What is the strategic and tactical role for Canada’s Information & Network
Communications Technology Industry in Bridging the Canadian Manufacturing ‘Excellence
Gap’ in Productivity & Innovation?
Manufacturing Leadership Roundtable
Roundtable Summary – Bridging Innovation and Productivity
- Information Technology is seen as an obstacle to innovation as
well as a catalyst – IT urgently needs fresh ideas if it is to
have a more effective strategic role
- Participants view IT innovation as better incrementally, e.g. integrating
decisioning systems for more flexibility – rather than as a ‘big
bang’ creative breakthrough
- Quality and performance improvement can be innovative if they enable
future innovation – while cost cutting is not an innovation strategy
- CEOs need to earmark specific funding for IT innovation
- Culture is a huge issue, and not just for IT – getting a real
performance and innovation culture, addressing the middle management
crisis, and obtaining more employee engagement were flagged as critical
needs across the organization
Introducing the Innovation Gap
“Canadian industry has lagged behind its international competitors… There
is a significant gap with respect to innovation, including training, research
and development, investments in new technologies, and the commercialization of
new products… There has been less of a tendency to compete on the basis
of new products, new processes, and new skills, and a greater reliance on other
factors such as a low Canadian dollar, slower growth in labour costs, and strong
U.S. market demand. Those underlying conditions are now rapidly changing.” - “Manufacturing
20-20”, Canadian Manufacturers and Exporters, 2005
Manufacturing is a major force in Canada despite two decades of low-cost overseas competition. According to CME, manufacturing is 21% of
direct economic activity and 55% including goods and services purchased
in Canada. 70% of goods manufactured in Canada are exported, up from
25% in 1980. Manufactured products are 90% of Canada's merchandise exports.
Manufacturing productivity growth of 2% is comparable with other leading
Canadian sectors – but modest by global marketplace standards,
especially against the Far East where wage rates can be one-twentieth
those in Canada. Given Canada’s competitive handicap on labour costs,
Canada must depend on innovation to compete in the global economy.
How is Canada doing on innovating? Not as well as we might hope – Canadian
companies invest only 43 per cent per worker of what U.S. companies spend
in information and communications technology, according to The Information
Technology Association of Canada. Statistics Canada reports labour productivity
has been flat in Canada for more than two years, compared to single digit
growth in the U.S. and more in some Far Eastern competitors.
Against this background, 75 people met on October 6 at the Richard Ivey
School of Business for the Manufacturing Leadership
the Gap.” They represented a cross section of Ontario industrial
and product manufacturing, both large companies and small. The question
on the table was:
What is the strategic and tactical role for Canada’s Information & Network
Communications Technology Industry in Bridging the Canadian Manufacturing ‘Excellence
Gap’ in Productivity & Innovation?
A nine person leadership panel – manufacturers, technology vendors,
and consultants – started the day discussing experiences of using
technology to improve manufacturing competitiveness and closed the day
by summarizing key points. In between, all participants joined in three
breakout sessions: knowledge-based manufacturing, the Lean business process,
and innovation in manufacturing.
A recurring theme throughout the day was facing low cost competition
from China, India, South America, and elsewhere. CATA said recently that, “looking
at a pure cost, Canada can’t compete at the level of India or China;
when you move up in the engineering class or the highly innovative manufacturing
talent, Canada ranks right up there.” While Roundtable participants
discussed productivity more than innovation, both are highlighted in
the rest of this Report.
Innovation for Competitive Advantage
A discussion of innovation could usefully be supported by a definition. “Being
an innovator in the global marketplace requires a strategy of growth,
melding research with engineering on products – whereas many so-called
productivity efforts are really strategies of shrinkage,” according
to Chris Piper, Associate Professor and Faculty Director of the Ivey
Operations Program at Richard Ivey School of Business.
Quality techniques such as Six Sigma and TQM were once innovative but
today are so widely adopted as to no longer be competitive advantages.
Louis J. Vesprini, Stelco CIO, defined this as the distinction between “ongoing
quality or productivity improvements that are ‘price-of-admission’ and
revolutionary innovations like outsourcing.”
