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Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
Deloitte: The Future of Productivity
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Deloitte: The Future of Productivity

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Presented at the Halifax State of the Economy Conference …

Presented at the Halifax State of the Economy Conference

Is there something about Nova Scotia’s DNA that hinders the development of business-led clustering and achieving greater productivity?

Canada now faces a significant and growing productivity gap relative to the U.S., which will threaten our long-term prosperity. Low productivity is, and will continue to be, the most significant threat to Canada’s standard of living. As a result, Deloitte has invested significant time and energy in the study of Canadian productivity.

One of the findings was that in regions with cluster characteristics, business-led incubator and innovation parks can be strong catalysts for economic development. There are several leading incubators gaining global recognition.

What is hindering Nova Scotia from developing a similar clustering and innovation culture?

Published in: News & Politics, Business
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  • 1. The future of productivityAn eight-step game plan for CanadaGreater Halifax PartnershipState of the Economy ConferenceMay 24, 2012
  • 2. Canada now faces a significant and growing productivity gap relative to the U.S.,which will threaten our long-term prosperity Over the past 30 years, productivity growth The period from 2001 to present has been most has taken divergent trajectories in Canada and challenging, as Canadian productivity growth has the United States trailed most OECD nations GDP per worker, indexed to 1981 baseline Labour productivity CAGR, 2001-2009Sources: Centre for the Study of Living Standards, OECD1 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 3. Within Canada, Nova Scotia helps drive productivity growth but lags in its overall level of labour productivity Provincial Productivity Level, Productivity Growth, and GDP 55 Canadian Productivity Growth = US Productivity Growth = 2.0% 0.8% Labour Productivity Level, 2010 ($/hr) 50 AB NL 45 ON Average Canadian Productivity Level = $42/hr SK 40 BC QC MB 35 NS NB Legend PEI % contribution to national GDP 30 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Labour Productivity Growth, 2000 - 2010Observations• Atlantic Canada has the strongest productivity growth, led by Newfoundland, despite representing a small shares of Canadian GDP © Deloitte & Touche LLP and affiliated entities. Sources: Statistics Canada
  • 4. Deloitte believes that low productivity is, and will continue to be, the mostsignificant threat to Canada’s standard of living Is this a problem for Canada? No No Yes Yes Canada’s unemployment rate While the average number Canada’s productivity growth GDP per capita is has not surpassed 12% in the of hours Canadians work has has been declining in recent increasing at a slower rate past 40 years, and has hovered decreased slightly over the years on both an absolute than many of our peers between 6% and 9% in the past 30 years, declines are in basis and relative to its peers past 10 years line with the OECD averageSources: OECD, Statistics Canada3 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 5. We have identified six issues that Canada should focus on addressing in order toclose the productivity gap4 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 6. Although some differences exist, Canadian and American executives identifythemselves as having very similar levels of risk tolerance How firms characterize their risk tolerance levels 46% 43% 31% 25% Canada 13% 13% 13% United States 11% 2% 3% Very low risk tolerance Low risk tolerance Moderate risk tolerance High risk tolerance Very high risk tolerance “Risk Avoiders” “Risk Takers” Percentage of total firms Percentage of total firms Canada U.S. Canada U.S. 54% 59% 46% 41%Source: Deloitte Research5 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 7. However, when measured against Deloitte’s Executive Risk Behavior Index, we seethat, in practice, Canadians are much less willing to take risks The Deloitte Executive Risk Behaviour Index 57.7 47.4 Canada United States Observations • Based on a survey of 900 Canadian and American business leaders, Canada scored a 47.4 on the index vs. the American score of 57.7 (maximum score of 100) • The Deloitte risk behaviour index was constructed based on a wide array of factors representing a firm’s actions, including a firm’s risk evaluation practices, involvement in research, development and innovation, and dependence on government support • The index has been adjusted to account for national differences in the current/future state views on macro-economic conditionsSource: Deloitte Research6 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 8. This is illustrated by behaviours like Canada’s lower R&D participation rates, aphenomenon that is largely driven by Canadian “risk avoiders” The overall rate of R&D participation of surveyed firms Risk avoiding Canadian firms are less likely to conduct in Canada is lower than in the United States R&D than their American counterparts R&D participation rate R&D participation rate “Risk takers” “Risk avoiders” 100% 100% 90% 90% 86% 84% 83% 81% 80% 74% 80% Percent of Survey Respondents Percent of Survey Respondents 69% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Canada United States Canada United States Observations • While overall participation in R&D is lower in Canada than in the United States, the difference is most pronounced among firms with “risk avoiding” business modelsSource: Deloitte Research7 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 9. Canadian firms also exhibited a far greater reliance on government incentivesthan on market factors to induce productivity-boosting behaviours like R&D Government factors Market factors Firms “Somewhat Likely” or “Very Likely” to increase Firms “Somewhat Likely” or “Very Likely” to