Innovation is the key to our economic future
By Jayson Myers
President, Canadian Manufacturers & Exporters
Innovate or die – that’s the new economic reality for Canadian manufacturers courtesy of what many experts are labelling the “Great Recession.” Companies are trying to survive the grasp of an economic tsunami that is forcing many Canadian manufacturers to reduce their workforces and some to close their doors. This storm is compelling all companies, regardless of size, to rethink their entire business mantra.
Simply put, business as usual is not an option. Today’s reality is a proverbial game of survival of the fittest, where the survivors focus on innovation through new technology.
History has demonstrated that embracing new technology leads to landmark innovation. Between 1990 and 2005, Canada’s manufacturing sector reduced its greenhouse gas emissions by 9.3 per cent, even as production increased by nearly 60 per cent. Half of those reductions came from improvements in energy efficiency, while the replacement of industrial processes accounted for another 30 per cent of emission reductions.
Technological advances in IT have helped companies improve productivity while reducing energy consumption.
Microsoft’s Windows Vista, for example, can reduce energy use by as much as 30 per cent as result of its power management features, and its Virtualization solution allows multiple operating systems to run on a single server, potentially reducing energy use by up to 90 per cent.
Manufacturers didn’t need to be taxed or regulated to achieve emission reductions. It just makes good business sense to improve energy efficiency in order to cut energy costs and to replace old equipment with new, more productive technologies that at the same time resulted in more energy-efficient and less carbon-intensive production processes. Capital investment was crucial. As investment increases, manufacturers have shown that both energy- and carbon-intensity levels fall.
This lesson should not be lost on us as consumers, and it should also be a guiding principle for government policymakers.
With cash flow virtually evaporating and a credit crunch still tightening its grip and essentially cutting off the oxygen manufacturers need to survive, many don’t have the financial resources needed to make the investments that will ensure they weather this storm.
While there are government incentives to invest in new manufacturing technologies, such as the two-year Capital Cost Allowance provisions, companies have to be in a profitable position to enjoy the benefits.
What is the solution? It starts with ensuring that companies have access to the credit they need to help them through this tumultuous time and to make the needed investments in innovation.
Traditional financing institutions need to adjust their risk portfolios while Export Development Canada and the Business Development Bank of Canada need to exercise their new powers and act quickly to ensure that credit flows.
Technology equips manufacturers with the tools needed to create value for both customers and investors in this fast-paced, high-risk, global economy. No company can base its competitive future today on low labour costs, nor should they try.
Where Canadian manufacturers do have a competitive edge is in their flexibility – their ability to respond rapidly to changing customer demands, to specialize and customize production for niche markets, and to add value through the quality and services they bring to solving their customers’ problems.
These competitive strengths will become even more important as we look at future market trends. In a world of intense global competition where products and services literally become commodities overnight, companies have to differentiate themselves and their products in order to compete for business and to grow.
Now, in order to compete and grow in light of these new global market realities, manufacturers in Canada need to focus on the rapid development and commercialization of new products. They need to adopt flexible, automated, integrated and reconfigurable technologies and production systems. They need to be lean – to focus on what their customers value and eliminate wasteful non-value-adding activities in their businesses and supply chains. They need to be fast, because time is the currency of 21st century business, and they need to see their business no longer as one of getting product out the door but as one of using their capabilities to provide customer solutions.
And so, they need to focus on customer service throughout the whole life cycle of their products. And they need to do all this better, faster and at lower cost than anyone else.
A tall order? Definitely.
But if not innovation through technology, I don’t like our other option.
