Led Network of Centres of Excellence, but the proposal didn't make it past the letter of intent stage. Good says that while CBoC is disappointed, strong connections were established with the institutions supporting the proposal which could lead to academic investment in the future.

R$