The government’s frequent announcements of billion-dollar innovation initiatives, new programs, and federally funded reports on Canada’s economic stagnation are like a call to action. But when you lift the bun… where’s the beef? The urgency of the situation demands more than just announcements.

We’ve created an innovation ecosystem where grant applications frequently require specialized consultants to navigate the bureaucratic processes and red tape. What we lack is sufficient entrepreneurial activity and builders who create value and enduring jobs. It’s time for a change.

Participation, Productivity, Prosperity

“However beautiful the strategy is, you should occasionally look at the results.” – Winston Churchill

To understand the health of Canada’s innovation ecosystem, consider examining the economic scorecard. At the macro level, here are three simple indicators that tell us most of what we need to know:

• Entrepreneurial Participation – Are People Starting Businesses?
• Productivity – Are we getting better at creating more value with fewer inputs?
• Prosperity – Are Canadians better off, by global standards?

Spoiler Alert: We’re trending in the wrong direction on all three.

Entrepreneurial Participation – The Vanishing Founder

BDC’s Index of New Entrepreneurial Activity(1) tracks the proportion of new entrepreneurs who hire others. The Entrepreneurial Index has been trending down for decades. Fewer Canadians are starting businesses and even fewer are hiring. And if that continues, fewer people will create the kinds of jobs and innovations that drive productivity.

Regarding entrepreneurial participation, I have more questions than answers, but here’s what I’m wrestling with:

• Why is entrepreneurship declining in Canada?
• Which industries are shrinking fastest?
• What are the actual barriers? (Hint: talk to builders, not bureaucrats)

My experience and research suggest that declining entrepreneurial participation is a systemic structural issue. One thing keeps showing up is that the system makes it hard to start, and even harder to scale. While there are successes like Shopify and Lightspeed, they are more the exception than the rule. However, these success stories demonstrate that, with the right conditions, Canadian startups can thrive and make a significant contribution to the economy.

Productivity – Breaking the Glass

According to the Bank of Canada, we’re in a “national emergency” when it comes to productivity. In a March 2024 speech, Senior Deputy Governor Carolyn Rogers literally titled her address:

“Time to Break the Glass: Fixing Canada’s Productivity Problem.”(2)

There is also a chart circulating that compares Canadian and U.S. productivity(3), saying it all. We’re not just lagging, we’re sliding. COVID didn’t help, but the trend predates the pandemic. And without entrepreneurship to inject fresh thinking and competitive pressure, productivity will continue to stall.

Prosperity – From Top 3 to Just Top Third

The Legatum Prosperity Index (4) tracks not just economic output but also broader societal health, opportunity, education, governance, and other key indicators. In 2013, Canada ranked 3rd globally. Today, we’ve slipped to 15th or 16th, depending on the year, and that is yet another warning light. I like to frame prosperity as the reward at the end of the innovation chain. But if fewer people are starting things and productivity is falling, it’s no wonder our prosperity is drifting downward.

Entrepreneurial Participation Is the Upstream Driver

All three indicators are flashing red. But if you follow the causal chain upstream, entrepreneurial participation is the lever that moves the rest.

Fewer startups → less innovation → lower productivity → slower growth → weaker prosperity

Lower productivity and declining prosperity aren’t a mystery. If we want better results at the macro level, we need to make it easier, faster, and less painful to start and scale businesses in Canada. However, macro metrics only tell us where to look. To fix this, we need to examine the issues, so that’s where we go next.

The real 600 lb beaver in the room …

I write this section not to point fingers, but to do what Jim Collins calls “confronting the brutal facts.” If we’re serious about revitalizing Canada’s innovation economy, we need to be honest about what’s holding us back, not at the surface level, but at the systems level.

With my startup experience, years of policy research, plus countless conversations with founders, policymakers, and others, I’ve come to see three fundamental challenges we need to address:

• “Made in Ottawa” Innovation Policy
• Canadian Oligopoly Economics
• Canadian Organizational Culture

These are not minor problems. They are significant structural barriers that reward the status quo, punish risk taking, and discourage entrepreneurial action. Let’s unpack them.

