Canada ranks in the Top 5 in the world in availability of technolgy, but 21st in applying it. ITAC’s chair tells us why under-investing in technology is crippling our prospects for economic leadership

OPINION: An opportunity for transformation

If there is a silver lining in the reversals of fortune we are witnessing at both the enterprise and the economic level, it may be the opportunity they present to abandon old ways of doing things in favour of new approaches. Challenging times, as we’ve seen in economic history, present us with a unique opportunity for transformation.

But Canadian businesses are disadvantaged in seizing this opportunity as effectively as their global competitors. Canadian business under-invests in technology. The most recent report from the Centre for the Study of Living Standards tells us that our current rate of investment in technology per Canadian worker is 62 per cent of the investment in American companies make in their workers. If the United States is the standard of excellence, then our performance is a C-. This is a mediocre score in an area of competency that will be essential in Canada’s ability to graduate into the ranks of 21st century global economic leadership.

It has been more than 20 years since Peter Drucker forecast the emergence of the information-based organization. Today, whether your occupation is growing grain, trading stocks and bonds, or manufacturing windows, information – about commodity prices, returns on investment, client preferences and so on – is a vital business input. If our economy is to remain competitive, we must be at least as adept in accessing and using information as our competitors are. This means we need to acquire both the tools of modern technology and the skills to use them effectively at a better rate than our current levels. We have the technology. A recent OECD study shows Canada in the Top 5 in the world in the availability of the latest technology, but ranks us 21st in our absorption of this technology.

Our lagging use of technology has become a concern for public policy-makers and those they turn to for advice. Ontario’s Task Force on Competitiveness, Productivity and Economic Progress, led by Roger Martin, for example, has repeatedly stated that “investment in our own skills and knowledge and in assets like machinery and technology is a critical driver of increased productivity, and productivity growth is necessary if we are to realize our full prosperity potential. Ontarians need to step up our investments.” And the Council of Canadian Academies, in a report it published last spring, expressed similar concerns while underscoring the important role that technology can play as a source of innovation as well as productivity. And as recently as last month, Industry Minister Tony Clement affirmed his belief in the vital role technology will play in the economic recovery noting “whether it’s manufacturing or minerals extraction or new renewable energy, if you don’t have the ICT component, you’re not going to be competitive with the world,” he said.

Canada’s economic structure presents major challenges to our uptake of technology. Small and medium-sized businesses make up a much larger segment of our economy than that of the United States. This is particularly true in Atlantic Canada.  SMEs in both countries use technology at lower rates than larger firms in both economies, but Canadian SMEs invest significantly less in technology than their counterparts in the United States. And research has shown that they under-invest even though they clearly understand the productivity-enhancing impact of investments in technology. Running a small business is tough and never more so than in a global economic recession. It takes an extraordinary businessperson to make bold strategic decisions and investments while the running a company day to day. Even the most extraordinary business leaders can use encouragement and support to do so. Public policy can play an important role here.

Canada is not the only country to confront the problem of lagging innovation and productivity due to under-use of technology. Many jurisdictions in Europe in particular have introduced measures to encourage business owners to make the decisions necessary to survive the downturn and succeed when it is over. In Canada, we have seen an accelerated capital cost allowance on computer equipment announced in the last federal budget. This is a useful step, but it is clearly not enough. What is required is a clear, strategic, “Made in Canada” technology strategy that sets out goals and a list of priority actions. This country is blessed with tremendous leaders and access to technology and skills. We have the ability to reverse our global position and the lead the world.
Tom Turchet is chair of the Information Technology Association of Canada’s board of directors and vice-president, software, general business, IBM Corp.
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