Victor G. Dodig is president and chief executive officer of Canadian Imperial Bank of Commerce.
With a new federal government having just been sworn in, I can't think of a better time to share some ideas about how together we can drive innovation and foster economic growth.
It's time to think about our economic strengths and challenges, where we stand and where we need to go, and the choices we face in building a modern economy equipped for growth and competitiveness, both at home and around the world.
Over the past decade, Canada lost 10,500 manufacturing plants – 17 per cent of our manufacturing capacity. Even with the current weakness in the Canadian dollar, it is unrealistic to think that this "traditional" capacity will be rebuilt. The reality is that going forward, economic growth will come from innovation across all key sectors of our economy – natural resources, financial services, real estate and broadly defined diversified sectors.
While Canada is roundly – and rightly – envied for its solid economy and how it withstood the financial crisis, we have three gaps to fill if we are going to continue to prosper and be leaders among the advanced economies.
First, I believe we need to do a better job of building the intellectual capital and skills necessary to fuel innovation and execute in a modern economy.
Second, we need to ensure our innovative entrepreneurs are able to attract both the formation and sustainability capital necessary to commercialize new ideas into valuable products and services.
Third, we need to ensure that we build an innovative ecosystem that effectively encourages and nurtures that development.
The fundamental strength of every modern economy starts with its people. As the World Economic Forum told us in a 2013 report, "The most important determinant of a country's competitiveness is its human talent – the skills and productivity of its work force."
In Canada, we are not coming to this challenge from a standing start. Participation in postsecondary education in this country has grown to 53 from 41 per cent over the past decade, the highest among countries in the Organization for Economic Co-operation and Development. So while we are investing in our intellectual capital, how productive is this investment for the new economy?
Actually, some troubling issues lie behind those positive numbers:
- We have a much lower proportion of graduates in the all-important STEM sectors – science, technology, engineering and mathematics – than 22 other OECD countries.
- Only about 20 per cent of our graduates are from those disciplines.
- Postsecondary graduates rank 19th of 21 in numeracy, 18th of 21 in literacy and 14th of 18 in problem-solving skills.
We're talking about the very people and very skills we need to need to lead Canada in innovation and create the high-value jobs for the future.
In effect, a postsecondary education is simply not enough in today's modern economy. Our students, by and large, are choosing an educational path geared toward acquiring credentials rather than skills acquisition and what the labour market needs.
So, what do we need to do?
We need to promote education choices that match the needs of the job market. We also need policies and models to support emerging industries that focus on creating solutions in the global supply chain as opposed to just building products. As much as 70 per cent of the economy and 80 per cent of all jobs are in tradable goods and services. We are already seeing trade in service industries, such as engineering, architecture, computer and financial services, grow in increasing importance.
These emerging firms share a common outlook: They are innovators. And, to put it simply, innovators are all about finding new and better ways of creating value. In today's context, innovation is the generation, commercialization and adoption of new ideas, processes, products and services in the marketplace.
To support them, they require access to expertise, skilled labour and capital.
One model worth considering is the Business Growth Fund created by five of Britain's largest banks. This fund provides the startups with capital and, importantly, access to a network of 3,000 experienced expert advisers.
However, capital on its own is not enough to drive growth and ensure success for our startup companies. We need to create an environment that supports their continued success and helps them turn into global players with access to needed expertise, whether through the business community or our educational system.
We could learn from a global innovation leader like Germany, which, through a mix of public and private funding, has created 80 institutes and 150 business incubation centres to help move radical ideas into the marketplace. Germany is helping startups to commercialize and achieve scale, resulting in the creation of more than 5,800 companies and 46,000 jobs.
Canadians are no strangers to discovery and innovation, but today's innovation ecosystem is highly complex. Far too many Canadian high-tech startups get bought out before they have a chance to grow. They often sell out before attaining their true potential.
When small and mid-sized startups are sold, the country is weaker for it.
Why? Because the really smart innovators never stop. After a successful sale, many are back the next day looking for the next opportunity and dreaming of the next big discovery. And retaining highly paid head-office jobs in Canada rather than seeing them farmed out elsewhere will help spread those benefits to the broader economy.
Fuelled by several hundred successful innovators with their own money to invest, the innovation ecosystem regenerates and starts the discovery process all over again.
Make no mistake, innovation is absolutely essential in today's economy. This is true for emerging players and established companies like ours.
It's the doorway to the future, enabling our economy to be more competitive, produce the high-value jobs we need for the future, and enable companies to create real value for shareholders.