I went to the OCRI execTALKS Business Forum yesterday morning to see Deloitte’s Bill Currie speak about their latest study and recommendation for the widening productivity gap that’s been all the rage in the media of late.  First off, the study and its results were comprehensive, and Deloitte has done an excellent job of relating the complexity of the situation and the solution.  In short, it’s not a simple fix (which, when I preambled a question to Bill, came out poorly–intimating that Deloitte has made it confusing; not so).  A few observations and comments about the presentation and the Canadian condition:

1.  Funny bit:  At one point Bill noted that although the productivity (and innovation) situation in Canada worsens, we are as a nation exceptionally productive at producing white papers.  Even funnier, when I was in university many years ago, and frankly up until last week, all policy planners and economists direly suggested that we HAD to be in the knowledge economy not the old and dirty production economy.  Apparently you have to be careful what you wish for.

2.  Early on in the list of eight issues, Bill identified that there was an eductional challenge particularly regarding risk, investment, economics, etc. That was great but might come up shy of the cultural change that’s required.  Specifically, there’s fewer risk takers in Canada and, more importantly, those among the risk averse are more decidedly risk averse than our American counterparts.  My suggestion is that educating about risk probably is not going to change that because it’s a cultural matter (see below).

3.  The recommendations are typically and, I suppose, necessarily top down from the organizational level.  Essentially, company leaders (CEOs and executives) and educational leaders (chancellors, presidents, and deans) and government leaders (policy makers of all stripes) need to enact changes.  That’s great, but return to point no. 2 and see if there’s a bit of a thin connection here.  Notably, what Currie identified was that the participant that wasn’t at the table was business.  Hmmm.

4.  During the Q&A a woman asked Bill what she could do now.  He glibly answered, “Go back to the office and buy a new machine.”  I loved it, particularly since it underscored one of the themes of their research was that Canadian businesses don’t invest in newer, more efficient production equipment at the same level as Americans and hence don’t benefit from the productivity gains.

5.  I noted that about 30 years ago I had participated in exactly the same kind of business congress with the same sort of hand-wringing about the same impending problems.  Then I asked Bill what he thought was the consistency between these two times.  Admirably, he dodged that specific question and noted that the structural and other specific conditions of the two times were different and that those challenges had been addressed by people at that time.  I was actually hoping that he would call out the fact (obvious in the first, “educational” point) that the consistency was Canadian business people and their conservative “milk the cow” business approach toward investment into productivity-enhancing tools let alone investment into innovation.  That didn’t happen.  My point is that while the times were different, the problem was ultimately the same.  A medical doctor would likely refer to the treatment of the structural issues then and now as a measure of “treating the symptoms not the disease.”  The disease, as it were, is cultural.

6.  At one point, talking about spending nationally, Deloitte makes the point that American spending on defense outpaces the next ten economies together.  BUT, when Deloitte, normalized the effect of the spending, they uncovered that there was no immediate correlation between the defense spending and the state of national productivity.  Bill made the point that it typically takes 20 years or so to commercialize defense development.  I said to him after the speech that if that is the case, we should probably be seeing a massive productivity increase as a result of the Reagan Star Wars work in the early 1980s any time now.  A pop that wouldn’t appear in Canada.

The entire study and the recommendations are decidedly made as a comparison to the United States of America.  Is this meaningful?  Yes, we lag the US even in the development of massive income disparity between haves and have-nots (although we’re catching up even there).  But, as Deloitte notes, the economies that are growing the fastest, becoming more productive the fastest, that are likely to overtake everyone are the Asian economies–particularly China and India.  Shouldn’t we, therefore, take some of our lessons from them?  Maybe not:  its easy to have 50% growth from 2-3 rather than from 1M – 1.5M.

All this said, the Deloitte study and Bill Currie’s presentation are very good.  Productivity in Canada, tied to lagging innovation benefit, is a genuine problem that is particularly interesting (let alone vexing), and I have more thoughts about it.  Stay tuned.