“Made in Ottawa” Innovation Policy

I am sure Canada’s Innovation Agenda (5) was well-intended when drawn up in a boardroom somewhere in Ottawa. However, Made in Ottawa innovation policy is the first 600lb beavers in the room. Canada has over 140 federal programs spread across 28 departments, all aimed at promoting innovation. However, that support does not align with how innovation works in practice.

Key issues:

• Top-down program design – too rigid, slow, or detached from ground-level business realities.
• Misaligned incentives – that reward compliance and paperwork, not risk-taking or results.
• Program Mismanagement – this is a very deep rabbit hole of soft corruption and lack of stewardship (6).

Senator Colin Deacon’s report (7) outlines many of these flaws. There are bright spots, including CSBFL, TEC (The Executive Forum), Build Canada, and other grassroots or privately led models that show promise. But they tend to operate despite the system, not because of it. We don’t need more Made-in-Ottawa innovation clusters. We need a policy that enables builders to build and then gets out of the way.

Canadian Oligopoly Economics

Let’s name another 600 lb beaver, concentrated market power. From the telecom triad to banking barons, grocery gangsters, and the milk mafia, Oligopolies dominate Canada’s economy. These oligopolies excel at protecting their turf, but they struggle to encourage innovation.

Why does this matter?
Large incumbents can lobby for policies that protect their turf.
Incumbents absorb the lion’s share of public funding and procurement.
Incumbents stifle and shelve smaller innovators (Like Mint Mobile (8))

Even the Bank of Canada has acknowledged the problems with a lack of competition. In recent remarks, a report called for reforms to “facilitate competition” as a path to stronger productivity. Innovation thrives in competitive environments, not in markets where three players control everything and startups can’t get distribution without going through them.

Canadian Organizational Culture

Here’s where we need to be honest about culture and the biggest of the 600 lb beavers in the room. Two short stories illustrate this point that you may find particularly interesting. The first story is about two little girls setting up a lemonade stand on the Rideau Canal in Ottawa. The second is about a young boy named Seth who set up a Root Beer Stand in Utah, similar entrepreneurial ventures with very different outcomes. Perhaps most interesting, these are true stories; you can’t make this stuff up!

The Ottawa Lemonade Stand (9) – “Do you have a permit for that lemonade stand?”
A few years ago, Eliza (7) and her sister Adela (5) set up a lemonade stand along the Rideau Canal in Ottawa. The plan was to raise money for summer camp. It was a hot day, cyclists were thirsty, and the setup seemed perfect.

However, their entrepreneurial spirit ran into an immovable object: Canadian bureaucracy. A passerby warned the girls that they might need a permit. Not long after, a bylaw officer arrived and confirmed that the stand is on National Capital Commission (NCC) property. Therefore, without proper paperwork, they couldn’t operate. The stand shut down.

Their father, Kurtis Andrews, put it plainly: “I think they need to relax a bit… We’re talking about a five- and seven-year-old raising money for camp.”

The lemonade stand wasn’t just about making lemonade. It was a small, clear signal of how Canada’s system handles initiative: with rules, caution, and red tape.

The Utah Root Beer Stand (10) – Contrast the lemonade stand story with that of 11-year-old Seth Parker in Utah. Seth set up a Root Beer stand in front of a church with a sign that read: “Ice Cold Beer” (The word “root” was in tiny letters.) Naturally, concerned locals called the police. But when officers arrived and saw the setup, they didn’t issue a warning. Instead, they had a good laugh, took photos, posted praise online, and celebrated Seth’s clever marketing. No shutdown. No permit application. No red tape.

Even U.S. Senator Mitt Romney joined in: “A lesson in reading the fine print! The future is bright for this young Utah entrepreneur.”