To qualify as truly an innovation, it needs to be immense, inimitable
and rare – meaning that breakthrough innovations are not easily
achieved whereas productivity, being more incremental, is an easier option.
Given the choice between innovation and productivity, many participants
talked more about productivity. However, this raises a question as to
whether productivity performance improvement can generate enough of a
competitive advantage to do more than just keep pace with quality and
cost improvements in other countries. It also raises a serious question
as to how Canadian manufacturers are going to develop differentiated
enough products and services in the future.
For those looking for innovation, the search starts at the strategic
level. Gerry Cooper, Director of Innovation Ontario Region, Industry
Canada, says Dofasco’s success compared with Stelco is attributable
to a formal innovation strategy – prompting a lively discussion
from the floor by Brian Mckeown, Stelco’s manager of Systems Integration,
about Dofasco’s outward-looking perspective whereby they search
the world for best practices they can bring back to Canada. Garth Dean,
Director of Microsoft Business also sees innovation as a management practice. “Adaptive
organizations are better placed to be innovative,” he believes.
For Walter Lowes, Manager Sales & Marketing, Siemens Business Services
Canada Inc. “Canada’s ethnic diversity still gives Canada
a significant advantage in providing customer support.” This points
to the wisdom of selectively ‘servicizing’ products into
solutions in order to help customers become more competitive in their
Can a short term innovation focus be successful? A panelist evidently
concerned about short term survival in an era of rapid change and win-at-all-costs
competition makes a well-argued case for the short-term perspective.
However, the overwhelming view is that we need to think through longer
term implications of performance, investment and scale – especially
when some innovations require multi-year acts of faith to develop them
and bring them to market.
In the end, the participants conclude that innovation is different for
every company. They clearly understand what success means in their own
markets. Indeed, the panelists’ organizations seem generally to
be holding their own in their respective fields.
IT should Drive Innovation, but Often Does Not
Information technology can be a powerful innovation and change enabler,
especially when used to foster adaptive processes. However, a surprising
number of participants see IT as a substantial obstacle to innovation
and change. IT, they say, takes too long to respond to requests and
proposals for innovation, and often is not proactive in leading the
The widespread perception is that IT has failed to take on the role
of innovation driver. This is one of the most crucial points to come
out of the Roundtable.
Several participants characterize IT as being averse to risk – seeking
uptime stability rather than supporting innovation. It seems that in
many Ontario manufacturers, innovative managers bypass IT and work with
the operations executive or the CEO in upgrading technology.
The ‘IT Innovation in Manufacturing’ executive roundtable
hosted by Siemens after the Leadership panel discussion reinforces this
point – “the Manufacturing VP rather than IT should talk
to the CEO about the IT solutions needed”.
Not only is technology innovation in need of renewed IT focus, it is
also essential to fund it systematically. It is shocking that less than
half of the Roundtable participants have formal innovation funding in
place. This disclosure, associated with the perception of IT as a barrier
to innovation, is significant to continued manufacturing growth. A much
more organized approach to innovation is clearly needed in many Ontario
The concern about IT and innovation is evidently deep-seated and pervasive.
What causes IT to be the obstacle? The consensus is that an inappropriate
culture is the culprit. The subject of culture is raised later in this
Manufacturing and IT Innovation
“A history of technology innovation is a history of defense against
low-cost international competition,” says Tim Armstrong, Vice President,
Corporate Systems of Canadian General Tower, an automotive supplier. CGT
has replaced several legacy systems with a single enterprise resource planning
system (in this case, Microsoft’s Axapta software) innovating in
their supply chain to reduce costs for everyone for much more intelligent
prioritization, decisioning and re-tooling on the fly. The automation
has brought routine costs down.
Is this true innovation? Well, yes – especially in the sense that
future innovation can best occur with a flexible technology platform
and information base in place.
Different aspects of manufacturing management are stressed by different
companies. For example, 3M have improved IT process control and then
have worked with academia to refine the ratio of product quality to cost,
as recounted at the ‘IT Innovation in Manufacturing’ roundtable.
Savino DiPasquale, GlaxoSmithKline’s CIO says that because “GSK’s
business is innovation intensive … considerable attention is paid
to project management.”
