Yesterday I attended the BC Business Council’s “Business 2011” conference as a guest of the Vancouver Economic Development Commission. The keynote was The Honourable Kevin Lynch, Vice-Chair, BMO Financial Group — but better known as a career federal public servant in a variety of important and influential roles — Clerk of the Privy Council, Secretary to Cabinet — just to name a few.
Lynch is an economist 3x over — BA, MA and Ph.D. But this doesn’t stop him from being an excellent speaker — straightforward and to the point with his message.
His topic: MORE PRODUCTIVE TODAY, MORE COMPETITIVE TOMORROW.
This whole productivity issues has been around for awhile in BC and Canada as a whole. Lynch’s presentation was the first time I fully grasped what it means and what we can do about it. Thus this blog.
First a few facts to set the context:
- Canadian labour productivity in the business sector grew “an anemic 0.8% annual rate over the last decade” – way worse than previous decades.
- We are real laggards when you compare us to other countries — we stand 17th among OECD nations (2007)
- BUT, we work more hours on average so out total output per works pushes us up to 8th among OECD countries but still behind the US.
- Direct quote from Lynch: “In 2007, Canada’s business sector productivity (measured per worker) was only 75% of the US despite the highly integrated nature of our North American economies.”
- This little problem (the 25% gap with the US) “costs” us $300 billion annually in lost income.
Whew.
How come you say? The business community used to defend this performance by saying that the government had not put in place conditions to encourage investments in productivity. But this doesn’t wash today as now Canada’s debt is the lowest in the G-7, we have our pension act together and our corporate tax is more than competitive.
Lynch says research points to a number of factors: low business spending on R & D and thus low innovation; poor investment in Information and Communications Tech (ICT); low business investment in new machinery and equipment, small average firm size; low competition in some sectors which affects innovation/productivity; and the “behavioural impact of the long design in the Canadian dollar…Canadian firms used relatively less capital and new technologies.”
So what do we do?
INFORMATION DRIVEN COMPETITION: we need to be engaged in understanding and using “global best practices”. Lynch suggests creating a national Productivity and Innovation Council to benchmark Canadian business globally on a sector-by-sector basis. Should business schools be pointing their research in this direction?
FINANCING: We need to sort out our venture capital financing — how can start-ups grow without support? We seem to need a VC sector plan that can be designed to meet Canada’s needs. Look at Israel and Singapore in terms of innovative new companies.
GLOBAL TALENT HUNT: Back to HQP (highly qualified personnel). Points to education and the importance of it at all levels. Lynch says we should focus on talent — which also means focusing on literacy. I was always interested in the research that pointed to government investment in literacy being more powerful than investment in university research when it comes to productivity. Which is not to say we shouldn’t fund research. But we need both. Lynch also mentions the importance of language skills — why isn’t Mandarin a must?
GLOBAL GRAVITY SHIFT: “Global GDP is shifting to Asia”. We need a clear and focused market strategy to respond to Asia and Brazil in particular.
THE LEADERSHIP THING: Apparently too many leaders dismiss productivity for any number of reasons — expecting a lecture, making us work longer, bad politics. In our market economy, business attitudes do matter.
“Our marketplace needs more competition to spur faster adoption of new technologies and processes, and to reward innovators and early adapters.”
Lynch summarized his message by talking about the next decade being characterized by complexity, uncertainly and change. “In this environment, innovative and productive economies will have a much better chance of sustained growth, rising living standards and good jobs than those who are not”.
It means being open to the problem diagnoses — really observing what is going on, drawing insights, framing opportunities and generating and testing new ideas.
Sounds like a call for design thinking in business to me.