Canada Has An Innovation Mountain To Climb, But It Is Not Starting At The Bottom

Small Business Canada

Canada is used to sitting at or near the top of impressive global rankings; GDP, happiness, education spending, take your pick. When it comes to innovation, something has gone awry. Looking back across the last decade, Canada has slipped from eighth place in the Global Innovation Index to the 17th. At the same time the UK, a comparable economy, has overtaken us, rising from 10th to 5th – reaching as high as 2nd place in 2014 and 2015. 

For the UK, its scores in the rankings since 2014 have remained pretty consistent; it has slipped to 5th place as other countries have become more innovative while the UK sails a steady (perhaps complacent) course. Sadly, that is not the case for Canada. According to the Global Innovation Index, we have slipped down the rankings because we have become less innovative over time. This year, Canada has also dropped in the respected StartupBlink rankings for startup ecosystems, with Toronto and Vancouver falling down the global tech hub rankings – now no Canadian city features in the global top 20. As a proud Canadian and champion of Canadian innovation, this is pretty startling news.

Innovation is the driving force of productivity and economic growth. Faced with the economic consequences of the Covid-19 pandemic, coupled with the urgent need to achieve net-zero emissions by or before 2050, innovation will be more important than ever to future jobs and prosperity. With unemployment hitting a record 13.7% in June, revitalization of industry, re-skilling of the workforce and a supercharging of Canadian innovation are what is needed to get us back on track. 

It sounds like Canada has a mountain to climb – it does. The good news is, at a federal government level at least, a lot of the groundwork has already been done. After hitting a low of 18th place on the Global Innovation Index in 2017 and 2018, 2019 was the turning point. Canada is on the climb.

Governments across the world are facing increasingly complex problems: they are urgent, they cross-sectoral and political boundaries and they are difficult to measure progress against. Many governments are tackling these problems with the same arsenal they have always used – primarily grants and procurement programs. But some, like the Canadian Government, is taking a new approach. 

Launched in 2017, Impact Canada is a Government of Canada-wide effort to help accelerate the adoption of innovative funding approaches to deliver meaningful results to Canadians. Challenge prizes have been some of the first approaches explored. Traditional grant and procurement funding tends to favor large established companies, with funding upfront for process rather than actual solutions. Challenge prizes have a unique ability to unlock innovation and solve large problems. They reward solutions only after they are proven to work, de-risking investment in unknown entities, SMEs, and start-ups and allowing new ideas, companies, and innovators to breakthrough.

Working closely with Nesta Challenges, the leader in developing and delivering challenge prizes in the UK, the Canadian government has embedded challenge prizes across national government departments to make them an integral part of innovation policy. 

Rather than pursuing an unfocused policy of ‘innovation for the sake of innovation’, the challenge prize method ensures innovation is supported and promoted in the areas most in need of solutions and ensures the benefits are felt by the people who need them most.

The Drug Checking Technology Challenge aimed to reduce the harm of the opioid crisis; the challenge successfully attracted new ideas and innovators, most of whom were new to the Government of Canada funding. The Women in Cleantech Challenge is promoting far greater diversity in an industry where 95% of businesses are founded by men. Women innovators are developing technologies to tackle energy and environmental challenges, competing for the $1m final award.

As the Government of Canada understands, innovation does not just happen; it needs a finely balanced ecosystem to make real impacts. It needs financial support, political support, and an active, healthy market in which to launch new products. Too often, markets are stifled by the over-reliance and dominance of a few big incumbents, denying entry for small agile disruptors. Challenge prizes unlock and unleash the potential of those innovators.

The federal government’s embrace of innovative approaches like challenge prizes is a great start, but it will only get us so far. If we are once again to challenge for the top spots in the global rankings, we first need to create the right conditions for innovators and job-creators in our SMEs to thrive. With the US suspending its H-1B visa program this year aimed at fast-tracking tech talent, now is the right time for Canada to act to attract and retain that talent in our excellent tech hubs.

Canada must set its sights on becoming the go-to destination for small and medium start-ups and scale-ups. Widespread adoption of challenge prizes by our provincial governments and by Canada’s dynamic private sector, to promote untapped talent and disruptive market entrants can release a wave of innovation that will propel us to the top of the mountain once again.

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