Roy Boorsma, Assistant General Manager of Toyota’s Information
Systems Department says “Toyota looks at IT holistically, identifying
the right information and elevating it to a higher capability – then
goes on to look for next opportunity… Toyota socializes innovation
ideas widely so everyone knows the innovations in process.”
Cognos’ multilingual product software development is a good example
of technology driving innovation. Software design specialists recognized
a lack of available additional programming budget for a multilingual
product. Cognos designers took the initiative to deconstruct the programming
process. They then automated it, increasing productivity by a factor
of 15 and winning a Canadian Productivity award.
A second breakout session, hosted by Adobe, poses questions about the
direction the knowledge-based industry is taking. Participants want more
consistency – for example, which CAD standards to adopt. It is
also evident that many participants are giving high priority to getting
the shop floor to deal with complex tools, and want help in tapping into
shop floor knowledge of better ways that existing engineering processes
may prevent from coming to light.
Lean is not Mean
The Lean business process roundtable, hosted by Microsoft, emphasizes
that Lean is less about reducing transaction administration and workforce
costs, and more about continuous improvement. The goals are to drive
waste out of business – and to grow the business in order to
redeploy ineffectively used resources.
A culture of Lean must come from the top and spread progressively across
the organization, celebrating successes along the way. Lean is a journey
that is never completed.
Lean is evidently well entrenched in Ontario manufacturing. For example, “before
the rise in the Canadian dollar, only a third of Sheridan College’s
advisory companies saw Lean as appropriate to include in the Sheridan
applied engineering program,” according to Gary Closson, Sheridan’s
Dean, Applied Computing and Engineering Sciences. Today, there is rapidly
growing interest in sharing Lean best practices.
Spar says that Lean is a passion for them, especially standardizing
their processes, encouraging R&D, and spreading the cross functional
team gospel. As a result, they are correcting a perception that ‘unique’ is
incompatible with ‘Lean.’
To overcome supply chain resistance and make Lean work with customers
that are not Lean, Toyota conducts ongoing shop floor training and
discussion to make problems visible to everyone.
David Wood, the President of W. C. Wood, a refrigeration appliances
manufacturer, practices continuous improvement with a focus on actions,
especially in redirecting the business and revenue model around service,
not just products. Several companies who involve their customers in the
Lean process advocate meeting face to face in your plant or theirs to
get new ideas. A printing company provides Lean prices for standardized
offerings and differentiated pricing for finer tolerances.
A small liquid filtration systems company with worldwide customers has
moved from being purely a job shop into providing customized specifications.
They put engineering intelligence “into a box, reducing high turnover
in the engineering group, shortening the design process, making time
for more R&D, speeding up design quotes, and improving their presentations
Steve Fisher, President of Boeing Canada, emphasizes the importance of
evangelizing the reasons for the hard work involved in Lean, especially
when implementing it in a unionized environment.
Communication with customers and suppliers
There is general agreement that manufacturing organizations should listen
more to their customers and suppliers – and also to employees.
Organizations must ask questions and engage in dialog, not just be
the recipient of information. For example, to find out customer expectations, “put
yourself in the customer’s shoes as you test customer-facing
processes to see how they perform for the customer.”
Most participants agree that customers should be involved in innovation,
for example putting manufacturers in touch with super users, and helping
to drive costs out of the customer’s value chain.
The participants see a variety of opportunities for performance improvement
with suppliers. Several participants are seeking to transform supplier
relationships by making them innovation partners and sharing risks. Jim
Merry, Senior Business Development Manager, Adobe, cites the example of
Daimler Chrysler “publishing the innovation they expected from
their suppliers in a document that is made available to suppliers.”
The opinion was expressed that it is hard to get the Voice of the Customer
paid sufficient attention in a large organization – and it is clear
from the ensuing discussion that several of the participants are indeed
experiencing that. The suggestion is to put call centre people more into ‘customer
experience’ conversation with customers.
Leveling the Playing Field
Other countries promote their manufacturing sector more, according to
several exporters. However, it is refreshing not to hear a general
call for government support as might have perhaps been expected. The
focus is more on what we can do to help ourselves, which is encouraging
from an Ontario manufacturing innovation viewpoint.
