Business Responds to Innovation Challenge: No Thank You

Business Responds to Innovation Challenge: No Thank You
George Brown College’s Toronto Next: Return on Innovation study
casts a sobering light on the GTA’s underperforming record

  • Half of private sector in GTA believe government is responsible for driving innovation
  • Only 21 per cent believe the responsibility belongs to the private sector
  • Half of GTA businesses and organizations perceive little to no return on investment in new technologies, innovative skills training product development or fostering R&D partnerships with academic institutions
  • Only 24 per cent of small businesses in the region would invest in innovation if it offered long-term financial gains at the expense of short-term costs
  • 55 per cent of GTA business could not name a successful local innovator

TORONTO, October 29, 2012 – Canada’s chronically low productivity and faltering innovation and competitiveness are important issues that have confounded analysts and politicians for some time. Yet, according to the results of Toronto Next: Return on Innovation PDF icon, released today by George Brown College at an Empire Club of Canada speech, Toronto can anticipate more of the same unless steps are taken to address the relationship between talent, investments in technology and long-term planning as drivers of innovation.

The George Brown College report surveyed a wide cross section of GTA employers, including small, medium and large organizations operating in industries, including high tech, health care, commerce, communications and construction to name few. The survey reinforces Canada’s well known reputation for a lack of private sector investment in innovation, with 50 per cent of respondents saying government bears the primary responsibility for driving investment in innovation.  Only 21 per cent of respondents put the responsibility on the private sector.

There is some good news. Ranking the importance of productivity, innovation and creativity to their business, more than 90 per cent of GTA employers said productivity was the most important. However, 50 per cent perceive a modest to no tangible return on an investment in new technologies, innovation skills training, development of new products and services or fostering R&D partnerships with academic institutions — all of which have been aggressively promoted by Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney as key ingredients in enhancing Canada’s productivity scores.

“We anticipated employers would take a pragmatic view with a bias towards tangible, short-term returns on innovation,” says Anne Sado, President, George Brown College. “But we did not expect to see such a profound deference to government as the primary innovation engine nor the lack of strategic investment in new technologies and R&D partnerships that enable strong productivity.  Clearly the more than 1400 GTA employers we partner with on a host of applied research and employment initiatives understand the value of strategic investments in technology and skills to drive innovation, competitiveness and productivity.  For those who do not, a research partnership with a college that has a bias for action could help them realize the potential for concrete returns.”

Although a large majority of respondents acknowledge the positive correlation between innovation and the competitiveness of an organization and a regional economy, few see an explicit link between innovation and productivity.  When asked if they strongly agree, somewhat agree or disagree with a series of statements on innovation, 76 per cent strongly agreed that innovation is an effective tool in gaining a competitive advantage over the competition.  Yet, only 41 per cent strongly agreed that gains in productivity are a direct result of a culture of innovation. 

“Our findings raise the legitimate concern that GTA businesses may not be seeing the productivity benefits that can be generated by embracing innovation as a business strategy,” said Anne Sado, President of George Brown College. “This study also validates our mandate to ensure we demonstrate these connections with our students and continue to encourage greater innovation and risk acceptance as they enter the workforce and consider forming new companies.”

Examining criteria that would motivate GTA businesses to invest in innovation for the benefit of productivity or long-term profitability, Toronto Next: Return on Innovation uncovered a gap between small business owners and companies in the mid-to-large category.  Larger businesses were very likely to invest in innovation if it helped make an existing process more efficient and effective - at 66 per cent - while small business – at only 56 per cent - were very likely to invest when presented with the same this scenario. 

When presented with the premise that investment in innovation would increase long-term profitability but reduce profits in the short-term, 36 per cent of mid-to-large businesses said they would be very likely to invest.  Small business owners were much less motivated by long-term gains with only 24 per cent saying they would be very likely to invest.

“There is a common perception that small businesses and start-ups tend to have a higher risk threshold and see the explicit value of spending money to make money.  But GTA businesses we surveyed are proving to be the exception,” said Robert Luke, Assistant Vice President, Research and Innovation, George Brown College. “We are seeing a considerable level of risk aversion and focus on short-term gains amongst small businesses, which given the huge influence of small business on our regional employment and economic condition may be a key barrier to long-term innovation and enhanced productivity.”

This focus on short-term gains at the expense of long-term growth is further corroborated when looking at the primary barriers to innovation. Difficulty sourcing innovative employees and concerns that up-front investments will not deliver long-term gains were the top two barriers to innovation at 72 and 74 per cent respectively.

However, when asked to identify reasons for Canada’s lagging innovation record, the number one response for one third of respondents was that Canada is too dependent on “old economy” industries.  One quarter blamed a lack of private sector venture capital investment.  Despite this factor, less than a third of businesses had solicited any third party support — be it from an investor or the research support of a college or university — when introducing a new product in the last two years. 

“We clearly need to view these results in the context of a sluggish regional and global economy that would give any organization reservations about investing long-term,” said Sado. “But the low value placed on innovation as a driver of productivity, coupled with dependence on government to spark our collective innovation potential may pose the biggest risk to productivity and growth.  For our part, we will continue to prepare graduates with innovation skills and instill an exemplary work ethic, problem solving skills and a capacity in our students to learn quickly and over the long term so employers will have access to innovative employees.   We will also continue to partner with employers, linking them to third party funding and the rich research and commercialization potential we offer at George Brown. ”

Toronto Next: Return on Innovation was conducted by NorthStar Research Partners between August 15 and September 13, 2012.  NorthStar surveyed 314 businesses in a range of sectors in the GTA via telephone.  The survey has a margin of error of +/- 5.6 per cent.

A full copy of the report is available at PDF icon

About George Brown College
Toronto’s George Brown College has established a reputation for equipping students with the skills, industry experience and credentials to pursue the careers of their choice. From its three main campuses located across the downtown core, George Brown offers nearly 160 programs across a wide variety of professions to a student body of 60,000 (including those enrolled in full-time, part-time and continuing education programs). Students can earn diplomas, post-graduate certificates, industry accreditations, apprenticeships and four-year bachelor degrees. 


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