Federal Budget Innovation Goals and What’s Next for Recovery

COVID-19 fast-tracked innovation and digital adoption in Canada. See how the Canadian federal budget plans to support digital transformation, and how culture, customer centricity, and AI will be key differentiators for companies during the recovery with IDC's Mark Schrutt

Innovation and Digital Adoption, a Government Paramount

More companies went out of business in the second quarter of 2020 than at any time in the previous decade. The bigger news was the opening of new businesses, which since Q3 of 2020 has also set all-time records. This trend will most likely continue.

Digital advances will vary by industry and industry segments, but change is the constant. Auto dealers that let you schedule test drives to come to your home and fully digitizing the buying process (no haggling!) will be commonplace. Neighborhood gyms will open, with hybrid on-line and at-home workouts. The wealth of data that clubs collect may not position them to unseat Peloton, but definitely will allow them to better know and engage with their customer.

These themes were picked up on by the Federal Budget that was released last April. The budget called out Digital Main Street, a GTA-based not-for-profit. Founded in 2018, their mandate is to "help small businesses grow through the adoption of technology". Digital Main Street really hit its stride during COVID-19, as it engaged with well over 10,000 small and mid-sized businesses. "We are working with companies to set up their e-com sites, improve their social media presence, and streamline back-offices," managing lead, Darry Julott told me. Through its FutureProof program, Digital Main Street has worked with impacted industries such as restaurants to develop meal kits, virtual art galleries, and live streaming for music venues.

Digital Main Street is beyond grassroots. They have worked with 45,000 businesses in close to 400 Canadian cities and towns. Their platform combines 160 employees, local economic development agencies, chambers of commerce, and educational-based innovation hubs. It has been one of the best-kept secrets until last week's budget. The Federal government took a page from the Digital Mainstreet platform with its C$4 billion, four-year Canada Digital Adoption Program (most government programs go for five to ten years in length – four years demonstrates urgency on the government's side). The budget also added C$1.5 billion in tax savings for technology transformation in corporate Canada.

Enabling small and midsized businesses to adapt to change and innovate are lynchpins in the Federal budget. The budget includes over C$15 billion dedicated to innovation, surpassing the high watermark of 2018's budget, which focused on cyber-security and research council enhancements.

The Federal government will now account for more than half of the C$35 billion spent annually on innovation in Canada. The government has a role in innovation. It actually starts with applying new and improved ways of governing and providing a better citizen experience. Investments in innovation generate higher GDP and create stable, high-paying, and in-demand employment. This, along with commercializing new products and ideas, is the genesis of the Supercluster initiative.

Yet providing funding to directly enable the digital transformation of business has been a very controversial step the government hasn't really taken until now. The 2021 budget crossed this line. The federal government's position is that the long-term strength of the Canadian economy relies on digital investments, along with other budget priorities of resiliency in the biomanufacturing sector and a more environmentally friendly future (combined, these three areas added up to C$15 billion in new spending).

How will Canadians Respond to the Innovation Challenge

The next step won't be taken in Ottawa. It may lead back to main street, but will be played out on the digital playing field. It will be centered around the customer and the use of data and AI to establish relevancy, develop a personalized and better customer experience that will surface as a competitive wedge. It will also be accompanied by a culture that believes that doing right is good for their customers, employees, and bottom line in the long term.

For many, COVID has been a fight for survival. The recovery will be about reinventing ourselves. There is a lot to pack into the innovation arsenal in the next few years. Ultimately, innovation is about improvement and means change. Our products and services are not perfect, and market share is not a given. Peloton is not perfect, nor is dealing with getting to the club after work or the frustration of finding an open spot in a class. My kid tells me the virtual classroom is full of technical difficulties that can be improved upon. The difference between buying a car from on-line dealers like Carvana and your local GM dealer is night and day, but both have their drawbacks.

There must be a better “in-between” from what we had prior to COVID and the hastily rolled out solutions over the past year. The next stage of innovation will provide the opportunity to make these things better, improve on what others are doing, and prepare for the future.

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International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. To learn more about IDC Canada, please visit www.idc.com/ca or follow on Twitter at @idccanada and LinkedIn.



Cristina Santander

Manager, Marketing & Customer Experience