TORONTO—Canadian productivity needs a boost. Here’s a list of effective strategies from some of Canada’s leading business minds, consultancies and research associations.
Expansion: Canadian businesses must continue expansion into new markets.
By improving relationships with emerging economies—developed or not—Canadian firms will broaden the scope and scale of their businesses. This will improve the business case for investments in processes and technologies.
Canada’s reluctance on this front is reflected by recent drops in global competitiveness rankings by the Global Economic Forum and the Conference Board of Canada.
However, blame does not lie solely in the laps of Canadian businesses. Enhancing expansion opportunities comes down to improving and developing trade relations with markets other than the NAFTA and BRIC countries—efforts requiring more support from the federal government.
And while other markets may be less developed, smaller countries like Finland and Denmark are beating us when it comes to innovation and R&D.
Investing in technology: It’s no secret Canadian industry struggles to invest not only in technology, but also research and development. And the plethora of government tax credits are less widely used than they should be.
Here are some highlights on Canada’s ranking, according to the Global Economic Forum:
- 12th out of 142 countries in global competitiveness (down three spots since 2009)
- 14 out of 17 countries in innovation performance
- 24th out of 142 for capacity for innovation
- 71st out of 142 for competitive advantage
Considering Canada’s education system has been ranked the 7th best in the world, these numbers are a major cause for concern.
And when it comes to productivity, technology doesn’t always mean super-cool new equipment for the shop floor. It can be the crafty software necessary to measure technological outputs.
“Canadian firms are pretty good at buying the boxes, but not so much when it comes to having the latest and greatest,” says Jim Milway, executive director at the University of Toronto’s Institute for Competitiveness and Prosperity. “Software does amazing things for productivity but it has to be used well.”
Canadian investments in technology have fallen 37 per cent in the last decade, according to Canadian Manufacturers and Exporters’ (CME) Invest to Grow report. That number is well-reflected by our dwindling position as a global innovator.
Milway says innovation starts with technology, but it’s all about how a firm gets there.
“People think that productivity and innovation are different, but they’re not,” he says. “Is there a way you can embellish your products so customers will pay more? A company needs to thoroughly understand where its money is coming from before it can improve its productivity.”
But to invest in technology accordingly, an arsenal of well-equipped minds are necessary, both young and old, experienced and inexperienced. Here’s why education is also crucial to boosting productivity according to Conference Board of Canada and how Lincoln Electric encourages its shop-floor employees to suggest process improvements.
Education: Canada has the seventh best education system in the world, according to the Global Economic Forum, yet we’re consistently falling behind in innovation and technology adoption.
Increased training may lead employees to become involved in developing processes that improve productivity.
Toronto-based Lincoln Electric, for instance, gives shop-floor employees the opportunity to contribute to new process development, says operation director Kendall Fullerton.
“That’s not only created relationships between our shop employees and management, but it’s also got those employees increasingly involved in how we produce our product,” he says.
He adds that reviewing those processes is also increasingly important when times are tough.
While at the height of the recession in 2009, Lincoln cut its production by almost 85 per cent.
“We were on the edge of survival, so instead of laying people off and shutting things down, we took that opportunity to align those operations processes,” says Fullerton. “We spent the time we needed to do those kinds of things to make sure our processes are running smoothly.”
Innovate, innovate, innovate: OK, let’s not revisit how Canada falls short when it comes to innovation, but the truth is that Canadian firms aren’t doing enough.
Milway says the government has done a pretty good job at showing Canadian businesses there’s a major capacity for innovation in this country and funding is there for the taking.
But, he says, to encourage a little more initiative, smaller Canadian businesses need to get a look at what global competition feels like.
“How you do come down to the risks you’re willing to take, the government programs you’re willing to look at,” he says. “The game’s changed and we haven’t. Canada never got scared by the Japanese like the U.S. did because we had the cheap dollar to fall back on, but now the dollar is too high to just sit back and watch.”
Indeed, focusing on innovation requires improving an already existing process. To do so requires a natural mix of both the old and new schools approaches in measurement to ensure focus is placed on processes in need of improvement.
Here are a number of ways businesses can improve measurement processes and innovate in the most productive way.
Measurement: Measuring your productivity should be a given. But if Canada’s current productivity slump is any indication, we’re clearly falling short on metrics.
Some ways to measure productivity include:
• The value-added method, which measures the wealth created by a company—income from sales minus expenditures on purchased materials and services. Simply, it measures the net output rather than the gross output of the business. It can also be used to measure the company’s efficiency.
• Labour productivity benchmarks, which refer to the volume measure of output and input. The volume measure of output reflects the goods and services produced by the workforce.
• Capital productivity, meaning the measure of how well physical capital is being used in providing goods and services.
• Manufacturing cycle efficiency (MCE): MCE = value added time / throughput (manufacturing cycle) time. Only process time represents value-added time. Throughput time = process time + inspection time + move time + queue time.
• Value stream mapping:a lean manufacturing technique that analyzes and designs the flow of materials and information necessary to bring a product or service to a customer. Value stream mapping creates a one-page picture of all processes that occur in the making of a product.
Outsourcing: Outsourcing has major benefits for small firms looking to implement new technologies and better their processes. While it may seem counter-productive to outsource a large part of a production operations, it can add value to a product or service while improving the bottom line of a business.
Outsourcing won’t work for everyone, but it does play a major role in:
• Cleaning up balance sheets and stabilizing cash flow;
• Optimizing strategy by determining whether or not certain operations are worth keeping in-house;
• Better supply chain management. Outsourcing allows the liberty of hand-picking the best suppliers in whatever the necessary field may be;
• Better access to state-of-the-art technologies without massive overhead costs;
• More flexibility when it comes to focusing attention on a businesses core operations.
But with the good comes the bad. Outsourcing can be risky as it often takes expertise out of a business, which could prove critical to a firm’s competitiveness. It also increases supplier dependence, which can be a critical risk.