These stories are funny, but the implications aren’t. Canada faces real economic challenges, including declining productivity and prosperity, as fewer people start businesses. To reverse these trends, we need a cultural shift.

Policy, Power, and Culture — All Interconnected

These three issues aren’t isolated. They feed into each other:

• Policy that protects incumbents,
• Incumbents that stifle competition and innovation,
• Culture that rewards playing it safe.

No wonder fewer Canadians are starting businesses. If we want a different outcome, we need a different system. Not just one that funds “innovation”, but one that enables builders.

Optimization for outcomes… or just optics?

“We’ve built an ecosystem for programs. What would it take to build one for progress?”

If we keep doing what we’re doing, we’ll keep getting what we got. And what we’ve got, by any macroeconomic measure, isn’t working.

The polite Canadian approach of waiting patiently for results isn’t cutting it. The clock is ticking. We need fewer billion-dollar boondoggles and more builders. Lack of productivity and innovation isn’t a funding problem. It’s a participation problem. A vision problem. An incentives problem.

Canada has the raw talent. What we lack is a system that trusts people to use it.

A Shared Vision

A shared vision and innovation strategy require alignment across government, business, educators, and citizens. That vision might look something like this:

• Entrepreneurship as a viable career path.
• Programs that empower builders, not reward grant-writing experts.
• Competition that challenges incumbents, rather than protecting them.

We need a new narrative. Canada isn’t too small, too cautious, or too cold to lead in innovation. However, we need to stop confusing paperwork with progress and start rallying around a shared vision that entrepreneurs can actually believe in.

Here’s the kicker: you can have more than one definition of success. Think of the Olympics as a major event with many different sports. The point isn’t to do everything, but to specialize and excel where we can. One of my favorite examples is Own the Podium (OTP). OTP is a focused, high-performance initiative that transformed Canada’s Olympic results. It didn’t try to do everything. It picked its sports, aligned around clear goals, and made measurable progress.

Maybe it’s time we treated innovation with that same level of coordination and intent.

Encourage Entrepreneurial Participation

Entrepreneurship is struggling because the incentives are misaligned(11) and the support is off-target, particularly for early-stage founders. We claim to want innovation, but we penalize risk and reward optics. The ecosystem tends to rescue success, rather than nurture it. Programs chase vanity metrics and serve political timelines, less than entrepreneurial ones.

Meanwhile, founders face:

• Downside risk (personal guarantees, no safety net)
• Delayed recovery (failure sets you back years)
• Punitive upside (increased taxes on successful exits)

To reverse the decline, we need to rethink how we incentivize entrepreneurship and encourage risk taking. When you consider that 50% of businesses fail in the first two years, doing a startup is a high risk activity, especially when things don’t go as planned. Two key areas for improvement stand out: fixing the safety net and reducing the recovery time.

First, self-employed founders still face gaps in Employment Insurance. The system has improved, but there’s a lingering culture of mistrust around entrepreneurs, it’s as if choosing to build something makes you suspect. That’s backwards.

Second, while personal guarantees aren’t going away, nor should they, we can make it faster and less painful to start again after failure(12). The time between ventures shouldn’t feel like a permanent penalty. Founders need a way to reset, after a set back.

Reducing downside risk and speeding up second chances would do more to raise Canada’s entrepreneurial participation rate than another strategy document. Reducing startup risk are targeted, tangible changes which can signal that Canada is serious about backing its builders.

Metrics that Matter

Most Canadian innovation programs don’t track real outcomes or, worse, they don’t track anything at all. What passes for measurement is usually a vague nod to GDP or a feel-good count of events held or program budget fully allocated.

Enter the “Big Check” ceremony. Which is that moment when a politician hands over a comically oversized cheque, cameras flash, and the work… is done. It makes for a nice photo opportunity, but follow-up. Five years later, there’s rarely a trace. Just another file folder in the archive marked “Strategic Investment.” Here’s the thing: if you call something a “strategic investment,” there should be a return. But ROI thinking is shockingly rare in Canada’s innovation policy. We spend, but we don’t measure.

