Conference Board strikes business centre to boost innovation culture in Canadian firms

Disconnect between perception and reality

The Conference Board of Canada (CBoC) has established a Centre for Business Innovation (CBI) that it hopes will help make Canadian companies more innovative. Launched last November and funded by members, the CBI is a five-year, multimillion-dollar initiative that will launch a series of research projects in five areas it considers integral to developing an innovation culture leading to greater productivity and competitiveness — business strategies for firms, capital markets, people, public policy and performance measurements and macro analysis.

The CBI complements new research by the CBoC that shows a disconnect between the reality of Canada's innovative capacity and the views of business executives. The research is contained in a new briefing document — From Perception to Performance: How Canadian Business Leaders View the Innovation Environment — and draws on the World Economic Forum's (WEF) Global Competitiveness Report 2011-2012. It surveyed at least 100 business executives for each of 142 countries with CBoC acting as its Canadian partner. While Canada ranked 11th among the surveyed nations, it ranked below key competitor nations such as Japan, the US and Germany.

The survey found that Canadian business leaders (47 from large firms and 51 from small companies) considered corporate taxes to be high, whereas, "Canada's total tax rate is in fact lower that those of nearly all countries that outrank it on the Conference Board's innovation rankings".

A misalignment was also found between the high ranking afforded Canadian post-secondary and management schools and the general lack of entrepreneurial training students receive. Survey respondents say that with some minor exceptions, "improving higher education and training is not an especially pressing concern for Canada".

The briefing report notes, however, that a number of barriers to better collaboration between business and academia persist, adding that colleges and polytechnics are well positioned to "further enhance business innovation".

"Our sense is that firms tend to judge people coming through their doors but they don't put a premium on entrepreneurial skills and a broader innovation skill set," says Dr Michael Bloom, CBoC's VP organizational effectiveness and learning. "We suspect that this is behind the strong ranking on the education side. Through the CBI, we will work on this perception …We think there needs to be a change in the innovation culture but it's easier to talk about it that actually do it in companies."

Dr Jeff Crelinsten, co-publisher of RE$EARCH MONEY is the co-author of several studies on the attitudes of company executives towards innovation. He agrees that the misperception of business leaders when assessing the merits of Canada's higher education system and innovation must be addressed if Canada is to improve its global innovation standing.

"The education system, especially post-secondary, is all about publication and peer review, discovery and invention. Innovation is about value creation but students don't get this kind of training," says Crelinsten. "It's about instilling an innovation culture but there's no pressure to change the system."

financing of innovation poses tough challenges

The briefing report notes that the financing of innovation is a more complex issue, with the WEF ranking Canada 9th on the ease of raising money through the stock market but 19th for access to venture capital and 22nd for loans to companies with good business plans but no collateral.

"Canada's business leaders reveal perceptions of, at best, mediocre availability of financing for innovation in Canada," states the report. "With such pessimism about innovation financing, it would not be surprising to learn that many firms do not give a central place to innovation in their business strategies".

Munro says that while the CBoC didn't compare the perception of business leaders with the reality of the capital markets, the views of the business community are "probably right". He adds that the CBI will examine this issue in greater detail.

The briefing report also notes that market incentives for greater innovation are extremely weak. It points to Canada's low ranking on the nature of competitive advantage, as well as business perceptions on government procurement policies, intensity of local competition and company spending on R&D.

"For business environment, we rank behind 10 of our competitors. We need structural changes but that's an open question right now," says Munro. "There's some noise about restructuring SR&ED in the Budget but we need to look at what sectors should be opened up to more competition. When you look at agriculture, there's an argument for opening up this market."

The CBI intends to instill at least some of that required attitudinal change in the business community. It has already lined up about 15 CBI "investors" including large innovative firms such as IBM, Cisco, GlaxoSmithKline and Sanofi, as well as a handful of banks and consulting firms. Champion investors contribute $50,000, followed by Partner investors ($30,000) and Participant investors ($11,500). The goal is to have 25 investors committed later this year.

The first set of projects will be announced in the next week or so and new projects will be added about twice a year, with five projects on the go at any one time.

"If we are successful, we will provide firms with tools and techniques to become more innovative and provide governments with insights to refine programs or build new ones," says Bloom. "There's a great need for new data for inside-firm innovation that does not exist in this country. Our work is designed to help over the next five years."

will build on previous research findings

Bloom acknowledges that much work has already been conducted to better understand Canada's weak business innovation performance. He cites CBoC's own innovation reports as well as those of the Council of Canadian Academies, the Science, Technology and Innovation Council, the Coalition for Action on Innovation in Canada and most recently the Expert Panel Review of Federal Support to R&D. He sees the CBI as an extension of that work with innovation culture deemed a "key priority".

"We will make this more prominent going forward. There was a strong signal at our first CBI meeting that culture was important," he says. "The process for change has already started but we're not too late. The process of achieving results doesn't occur in one day."

R$