However, government help is seen as needed to prevent intellectual property
being copied by foreign competitors. This is particularly a danger in
outsourcing core competencies, especially when Canadian manufacturers
are being forced by cost pressure to outsource more of their manufacturing
and management processes – away from their Canadian suppliers.
This coincidentally helps to perpetuate the spiral of manufacturing rationalization
A second area where government help is identified as a need is in reducing
the environmental, legislative and fiscal disparities with other countries.
The participants see foreign competitors getting advantages from better
tax treatment and being held to lower environmental standards in their
home countries. One company is at a 22% tax disadvantage against importers.
The rising Canadian currency is obviously a major concern, compounded
by the rise in energy costs, although it must be noted that the currency
rise has been mitigated by cheaper capital.
The Innovation Culture Challenge
Getting employees engaged in innovation, especially in IT, is called
out as a crucial issue that is only in the very early stages of resolution.
This does not surprise this writer – who, like many who work
in the field of performance management and organizational development,
sees an increasing number of organizations today becoming extremely
concerned about what it takes to become truly innovative.
Many participants speak of a “culture of innovation.” But,
what is it and how can it be achieved? An innovation culture has proved
very hard to articulate, harder to achieve, and even harder to sustain.
This is evidently the case with many of the participants who, like a
growing number of organizations, are adamant that achieving a high performance
culture as is an urgent strategic need. However, the message from the participants
is quite clear: few of them can point to sustained results, experiencing
instead among other things mixed leadership messages, employee dissatisfaction,
and a continuing struggle to come close to performance goals consistently.
The elusiveness of an innovation culture is illustrated by the variety
of ways in which participants refer to it, ranging from team sharing
of ideas – to holding annual innovation education boot camps – to
using measurement to change behavior – to making front line supervisors
better coaches of their teams.
Moreover, the generally short term culture of North America is further
inhibiting innovation. A participant who has worked in Japan notes that
for Japanese companies Six Sigma black belt status has only one step
and that it can take as long as two years or even more to reach it. In
contrast, in North America there are several intermediary stages because
we are more short term in our thinking and need frequent gratification.
Leadership is mentioned frequently in the context of the CEO needing
to instill an innovation mindset across the enterprise and have it followed
consistently. What kind of leadership will take Ontario manufacturers
to a position of advantage against global competition? Most participants
agree that leadership and an innovation culture are needed along with
more engaged employees, but it appears to be a lot more difficult to
articulate how to get sustained results.
Drawing on the roundtable comments, several suggestions for creating
a more effective culture of innovation and performance can be advanced:
- Take a top-down approach to culture change, leading by example
from the top
- Mentor middle managers, supervisors and staff so as to take into
account their own goals as well as the organization’s
middle managers acquire a proactive management mindset that will communicate
down to the shop floor – for example, Toyota
recruits carefully, seeking out team players who will thrive on open
communications and opportunities for personal growth
- Foster innovation
through leadership by creating a sense of urgency and awareness and
find a culture change rallying point – creating
a “clear strategy and a shared sense of desperation,” or “taking
a ‘create a crisis’ approach such as reducing the department
first before reducing workload which inevitably leads to resistance,”
or not hiring more people to handle growth
- Be sure to reinforce loyalty to employees, setting a goal and
rewarding them when they achieve it as Toyota does;
Of course, it is easy to suggest these things, quite another thing
to implement them successfully. The comments in this Report indicate
that only some of the participants are making measurable progress
towards an innovation culture.