Yet there’s a simple way to start: measure tax revenue generated. If public dollars help companies grow, that should show up in payroll tax (new jobs), corporate tax (profits), or sales tax (actual customers). We already collect tax data, we don’t use it to measure results, but we could.

It’s not complicated. Pick a program. Track the firms it funds. Compare their tax contributions before and after or against those of similar, unfunded companies.

You’ll never achieve perfect precision, but you’ll get a strong signal whether or not the program is working. And once you have a way to measure results, you can start measuring ROI in real terms: jobs sustained, exports grown, taxes paid, capital attracted. That’s how you know whether a program worked. It’s not by how big the check was, but what return on investment (measured by cold hard cash / tax) came out the other end.

Canadian Innovation Ecosystems – Less Bun. More Beef.

“You can’t build an innovative economy with just a smile and a check.”

We’ve built a national innovation machine optimized for optics. The government doling out oversized checks, commissioned reports, reams of buzzword-driven strategy. It’s a beautiful bun, but where’s the beef?

Canada has the raw talent. What we lack is a system that truly trusts builders and generates consistent results: successful startups / scaleups, real products, and real impact.

Maybe it’s time we asked fewer consultants how to craft strategy and more entrepreneurs what’s slowing them down.

Less bun. More beef. That’s how you build innovation worth biting into.

Ian Paul Graham

References

1 – BDC – Entrepreneurship in Motion: Skills to Succeed in a Changing World, Figure 2: BDC Entrepreneurship Index and new entrepreneurs annually, October 2023

2 – Bank of Canada – Time to break the glass: Fixing Canada’s productivity problem, Remarks by Carolyn Rogers Senior Deputy Governor, To the Halifax Partnership, March 26, 2024, Halifax, Nova Scotia

3 – CFIB – Canada’s productivity: How to free up WAY more time and resources in our economy, April 4, 2024, Simon Gaudreault
Source: Statistics Canada, tables 36-10-0104-01 and 17-10-009-01; U.S. Bureau of Economic Analysis, Table 1.1.6. Real Gross Domestic Product, Chained Dollars
Note: Adapted from Stéfane Marion, Attract private investment: Canada’s only way out, Special Report, National Bank of Canada, March 2024.

4 – Legatum Prosperity Index – data from 2007 to 2023

5 – Innovation, Science and Economic Development Canada – Building an inclusive and innovative Canada, June 14, 2016

6 – MARK MCQUEEN’S BLOG – No surprise in MaRS scandal, by Mark McQueen · May 30, 2014

7 – Office of the Honourable Senator Colin Deacon – Federal Programs for Business Innovation – Discussion Paper – Lead Researcher: Ryan Laberge With collaboration from: Benedicta Arthur and David Dlab, October 2024

8 – Yahoo Finance – Large barriers remain to bring Ryan Reynolds’ Mint Mobile to Canada, despite CRTC decision
https://ca.finance.yahoo.com/news/ryan-reynolds-could-still-launch-mint-mobile-in-canada-but-new-crtc-rules-may-scuttle-plans-151427391.html

9 The Ottawa Lemonade Stand – CBC – Do you have a permit for that? NCC shuts down kids’ lemonade stand – Idil Mussa · CBC News · Posted: Jul 03, 2016

10 The Utah Root Beer Stand – CBS News – This boy got the cops called on him for selling “ice cold beer.” But it turned out to be a clever scheme to get customers, By Sophie Lewis, July 18, 2019

11 – WhoYouCallingJesse – The Misaligned Support of Startups – Jesse Rodgers
https://whoyoucallingajesse.com/the-misaligned-support-of-startups-dde538825ff5

12 – ThreeFortyNine – Shorten Time Between Starts – Brydon Gillis – Oct 06, 2023
https://threefortynine.substack.com/p/shorten-time-between-starts