The challenges Canada faces in taking full advantage of the global trade opportunities digitization presents are clear. A recent synthesis study (drawing on a range of studies including those from the Council of Canadian Academies and the Institute for Competitiveness and Prosperity1) establishes clearly that Canadian businesses under-adopt information and communications technologies relative to their peers, underperform on R&D and innovation, and lag in productivity. Moreover, the study establishes that Canada lacks a significant number of flagship information and communications technology companies, is subject to shortages of highly skilled workers, and lags in its digital infrastructure.
So we know what Canada does not do well. While we must dig into the reasons behind these deficiencies, and what we can do to address them, we should also focus on Canada’s strengths. What DOES Canada bring to the table when it comes to taking full advantage of the global trade opportunities digitization presents?
Strengths in Digital Activities
The same synthesis study that identifies Canadian deficiencies also points to a number of areas of Canadian global strength in developing and selling digital technologies, including:
- wireless technologies and applications, including Wi-Fi and WiMAX;
- satellite communications;
- digital media and content, including animation and video games (e.g., Montreal’s Ubisoft);
- mobile content for wireless handsets;
- business software and computer services applied to supply chain management, information technology security, and e-commerce; and
- e-health technologies, including electronic health records and diagnostic digital imaging tools.
With a relatively well-educated population, and a vast geography that requires Canadians to communicate across vast distances, it is not surprising that Canada has developed areas of relative strength in such digital activities.
Strengths in Using Digital Tools in Other Activities
When we think about this country’s global strengths in the digital economy, we typically think about digital activities. But digitization allows us to benefit across all economic activities, rather than just specifically “digital producing” activities. What are Canada’s areas of potential strength in using digital technologies to open up global trade opportunities in other areas, including resources, services, and manufacturing?
These “digital using” areas of potential strength may not be as obvious as, say, digital media such as video games. So a good place to start might be Canada’s traditional areas of relative strength. To take what many would consider a “non-digital” example, let’s start with Canada’s relative strengths in resource extraction. As previous parts of this series have discussed, digitization now makes it easier to sell services globally and provides the tools to more effectively coordinate global supply chains. This means Canadian businesses can use digital tools to be more effective at, say, mining activities in global markets, as well as to more readily sell their resource-related services in global markets.
Another example of an area of relative global strength are Canada’s banks. UNCTAD consistently ranks Canadian banks among the most globalized financial services companies in the world.2 Canadian banks have been among the most resilient banks in the face of the recent financial crisis. They also benefit from a small number of players in the sector. This both allows them to invest heavily in technologies - such as those for online and mobile banking - as well as test them extensively on a large group of customers. (Canadians are relatively frequent users of online banking - and are in fact more likely than Americans to adopt online banking.3) Canadian banks can leverage this experience into new markets, where they are already actively expanding. This country could similarly build on its professional services strengths in other areas in which Canada has recognized global expertise, such as engineering and waste management services, now that the costs of coordinating such projects globally has fallen dramatically in the face of digital technologies.
A third example is Canada’s traditional expertise in making cross-border value chains work, as this country has done for decades over the Canada-US border. Canada could become a leader in cross-border logistics, adopting technologies and setting leading-edge practices that allow for better coordination of global value chains.
A final example of a relative strength - one that we do not often view as a strength - could be the pre-eminent role played by smaller businesses in the Canadian economy. Digitization makes it easier to break down production into smaller tasks and coordinate globally. This means that there are now many more opportunities available (in addition to fierce competition) for smaller companies to link themselves into global value chains. Smaller companies with a world-leading product or service may not have been able to tap into global markets before. Now, if they identify and fill a niche, digitization allows them to more easily go global. Such a strength cuts across a range of economic activities. An upcoming Conference Board publication will identify best practices and provide more insight into smaller business strengths in going global using digital technologies.
These ideas are only the tip of the iceberg in terms of Canada’s potential to use digital technologies to tap into growing international markets. But to seize on these and myriad other areas of future promise, businesses will need to more boldly invest in digital technologies and related skills than they do now.
This series on “Trading Digitally” comes from the Conference Board’s International Trade and Investment Centre. The comment period on this series is now closed. The series will be revised based on comments received and published by the Conference Board in spring 2011.
1Institute for Competitiveness and Prosperity. Today’s innovation, tomorrow’s prosperity. Task Force on Competitiveness, Productivity and Economic Progress. Ninth annual report, November 2010. pg. 38.
2UNCTAD, World Investment Report (2010). Country Fact Sheet: Canada.
3Goldfarb, Avi. Understanding differences between Canadian and American Internet Use: Geography and education. February 2009.
Blogs in this series