In this regard, the foregoing principles can be translated into some
additional practical suggestions mentioned by participants, as follows:
- Don’t be afraid to experiment – it is generally agreed
that the CEO should tolerate calculated risks, and not be too ready
to hand out punishment for initiatives that fall short of expectations,
in order to encourage a continued flow of innovation – bring
recent graduates into the innovation team to provide access to fresh
ideas free of preconceived notions
- Demonstrate patience when developing innovations and bringing them
to market, because many innovations typically take multiple years to
develop to a stage of market readiness
- Encourage the CEO to create an Office of Innovation that fosters
innovation and creativity and incorporates innovation into normal
business thinking – one
participant’s CEO, seeking to reverse a history of adversarial
management, has incorporated ‘innovation culture’ into
the mission statement and tasked the HR manager to implement an innovation
reward system; he is now discovering that employees do want to be
engaged and do appreciate the shift
- View people as the seeds of innovation and deeply involve them
in innovation opportunities through a teaming approach
- Create a culture
in which some risk taking is permitted, if necessary, following the
Japanese practice of simulating changes before implementing them, to
mitigate implementation risk – being sure to document
successes and failures and to gather the lessons from them, taking
the example of the U.S. military in holding after-action reviews recognizing
that even successful projects can be done better
Microsoft actively creates an environment that lets ideas flow, fosters
energy, and makes room for mistakes. Similarly, Adobe continually engages
its workforce, providing the right context, identification of critical
areas, and ongoing measurement. For Siemens, culture is less of an
issue than optimizing the support that IT provides for innovation.
By addressing organization-employee strategy and goal alignment, a strategic
and sustainable shift upwards in performance culture can be brought about.
Those who are doing this successfully generally find that innovation
is not far behind.
A relatively small but growing group of organizations are making real
progress in creating a shared learning environment and achieving sustainable
The topic of bridging the Canadian manufacturing ‘Excellence Gap’ in
productivity & innovation is not an easy one to resolve, let alone
in just a day of discussion. While productivity is more in evidence than
innovation, it is a tribute to the organizers and participants that tangible
evidence of innovation in Ontario can be detected in the day’s
From the comments about barriers to implementing manufacturing improvements
and thus catching up with global quality and performance standards, one
can conclude that many Ontario manufacturers are still preoccupied with
overcoming resistance to change and catching up with foreign productivity.
They are still coming to grips with true manufacturing innovation.
Finally, any conversation is only as good as the participants and panelists.
The Access Group thanks the executives from the organizations listed
below for taking time from their schedules to add to our collective understanding,
and for the enthusiasm they brought to the conversation. Thanks include
the Richard Ivey School of Business at The University of Western Ontario
and our sponsors, CATAAlliance, Microsoft Canada,
Siemens, Adobe, and Edge Magazine.
October 6, 2005
Canadian Information Productivity Awards
Richard Ivey School of Business
Husky Injection Molding
Siemens Business Services Canada Inc.
Microsoft Canada Co.
Taimour Zaman (firstname.lastname@example.org): founder of The Access Group,
and specialist in customer executive education sessions and qualitative
research for industry and technology companies.
Rick Wolfe (email@example.com): founder of PostStone, a consultant
in brand research, customer advisory processes, cultural change, new
product development, and kitchen table conversations.
James Povec (firstname.lastname@example.org): provides executive search advisory
services and coaching, founder of ImproveNow.com, improving work lives,
job satisfaction, and knowledge worker retention.
Andrew Wright (email@example.com): Director of the Executive Development
Programs at the Richard Ivey School of Business, responsible for marketing,
client relations, and senior development programs.
Robert Angel (firstname.lastname@example.org): President of The Gilford Group
Limited, subject matter expert in customer marketing strategies, performance
management, culture change, and organizational development.
Allprint Ainsworth Associates
Babcock and Wilcox
Bangor Metals Corporation
Brock Electronics Ltd.
Business Propulsion Systems Inc
Canadian General-Tower Limited
CCL Industries Inc
Dare Foods Limited
Essilor Group Labs
Ford Motor Company
Future Design Inc.
Glaxo Smith Kline
Husky Injection Molding Systems Ltd.
Impacto Protective Products
Jones Packaging Inc
L3 communications, Spar Aerospace Limited
MaGee- Rieter Automotive
Matcor Metal Fabrication
National Steel Car
Nutech Group of Companies
Omstead Foods Ltd.
Ontario Die Company
Richard Ivey School of Business
Siemens Business Services
SMT Industrial Supply Inc
Superior Machine and Tool
Valiant Machine & Tool
W. C. Wood Company
© The Access Group, October 2005,
All Rights Reserved. Reproduction without this copyright notice is
prohibited. Opinions expressed herein reflect judgment at the time
of writing and are subject to change. Registered trademarks are the
property of their respective companies.