Like Hockey Canada in the late ’90s, our industrial policy needs to refocus on the fundamentals

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Imagine it’s late February 2022 and the Winter Olympics are over. Overall, Canada does alright, but the men’s ice hockey tournament is a disaster. The country’s collection of professional superstars finishes outside the top eight, never mind winning a medal.

How would we respond? History suggests we’d stop everything and come up with a plan. A few inglorious years, culminating in a team that despite including Wayne Gretzky failed to win a medal in 1998, prompted Hockey Canada to hold a summit on the state of the game the following year. That led to a bunch of recommendations, including better mentoring of coaches and a greater emphasis on practising and skills development.

The fundamentals, in other words. Hold onto that idea. It will be important later.

Let’s step back into the present. Canada is stuck in a rut far more significant than the one that sidetracked the men’s hockey program in the 1990s. Despite possessing all the tools required to be a world-beating economy, Canada ranks 17th on the Global Innovation Index and 17th on Huawei Technologies Co. Ltd.’s Global Connectivity Index.

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It’s a failure on par with suddenly sucking at hockey. Bigger economies such as the United States, Japan and Germany score higher, as do some of the famously competitive Asian tigers. But so do smaller northern European nations such as Sweden, Finland and Norway. This is where the excuses run out. As Guillaume Bazinet, chief executive of technology consultant FX Innovation, asks in a new paper: Why should Canada lag behind the Scandinavian countries?

No disrespect to those fine places, but it’s an excellent question. Bazinet isn’t sure he knows the answer, but he’s taken the trouble to think it through more thoroughly than many of his peers in the Canadian software industry. He’s written a 37-page white paper — From Hype to Results — that FX Innovation, which specializes in helping companies join the cloud, intends to publish later this month when it launches a new training program in concert with the University of Ottawa.

We focus on the podium without clearly thinking about what it takes to get there

“My understanding is that the governments of those countries have really, really clear strategies around the transformation of the economy,” Bazinet said. “Aligning university and college. Aligning, also, any type of economic tools they could have to make sure that the country and all their businesses have a plan.”

Canada has strategies. It also has plans and initiatives. Dozens of them. And that might be a big part of the problem. Policy-makers lack focus and, as a result, business and higher-learning institutions are out of sync. We’re chasing without a clear sense of where we’re trying to go. “It’s not fair to say that we don’t have a strategy,” Bazinet said. “It’s just that we too early put a focus on an end result.”

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Put another way, we focus on the podium without clearly thinking about what it takes to get there. The best example is the fascination with artificial intelligence (AI), the computing revolution that programs machines to learn and process data on their own.

Thanks to luck and generous public funding for research, Canadian universities became the home for some of the world’s most important AI scientists decades ago when no one else would back their work. That gave Canada an edge when AI went mainstream. Companies such as Google LLC and Amazon.com Inc. set up shop here to exploit that talent. Governments have spent hundreds of millions of dollars to maintain what they see as a competitive advantage.

AI is amazing and Canada is fortunate to be in the premier league. But AI is what Bazinet calls a “general purpose technology,” just like electricity and the automobile. Electricity was life altering; it was also essentially useless until governments and industry put the infrastructure in place to power homes and factories. The internal combustion engine didn’t amount to much until there were assembly lines and highways.

AI is the same. It can do extraordinary things for productivity, but only if people use it. Its potential will only be fulfilled when users can access affordable computing power, super-fast internet, a deep pool of talent that knows how to make it all work, and widespread demand for the resulting services.

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Canada is lacking all of those things. The focus of policy-making for AI has been to support research. The limits of that approach were exposed last year when Santa Clara, Calif.-based ServiceNow Inc. purchased Element AI Inc., the Montreal-based software company that had become the flag carrier of Canada’s ambition in the field.

Element struggled to generate demand for its services. Its home market wasn’t ready and it lacked the wherewithal to compete with more diversified technology behemoths for international customers. Element is now a research shop within a big American software maker.

“It’s a new digital era and AI is part of the equation,” Bazinet said. “But AI by itself doesn’t live on without the proper technological infrastructure to support it. AI is an add-on, not the foundation.”

Like Hockey Canada at the end of the 1990s, Canadian industrial policy needs to refocus on the fundamentals. The big providers of cloud storage and services — Amazon, Google, Microsoft Corp. and IBM Corp. — have done for data what Henry Ford did for automobile production in the early 1900s. Those companies have already claimed the big prize.

There will be a second wave of winners: those who take maximum advantage of the public cloud. Rather than getting caught up dreaming about the kind of future Canada’s best and brightest might create, we need to make sure they can connect first. That will require an emphasis on connectivity and training an army of software engineers who know how to do more than build smartphone applications.

It sounds boring, but the stakes are huge. “We are at an inflection point,” Bazinet said.

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