Shannon MacDonald is on a crusade to improve productivity in the Maritimes, and she sees one shining example of progress -- the region’s startups.
The Managing Partner (Atlantic) of the professional-services company Deloitte, MacDonald has worked on the firm’s analysis of productivity in Canada, a study that includes some stark data for the country in general and Atlantic Canada in particular.
“Canadian productivity is starting to fall significantly behind our competitors,” MacDonald said recently during a lecture she gave for Dalhousie University business students. “This isn’t good, because it means my children and grandchildren will have less of a prosperous time than I’ve had.”
The Deloitte study shows that in the last 30 years or so, the gap in productivity between the U.S. and Canada has widened dramatically, so that an American worker now produces $59.23 of GDP per hour compared with $46.21 for a Canadian worker—a gap of 28%. This isn’t due to the recent strengthening of the Canadian dollar, says MacDonald, or the fact that our businesses are smaller on average, or that our workers are lazier. The main reasons are that Canadian businesses tend to be more risk averse and so invest less in measures that would improve productivity.
“We lack competitive intensity,” said MacDonald. “We have low trade intensity, and Canadian industry is more risk averse than other countries.”
During her lecture, MacDonald unleashed some depressing data on the sad state of productivity in this country. Examples: Since 2000, U.S. labour costs per unit of manufacturing GDP decreased 12%, while the figure rose 23% in Canada. In a list of 10 industrialized economies, Canada placed ninth in terms of exports by small and medium-size businesses (we narrowly beat Norway to avoid placing 10th).
Canada’s risk capital investment is less than half of the U.S. level and about one-quarter of the Israeli level - and on and on and on. The eastern region is performing worse than the rest of the country. “The Maritime Provinces are lagging in productivity, so the problem is more acute here, but we have all the ingredients to solve the problem,” said MacDonald.
In particular, she’s encouraged by what she sees in the regional startup community and what she witnessed at MentorCamp Halifax, when mentors from around the world came to the region to witness nine of our hottest tech startups.
Many came with low expectations but were surprised by the quality of entrepreneurship here; some even helped finance companies like LeadSift. “As these international mentors heard their stories, they said, ‘Hey, you guys are awesome!’ and started writing cheques,” said MacDonald.
In an interview after the lecture, MacDonald pointed out that several young startups are drawing in foreign investment, putting it into new products, and attacking export markets. She gave a shout-out to the universities for working with the young companies to commercialize research, and to courses like Dalhousie University’s Starting Lean for guiding young entrepreneurs.
The Atlantic Canada Opportunities Agency has been a catalyst for these startups, and MacDonald is pleased that the number of files on the desks of ACOA executives has been increasing.
While tech and other types of startup aren’t a large enough segment of the economy to dramatically improve macro-economic stats, they are leading by example. They’re showing that Canadian companies can invest in new technology, employ risk capital, and attack export markets. More companies need to follow their lead.