increase R&D expenditure on R&D if offered tax credits to do so expenditure due to improved intellectual property protections 74% 68% 64% 60% Canada United States Canada United States • Canadian firms are less averse to tax credit-induced • U.S. firms are more likely to expand R&D investment R&D expenditure than U.S. firms as a result of better IP protection Firms “Very Likely” to increase R&D expenditure if offered Firms “Somewhat Likely” or “Very Likely” to increase R&D increased government grants expenditure if there were increased availability of risk capital 68% 61% 33% 23% Canada United States Canada United States • Canadian firms are more likely to boost R&D spending • U.S. firms are more likely to increase R&D spending if incentivized with increased government grants as a result of increased access to risk capitalSource: Deloitte Research8 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 10. We believe that to address the issue of productivity businesses, academia andgovernment must act in a deliberate and collaborative fashion9 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 11. Deloitte has put forward eight recommendations we believe are necessaryto improve Canada’s productivity in the near-term, and to foster ongoingproductivity growth In order to achieve meaningful impacts on Canadian productivity, businesses, academia and government will need to act in a deliberate and collaborative manner across eight key recommendations: Each recommendation enables the success of others creating a self-reinforcing system for driving improvement in Canada’s productivity10 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 12. Co-locate: Create a national clustering strategyDeloitte believes that a national clustering strategy is required in order to increase productivity and driveinnovation in key fields. A national strategy will enable Canada Cluster development must be led by local … their strategies must be supported to realize the benefits of clustering businesses, governments and academia… by Federal and Provincial governments • Clustering supports the growth of high • Local stakeholders must collaborate to • Federal and provincial governments must productivity, high innovation areas where develop strategies to support the provide the necessary resources and related firms can actively collaborate emergence or growth of clusters infrastructure to support local cluster strategies Key Considerations • Cluster development requires a long term vision, with the growth of world class clusters measured in decades, not years • There must be a strong rationale for each cluster that builds on existing talents, industries and or natural advantages (e.g. geography)11 The future of productivity © Deloitte & Touche LLP and affiliated entities.
  • 13. Deloitte has worked with the leading hubs in Canada to determine their economicimpact and the complexities of their clusters Communitech is a leading incubator in the Waterloo region Description Impact $84M $154M $530M 25 Client capital raised Client revenue Client deal flow New research and industry collaborations • Communitech is a not-for-profit organization that supports technology startups in Waterloo Region 573 366 $7.1K 8,000 • Communitech plays a material role in New jobs created by Startup client companies Cost for Communitech to Visitors to the Hub create a new direct job championing innovation on a provincial and Communitech clients national level • The ecosystem creates a network of resources that benefit both entrepreneurs and the members of the network MaRS is a premiere incubator in Toronto with strong ties to the health sciences Description Impact $277M $130M $71M 1,771 Client capital raised Client revenue Total grants received New products to market • MaRS has a prominent location in the heart of Toronto with 700,000 square feet available for research labs, offices and event facilities 2,530 70% 1,203 1,054 Total Jobs New jobs created by ICE New jobs created by Startup client companies sector • MaRS accommodates companies across Communitech clients Information and Communication Technology, Clean Tech, Life Science and Social InnovationSource: Deloitte analysis © 2010 Deloitte Touche Tohmatsu © Deloitte & Touche LLP and affiliated entities.
  • 14. Successful hubs leverage available resources and the existing local environment toaddress specific market demandsEXTERNAL Market DemandENVIRONMENT Collaborative • Hubs must have Networks client / tenant Risk Capital demand for • Formal and informal • Investment is services collaboration required for high Talent between Policy risk / uncertain stakeholders to • Pool of talent is activities of • Stakeholders effectively leverage necessary for entrepreneurs and consider market networks for scale, ideation and best practices researchers regulation and implementation of financial incentives innovation (e.g. tax rate and credits, subsidies) Innovation Hub Dedicated Anchor Hub Financing • Anchors bring • Typically hubs use significant resources a mix of and network public/private influence to the hub Infrastructure support and Mentors revenues • Co-location • Experienced Experienced Hub requires the right entrepreneurs help Management mix of space and new ventures equipment (e.g. navigate operational • Hub management offices, meeting challenges and needs the rooms, commonINTERNAL secure funding capabilities for areas, and labs)HUB RESOURCES operations © Deloitte & Touche LLP and affiliated entities.
  • 15. There is a significant opportunity for Halifax to develop a clustering strategy;the initiative must stem from the business community Businesses Academia Government © Deloitte & Touche LLP and affiliated entities.
  • 16. Discussion Questions1. Would a clustering strategy make Halifax a more productive city?2. Around which industries should a Halifax cluster be built? Is the shipbuilding contract a natural catalyst?3. As a business leader, what is your role in building a cluster and increasing productivity?15 The future of productivity © Deloitte & Touche LLP and affiliated entities.

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