Catalyzing Canada's Digital Economy — Report by the Expert Panel on Digital Technologies and Innovation
Theme(s): Growing the ICT Industry, Innovation Using Digital Technologies
To respond to the government's public consultation on Canada's Digital Economy Strategy the Board of Governors of the Council of Canadian Academies appointed a panel of experts (Tom Brzustowski, Marcel Côté, Claude Jean, Peter Nicholson (chair), William Pulleyblank, Andrew Sharpe, and John Thompson). With the consultation seeking practical advice on a multi-year strategy, the panel focused on the following charge:
To foster greater innovation and productivity, what should be the key policy elements of a digital economy strategy for Canada?
The panel drew on analysis from the Council's 2009 report, Innovation and Business Strategy: Why Canada Falls Short, observing that information and communications technology (ICT) is the leading driver of innovation, competitiveness, and productivity growth. This occurs not only through ICT-driven efficiency gains, but more profoundly through transformative applications, like the BlackBerry and e-commerce, which make entirely new things possible.
Evidence suggests that Canadian businesses invest less in ICT than their counterparts in many advanced countries. This likely explains the steep decline in Canada's labour productivity, since Canadian businesses may be missing the competitive advantage which is derived from the transformative use of ICT. In this context, a strategy for Canada's digital economy needs to address two principal opportunities and challenges:
- To increase the uptake and productive application of ICT throughout the economy; and
- To increase the competitiveness and size of Canada's ICT-producing sector.
Thus, the panel deliberately focused its report on the role of an enterprise, since it is primarily through enterprises that the use of ICT translates into overall economic performance. (With this specific focus, the report does not directly address the important socio-cultural implications or the role of individuals or specific subsectors, such as digital media, other than implicitly as actors in a national economy.) The panel suggests that the strategy for a digital economy needs to take a systems perspective. The panel believes that strengthened demand for ICT from enterprises will more effectively mobilize supply-side factors (i.e., skills and infrastructure), which in turn will foster further uptake of ICT – a virtuous circle.
The rationale for the illustrative examples can be summarized as follows:
- Digital Transformation Assistance Program (DTAP) – ICT uptake, particularly by small and medium-size enterprises (SMEs), may be inhibited by lack of awareness of potential benefits, limited in-house skills, and high initial costs. A DTAP-like program would employ field advisors and offer small grants to help SMEs overcome these initial barriers, and also aim to disseminate practical business practices and lessons from the field. Such program would complement, rather than replace private-sector services.
- Catalytic government procurement – The government, acting as a sophisticated lead customer in a catalytic fashion, can provide early-stage stimulus to help build globally competitive ICT capability in Canada in such areas as health care, “green IT”, e-delivery of public services, and smart public infrastructure. Successful catalytic procurement will depend on sustained commitment and top-down leadership within governments, and should support open, global standards for digital technologies.
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The Council of Canadian Academies
Science Advice in the Public Interest
Notice: This report was prepared in response to a public consultation on Canada's Digital Economy Strategy undertaken by the Government of Canada. The report was initiated by the Council of Canadian Academies on the authority of its Board of Governors. The members of the Expert Panel that authored this report were selected by the Council for their special competencies and with regard for appropriate balance. Any opinions, findings, conclusions or recommendations expressed in this report are those of the authors – the Expert Panel on Digital Technologies and Innovation.
This report builds upon the Council's 2009 report on business innovation, Innovation and Business Strategy: Why Canada Falls Short, and provides further evidence to inform public policy development and decisions. This report has gone through a formal review process and has been approved by the Council's Board of Governors.
The Council is governed by a Board of Governors, a majority of whom are appointed directly or indirectly by the Council's three Member Academies –the Canadian Academy of Engineering, the Canadian Academy of Health Sciences, and the RSC: The Academies of Arts, Humanities and Sciences of Canada. A Scientific Advisory Committee advises the Council's Board with respect to assessment topic selection, terms of reference, selection of expert panels and report review.
Members of Expert Panels serve without fee, in their personal capacities, and not as representatives of their organizations.
