Collaboration is Key to Solving our Productivity Puzzle

Canada has been grappling with a productivity problem for years. The issue has been talked about at length, and the numbers paint a worrying picture: corporate investment per employee in Canada is 41 per cent lower than in the United States, and in the Toronto region, our GDP per worker trails U.S. cities by over $80,000.

As a leader at BDC, Canada’s bank for entrepreneurs, I work closely with some of the most innovative and resilient business leaders in the country. Our mission is clear: to support Canadian entrepreneurs in building strong, resilient businesses that drive prosperity, competitiveness, and inclusivity for Canada. But solving this productivity puzzle requires a collective effort. Entrepreneurs can’t fix it alone, nor can the government or financial institutions like BDC. This is a shared challenge, demanding a team approach.

One of the primary hurdles is the lack of corporate investment, particularly in key areas like machinery, equipment, and innovation. Many Canadian businesses haven’t been upgrading their tools or investing in R&D at the same pace as their global counterparts, particularly the U.S., where investment has been a game-changer. The result? Our productivity is lagging, and we are being left behind in the global economy.

 The reluctance of Canadian businesses to invest comes down to several factors. Many don’t know where to start, while others fear making costly mistakes or feel overwhelmed by the idea of automation and innovation. However, taking small, incremental steps can make a difference without requiring a massive upfront investment.

One of BDC’s clients in the manufacturing sector exemplifies how small, thoughtful changes can lead to significant improvements. This company knew they needed to automate but didn’t have a clear roadmap. So, they started by bringing together all levels of the organization—owners, managers, and floor workers—to identify inefficiencies.

From there, they began implementing small changes, like Lean Six Sigma methodologies and investing in predictive maintenance tools for their equipment. These incremental changes didn’t transform the business overnight, but they set the foundation for gradual improvement. Eventually, the company incorporated robotics and further automation into their operations. The key takeaway? They made this progress with a manageable investment, demonstrating that improving productivity doesn’t always require enormous financial outlays.

Another factor holding back productivity is complacency. In Canada, there’s a noticeable lack of competition in certain sectors, and that can lead to stagnation. Without the right pressure, businesses may become comfortable, and innovation is reduced. 

Another issue we face in Canada is that too many businesses focus solely on the domestic market or limit themselves to the U.S. Our businesses, especially in sectors like food and beverage, are known for their high standards and quality. There’s a global appetite for Canadian products, and we should be seizing those opportunities.

Canadian businesses need to think globally, expand their reach and aim to compete on the world stage. This shift in mindset is essential if we want to close the productivity gap and unlock new growth potential.

Productivity isn’t just a matter of business success—it has far-reaching implications for our quality of life. When productivity stalls, it effects everything from healthcare and infrastructure to housing affordability. If we want to raise wages, provide better healthcare, and improve living standards, we need a strong economy to support these goals. A more productive economy means more resources to invest in essential services and infrastructure.

So, where do we go from here? First, we need to break down the fear and uncertainty surrounding automation and innovation. While the transition can be daunting, it’s necessary for long-term success. Importantly, businesses don’t need to make massive investments all at once. Starting small and building on success is a proven strategy.

Second, we need to invest in upskilling our workforce. The future of work demands new skills, and our workers need to be ready for these changes. Rather than just hiring more people, we must focus on equipping our employees with the tools and knowledge to thrive in tomorrow’s economy.

Lastly, we need to foster a culture of competition and growth. That means encouraging entrepreneurs to take risks, scaling successful businesses, and expanding our market reach globally.

The productivity crisis is not just about helping businesses thrive; it’s about securing a prosperous future for all Canadians. The time to act is now. Let's work together to build a stronger, more competitive, and more productive Canada.