Manufacturers risk going out of business for failing to adopt technology

In promoting Canada’s tech sector, governments spend a great deal of innovation money and effort boosting the suppliers of new technologies, with a big focus on commercializing new knowledge and supporting tech start-ups.

Equally important, though, is the need to boost the adoption and use of these new technologies by businesses across the economy. But here, adoption of advanced technology has not had the same priority as in Germany, the U.S., China and a number of other countries. So Canadian companies lag in adopting the most advanced technologies and are less competitive than they could be. That’s a big cost to jobs and the economy. Technology diffusion has to become as important as technology creation.

Jay Myers, who is president of the new supercluster for advanced manufacturing, and before that, president of Canadian Manufacturers and Exporters, has published a detailed study, Technology Adoption in Canadian Manufacturing, which warns that “manufacturers in Canada lag behind those in other countries in adopting advanced technologies.”  He suggests that “at least 30 per cent of Canadian manufacturers risk going out of business because of their failure to adopt advanced technologies.”

How to capitalize on potential

So what can be done to get Canadian companies, not just in manufacturing but in resources, agriculture and services, to adopt advanced technologies in a world where industries in other countries are moving faster? Why is it that too many Canadian companies are technology laggards? These are urgent questions because industry worldwide is moving into what’s known as Industry 4.0

This fourth industrial revolution offers great potential for increased prosperity – and a great potential market for tech-based suppliers in cloud computing, big data and analytics, sensors and the Internet of Things, robotics and machine-machine communications, and additive manufacturing, for example.

Focus on the laggards

And in Canada, as in other countries, there are frontier firms and laggards. Frontier firms are those at the leading edge of technology adoption, while technology laggards are those that are far behind and may not even realize they need to play catch-up. In Canada, we have a disproportionate number of small and midsize companies, and they often lack all the resources needed to undertake the risk in adopting new technologies. It is the laggards that we need to concentrate on; the frontier firms will always be ahead, which is why they are frontier firms.

Myers finds many explanations for this lag in technology adoption. The risk, costs and revenue gains are unclear. Integrating advanced technologies into an existing business is a complex exercise. Businesses may lack the management skills and in-house talent to adopt new technologies and may be hard-pressed to develop or recruit the needed new skills to operate in a new technology system. There may also be a lack of awareness of the technologies available and the businesses skills that would be needed.

Business executives may also be wary of technology hype while others may prefer to wait and see how new technologies develop. There may be concerns about dependence on suppliers with a single technology when what many businesses need are integrated systems solutions. They may also lack awareness on where or how to access integrated technology solutions or to observe and test new technology.

In a report last year – The Next Production Revolution – the Organization for Economic Co-operation and Development highlighted the importance of technology diffusion. “While great wealth can come from creating technologies, most companies and most countries,” it said, “will be mainly technology users. For them, fostering technology diffusion should be a primary goal.” Of course, in Canada, we want to do both, create new technologies and use new technologies.  But it is the use of new technologies that need the greatest attention.

Global examples to follow?

Incentives such as investment tax credits and support from programmes such as the Industrial Research and Assistance Programme can help. So can vouchers that enable companies, especially small and midsize companies, to “buy” technology advice from universities, colleges, research institutes or consulting services. Germany has the Fraunhofer Institutes that work with companies on technology. The U.S. has its National Network of Manufacturing Innovation and its Manufacturing Extension Partnership centres in all 50 states  that work with small and midsize manufacturers on technology development and adoption. Japan has a robot strategy. And China has its Made in China 2025 project. Demonstration facilities and sources of independent advice are critical. Likewise, government has a key role to play in ensuring the supply of technology-specific skilled workers, including those with technology management skills, are available.

In his report, Myers underlines the need to make advanced technology adoption a key part of the federal government’s innovation strategy, and the same applies to provinces, arguing that advanced technology adoption should become an economic policy priority. This includes much more ambitious technology diffusion initiatives. But there’s an opportunity for technology creators and suppliers to play a bigger role as well through partnerships, support for technology diffusion centres, and other initiatives. As well as promoting the supply of new technologies, we also need to increase the demand if Canada is to succeed in Industry 4.0.

David Crane can be reached at [email protected].

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David Crane
David Crane
David Crane is a noted commentator on Canadian innovation issues. He was previously a business and economics writer with the Toronto Star.

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