Innovation isn’t in Canada’s DNA

Can John Manley jump-start our lagging global competitiveness?

Innovation isn’t in Canada’s DNAI caught up with John Manley by telephone at his eastern Ontario cottage, where his summer vacation was already drawing to a close. The former Liberal minister, who served as deputy prime minister in Jean Chrétien’s last years as PM, will have a busy autumn.

Manley has had five years of relative calm as a corporate lawyer and member of assorted blue-chip boards—Canadian Pacific, CIBC, Nortel. Well, the Nortel chip used to be blue, anyway. He did agree to run that Afghanistan panel for Stephen Harper, a decision that earned Manley a lot of detractors in the Liberal party. But then, he never was much good at passing tests of ideological purity.

Which makes his next destination an interesting pick. In October he’ll move into the offices of the Canadian Council of Chief Executives, and on New Year’s Day he’ll become the group’s president and chief executive officer. The CCCE—you may remember it under its old name, the Business Council on National Issues—is a club for 150 chief executives of Canada’s largest corporations. Its members claim $3.5 trillion in assets and $800 billion in annual revenues. This is the voice of big business in Canada. So it’s an open question whether it can also be the voice—quirky and unpredictable as his has sometimes been—of John Manley. He intends to find out.

But I didn’t call Manley just to quiz him about his new job. As you’ll see elsewhere in this issue of Maclean’s, a few of us recently interviewed the presidents of Canada’s largest research universities. One of them, the University of Toronto’s David Naylor, called for a first ministers’ conference on the innovation economy. University funding and the role of higher education would be part of it, but in Naylor’s view the need to put new ideas and techniques to work in the economy can’t be restricted to what goes on at universities. Naylor’s colleague, Heather Munroe-Blum of McGill University, agreed. “Having industry leadership there with government and universities is absolutely crucial,” she said.

Well, then. Would Manley, in his new role, want to join governments and academia in trying to build a smarter, more competitive economy? You’re right. I knew the answer before I asked the question. “Absolutely I would be interested in being part of that and contributing to it,” he said.

He was careful to emphasize that his opinions are his alone. He won’t be speaking for the CEOs until he is in charge of the CCCE. But Manley has a lot of history on these issues. As industry minister in the ’90s he used to say Canada runs a marathon against the rest of the world every day. He hasn’t changed his mind.

“Innovate or perish. The world is changing so quickly that the inability to find ways to adapt to the changing environment is detrimental, not only to the business sector, but to the country’s prosperity as a whole.” And for the moment, at least, he’s not shy about attributing some of the responsibility for our lagging competitiveness to business.

“I don’t think you could say that innovation is deeply in the DNA of our Canadian business enterprises,” he said. “We have built prosperity, up to and including this decade, on a fairly basic paradigm: we are rich in natural resources. We’re good at harvesting them. And we have built a manufacturing and processing sector, and to some degree a services sector, which has been quite successful in exploiting access to the U.S. market.”

So Canadian business often doesn’t do much more than build factories 20 km north of the U.S. border and lob products 50 km south. For years, that model got a lot of help from a cheap Canadian dollar. “I got into a certain amount of trouble when I was deputy prime minister for saying you shouldn’t mistake a bull market for brains. The fact that the Canadian dollar was trading at 62 cents . . . you shouldn’t take that for granted.”

And now that the loonie is trading a lot higher? It’s time to ask hard questions about why homegrown businesses don’t often succeed, not just at short-haul exports, but in a truly competitive global market. Research in Motion is one example of a Canadian start-up that thrives on high-technology exports. “Most of the others have died on the vine or been acquired by U.S. investors and moved out.”

Export focus has been lacking, then. So is an entrepreneurial class that knows how to grow a company past the start-up stage. “What you see, especially in small, technology-driven businesses, is a shortage of people who know how to grow them, how to manage them.”

So what? So the rest of the world will run these marathons whether Canadians do or not. “One day you wake up and there’s a company called Huawei,” Manley said, naming a burgeoning Chinese telecom giant. “[People say,] ‘They make crap, we don’t have to worry about them.’ Well, five years later it’s not crap anymore, and their prices are a fraction of what the established equipment suppliers are selling.”

So this week we bring news that the leaders of Canada’s largest universities, and the next leader of the country’s biggest business group, see challenges facing the country that governments have to address. Here in Ottawa for the last few years, we have all enjoyed an entertaining vacation from long-term thinking. But vacation’s almost over.