This week I got a chance to see Roger Martin present the 11th annual report of the Task Force on Competitiveness, Productivity and Economic Progress for Ontario, and one of the big themes was the need for Ontario firms to step up if we are to have a prosperous province.

Roger talked about the “last mile” of investment, suggesting that Ontario firms aren’t so wildly different from firms elsewhere except on the margin, but that difference shows up over time in productivity figures, as the difference starts to make a difference. For instance, it turns out that Ontario firms lag comparable regions in the US (states like Ohio and Connecticut) only slightly in spending on information and communications technology – but when you decompose that spending into components, the gap is by far the widest in software spending. As Roger put it, if you were to walk around the offices, they’d look about the same – similar numbers of computers, similar phone systems, etc. – but it’s the software that allows people to do their jobs more efficiently, more effectively, that is lacking. It’s subtle, and it’s a problem, and this reflects an overall underinvestment on the part of Ontario firms.

It’s not as though companies don’t have the cash to invest in their businesses: the same study shows that Canadian firms are well above US counterparts in terms of cash as a percent of total assets. This isn’t about the recession, either (tell me a firm in Pennsylvania isn’t acutely aware of the recession every time they post a job ad). It’s simply a significant difference here vs. elsewhere, and didn’t change in the 2008-9 period.

Unfortunately, this study doesn’t get at the root cause of this hesitance or unwillingness to invest, and from my conversations with people after the session it doesn’t seem that there’s strong research available on this question (yet). When I hear people in the GTA business community talk about investment caution, I hear things like being wary of not getting access to cash later when you need it, if you spend it now – but is this really so different in Canada vs. other places?

What I can’t believe is that it’s a lack of opportunity for capital. There are still massive uncertainties in the global economy, but also huge opportunities. Millions upon millions of people worldwide are realizing what it’s like to have investable assets and disposable income. We are all figuring out what it can mean for our businesses to have access to a global pool of skills, capabilities, and knowledge (and markets), enabled by the Web 2.0/3.0 tools we’re all using daily. Even pressures like climate change and resource scarcity are creating business opportunities, whether they are through innovative structures like social enterprise and investment-based philanthropy (or philanthropy-based investing, depending on how you look at it) – or via more traditional business approaches.

This plays into another key theme that came up in Roger’s talk: the need to produce high-value items that people want, rather than focusing productivity gains on squeezing operational costs from the system. In other words, understand what will sell – know your market opportunities. One of the most obvious ways to increase productivity and ROI of a company is to increase strategic marketing. Bring more things to market sooner, make sure you’re getting lots of feedback from the market via formal and informal channels (easier now than ever before), and use marketing as a tool to promote the heck out of it, and keep up the feedback loops. If you do anything less, you’re leaving money on the table.

Now, as I think about it, perhaps this wouldn’t do anything to decrease cash hoarding. Any high ROI activity may well lead to even higher levels of cash on hand, but would presumably do so via growing the business. And wouldn’t that be a lovely thing for Canadian firms to confound researchers with in a year or two?

Why do you think Canadian firms are cash-rich? Is it scarcity of ideas, failure of nerve, concerns about the future, regulatory or jurisdictional issues, all that maple syrup, or something else?

I’m always happy to speak with firms looking to grow through a focused strategy and intelligence about their marketplace – maybe I can help. Contact me at