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© 2010 Council of Canadian Academies
Expert Panel on Digital Technologies and Innovation
- Peter Nicholson, C.M. (Chair), Inaugural President, Council of Canadian Academies (2006-09), Ottawa, ON
- Tom Brzustowski, O.C., FRSC, FCAE, RBC Financial Group Professor in the Commercialization of Innovation, University of Ottawa, Ottawa, ON
- Marcel Côté, Founding Partner, SECOR Inc., Montréal, QC
- Claude Jean, Executive Vice President and General Manager, DALSA Semiconductor Foundry, Bromont, QC
- William Pulleyblank, Professor of Operations Research, U.S. Military Academy, West Point, NY
- Andrew Sharpe, Executive Director, Centre for the Study of Living Standards, Ottawa, ON
- John Thompson, Chairman, TD Bank Financial Group, Toronto, ON
Project Staff of the Council of Canadian Academies
Program Lead: Renata Osika, Program Director
The Expert Panel on Digital Technologies and Innovation would like to recognize the authors of Innovation and Business Strategy: Why Canada Falls Short, which was published by the Council of Canadian Academies in April 2009. As the present report draws on the earlier report's analysis of information and communications technology, and related matters, we would like to extend particular thanks to the authors for their valuable insights and hard work.
Peter Nicholson, Chair
Expert Panel on Digital Technologies and Innovation
This report was reviewed in draft form by the individuals listed below – a group of reviewers selected by the Council of Canadian Academies for their diverse perspectives, areas of expertise, and broad academic, business, and policy perspectives.
The reviewers assessed the objectivity and quality of the report. Their submissions – which will remain confidential – were considered fully by the panel, and most of their suggestions were incorporated into the report. They were not asked to endorse the conclusions nor did they see the final draft of the report before its release. Responsibility for the final content of this report rests entirely with the authoring panel and the Council.
We thank the following individuals for their reviews:
- Arthur J. Cordell, Adjunct Professor, Mass Communications, Carleton University; Special Advisor to Industry Canada, Ottawa, ON
- Charles H. Davis, Professor, Edward S. Rogers Sr. Research Chair of Media Management and Entrepreneurship, Ryerson University, Toronto, ON
- Ginny Dybenko, Dean, School of Business and Economics, Winfried Laurier University, Waterloo, ON
- Lib Gibson, Adjunct Professor, Rotman School of Management, University of Toronto, Toronto, ON
The report review procedures were monitored on behalf of the Council's Board of Governors and Scientific Advisory Committee by Joseph D. Wright, (retired) President and CEO, Pulp and Paper Research Institute of Canada (PAPRICAN).
The role of the report review monitor is to ensure that the panel gives full and fair consideration to the submissions of the report reviewers. The Board relies on the advice of the monitor in deciding to authorize release of the Expert Panel's report. The Council thanks Dr. Wright for his diligent contribution as a review monitor.
Elizabeth Dowdeswell, President Council of Canadian Academies
Table of Contents
- 1. Introduction
- 2. The Policy Theme
- 3. The Digital Economy as a System
- 4. ICT, Innovation, and Productivity
- 5. Where Canada Falls Short
- 6. Strategic Policy Proposals
- 7. Complementary Policies
- 8. Concluding Observations
- Data Sources for Figures & Tables
Information is the raw material of the knowledge economy. The locus of value in modern economies continues to migrate toward more information-intensive activities because the power of information and communications technologies (ICT) continues to grow exponentially, having already increased more than a million-fold since the early 1960s. This growth has been made possible through innovations that exploit the atomic-scale properties of matter and light to encode, manipulate, transmit, and store information in all its myriad forms. The underlying code is binary – on or off, one or zero – so information has been rendered digital, and increasingly so too has our economy and our society.
Digital technology, like steam power and electricity, is a general purpose enabler. The ultimate boundaries of its application, already very wide, cannot be foreseen. What is virtually certain, however, is that the future development and application of digital technology will be a principal driving force of innovation and economic progress for years to come.
Investment is measured in nominal terms (i.e. current dollars) with $C converted to $US at purchasing power parity (PPP).
It should be of great concern that investment by Canadian businesses in digital technologies and associated innovative applications that boost productivity and competitiveness, has persistently lagged well behind that of the United States (Figure 1) and of many of the most advanced European countries. Canada therefore urgently needs a digital economy strategy to mobilize the resources of business, government, and individuals to ensure that this country is among the global pace-setters in seizing the epochal opportunities that the digital economy presents.
* Data sources for figures and tables are listed at the end of this document
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