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The partnership paradox

By Chris Atchison | June 13, 2013
The partnership paradox
Elyse Allan

Canadian companies want collaboration without the sharing of risks and rewards. This reluctance will impact our ability to execute on innovation, GE Canada President and Chief Executive Officer Elyse Allan warns.

It’s no secret that Canada emerged from the Great Recession of 2008–09 relatively unscathed when compared to the United States and the major economies across Europe. 

But as the global recovery gained steam, many economists in this country began to openly question whether the Great White North’s economic resilience might have been largely determined by a somewhat fortuitous combination of factors. These range from prudent government policies (particularly in the financial sector, where tight controls limited risk exposure for Canada’s big banks) to a strong natural resources sector that helped Canada’s economy chug forward, albeit slowly, while global competitors stalled.

From an innovation standpoint, many pundits argued, Canada was lagging compared to other Group of Eight countries and faces dire competitive risks in the years ahead if that trend isn’t reversed – and fast.

Elyse Allan is familiar with those critiques, but as a driving force of innovation in this country, the President and Chief Executive Officer of General Electric Canada would rather focus on practical solutions. She believes that executing on innovation is more imperative than ever for the future success of Canada – and we’re closer than we think to changing the country’s reputation as a laggard when it comes to innovation.

“The world is changing dramatically – economically, politically and demographically. To succeed in such a radically changing environment, we can’t rely on the same old approaches. As companies and as a country, we must adapt. We have to be innovative in our processes, technology and how we go to market,” she says.

Earlier this year, the GE Global Innovation Barometer surveyed 2,800 executives in 22 countries. Asked to define innovation, 38 per cent of Canadian respondents said it’s about research and development, new intellectual property and inventions. Fifty-three per cent said innovation is about implementing new process, organizational or marketing changes, as well as products.

Allan is quick to note that R&D is only one part of the innovation equation. “We all know the importance of innovation. But what does innovation really mean? What we really need to ask ourselves is what it takes to move ideas to execution. Then we have innovation.”
According to the study, 87 per cent of Canadian executives who responded agreed that innovation is a key priority for their business. That finding ranks Canada alongside traditional innovation powerhouses such as Germany, Japan and the United States. Additionally, business leaders abroad perceive Canada to be innovative.
“The reality is that Canada has been slipping in innovation, R&D spending and global competitiveness,” Allan explains. “This is backed up by various rankings by the World Economic Forum, the OECD (Organisation for Economic Co-operation and Development), the federal Science, Technology and Innovation Council and the Conference Board of Canada.”
The opportunity, Allan stresses, is that business leaders and the Canadian government must move the innovation conversation from ideas into action. Accomplishing this, she says, will require conviction, collaboration and sustained leadership commitment to integrate innovation as a core part of operations.

One of the challenges to executing on innovation is how Canadian companies collaborate on processes and products that enable them to compete on the world stage, while making constant improvements to ensure their continued growth.
It’s here that Allan points out a key challenge highlighted in the Global Innovation Barometer: A decisive 85 per cent of Canadian respondents said they would form a partnership with another company to gain access to new markets, and 83 per cent would join forces with another firm to bolster their existing product or service offering – eight per cent more than the global average. Yet only 11 per cent of Canadian executives would be willing to share revenue risks and rewards with their partners. This was the lowest ranking of all countries surveyed. More than two-thirds of respondents cited a lack of trust or intellectual property protection as factors that would make them unwilling to collaborate.

Allan calls it the partnership paradox, and is quick to point out that Canadian business leaders’ attitudes need to change if the country is to be a player in global innovation.
“We like the concept of having partners to go to market with and we appreciate that collaboration is critical, but when we’re asked to walk the talk, we say no to it,” Allan laments. The reason, she hypothesizes, is tied in part to many Canadians’ trademark cautious approach to business, as well as the historic trend of 80 per cent of Canadian trade flowing south of the border. A similar language, culture, legal structures and business practices have made collaboration with the United States easier to navigate. Now, as Canadian companies seek new opportunities in emerging economies such as India, China and Brazil, those traditional collaborative comfort levels are challenged.

Allan suggests a re-evaluation of how Canada fosters innovation. She shares insights of inventor and GE founder Thomas Edison. In Edison’s view, invention was about developing a new idea or technology, while innovation involved solving a problem and taking it to a viable market. The ability to commercialize an idea in the right collaborative environment, Allan points out, is a critical factor in Canada’s future economic success.

“When we look at globalization, we have to be innovative in the way we position Canadian products and solutions,” she says. “Success might involve working with local agents and distributors, who can help you to understand and sell into a new market. If you’re smaller – and entering new markets – consider how you can partner on technology or in supply chain with a big multinational, one that already knows the market and can take you abroad.”

For example, GE Aviation is working with a Montreal-based company, called AV&R, to develop solutions for GE’s robotic centre of excellence in Bromont, Quebec. The solutions will ultimately roll out to GE Aviation’s manufacturing facilities worldwide.

“It’s a great example of when you have a global mandate in a country, how you can leverage that to help small to medium-sized companies work globally,” Allan explains.

“Most Canadian government research money is directed predominantly through universities and they’re the vehicle that has to pull together this collaborative environment in order to take a funded idea and do something with it,” she says. “We get fascinating outputs, but there may not be a direct client or immediate need. If we don’t have a sufficiently strong private-sector market that’s funding innovation, and government money is going toward research and invention more than commercialization, how do we get from A to B?”

GE Canada has collaborated with the federal and provincial governments on several innovation-driving initiatives in recent years such as the new Pathology Innovation Centre of Excellence in Toronto, a partnership with the Ontario government and the city’s University Health Network. In Alberta, the company recently opened the GE Innovation Centre – bringing together business, government and stakeholders to solve challenges in the energy, healthcare, transportation and finance sectors. “These are great examples of public-private collaboration,” Allan says.

Another tactic to drive innovation-producing change: effective regulation. While that might sound counterintuitive coming from a Canadian business executive – most of whom would argue for a more relaxed regulatory environment – Allan encourages the government’s role in setting performance standards to drive new technology. Business could then develop creative solutions to meet these standards. “Business difficulties with regulation largely relate to how it is implemented, i.e. there’s not enough time to make the transition or insufficient compensation to offset costs from accelerating capital equipment replacement or upgrades,” Allan points out. “Thoughtfully executed regulation that sets new standards of performance can be an effective catalyst for innovation.”

It’s those innovations driven by active collaboration across the supply chain and stakeholder groups, Allan says, that are Canada’s best strategy to guarantee nationwide growth and prosperity in the years ahead. And it’s one she is leveraging to fuel GE Canada’s continued bottom-line success. “We want Canada to grow and be globally competitive. A healthy economy often reflects an environment characterized by a broad range of businesses providing cutting-edge value and services, and a culture that realizes the benefits of executing on innovation.” she says.

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July 31, 2013

Ke

In the drive for innovation, let's work towards increased employment through new products and services where none existed before. If all companies, across the world, are endeavouring to reduce labour...where will the jobs come from and where will our customers come from? Just look at the USA and Canada when many manufacturing jobs went overseas and were not replaced with new, higher value jobs. Yes, collaboration helps, but there is still the underlying thought that we want to beat out our competition...let's focus on creating wealth for all and not the singular goal of providing a return for investors. That is very short sighted. Who is brave enough to do this?

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