Size matters, and so do sales

A new report from the C.D. Howe Institute highlighted an outsized emphasis on research and development in government policy, preventing Canada from growing enterprises to the scale where they can significantly improve the country’s economic productivity and innovative capability.

According to report author Charles Plant, Canadians regularly overlook the importance of marketing and sales, which are key to the success of even the most technologically sophisticated businesses. Such organizations are popularly perceived as being dominated by people steeped in research activities, educated in STEM fields such as engineering or computer science.

But Plant pointed out to Research Money how his own study of these companies revealed they generally have twice as many employees with non-STEM backgrounds. Their contribution may not be as exotic or glamourous as that of the technical staff, but it is in many ways more essential to ensuring the day-to-day viability of the business, especially at the higher levels of management.

“We have to do R&D, but it’s useless to do it without enough sales and marketing, because you won’t get any bang for your buck,” he said. “Eventually you’ve got to have sales people, admin people, accountants — and they always outnumber the STEM people.”

While Plant offered this finding as a common sense observation, which should be obvious to economic policymakers, it is not reflected in the way Canada supports innovation and commercialization. More specifically, he explored the rhetoric surrounding that support. In a content analysis of federal government budget documents from 2012 to 2022, he discovered “research” and “innovation” appear fully 34 times more often than “commercialization”. At the same time, he found a glaring absence of “marketing” or “sales” in policy documents purportedly aimed at promoting economic development. 

While it might be easy to dismiss these findings as vagaries of language, Plant insists this bias poses practical consequences and problems for the way Canada goes about trying to build its economy in advanced sectors like artificial intelligence, quantum computing, or clean technology.

For example, if Innovation, Science and Economic Development Canada (ISED) consistently avoids talking about marketing or sales (M&S), that could be because its mandate deals with the direct support for innovation, while M&S could be under the purview of more specialized agencies like the Trade Commissioners Service or Export Development Canada.

“However, arguing that ISED has no responsibility for assisting companies to take the innovations that ISED has supported to market makes no sense,” Plant stated in his report. “First, it would show a major lack of coordination to expect other entities to bear responsibility for marketing innovations arising out of ISED programs. Second, if M&S is linked to potential improvements in productivity, then M&S should be the responsibility of whoever is responsible for productivity — an issue central to ISED’s mandate. As their name suggests, they are responsible for developing the economy, including improving productivity, which will involve growing smaller firms into larger ones, where Canada is performing poorly, and which involves robust M&S.”

He regarded the question of scaling up firms as integral to the country’s economic health, since large, internationally competitive enterprises are the primary source of foreign revenue to sustain and enhance Canada’s standard of living. By emphasizing the virtues of research and STEM education, rather than marketing and sales development, government investments have yielded an abundance of smaller companies based on technical expertise or novelty, which often lack the resources, experience, and talent necessary to achieve commercial success.

“R&D is necessary but not sufficient to scale companies,” Plant’s report concluded. 

Nor does there appear to be much interest in addressing what would be sufficient. “Canadian observers have bemoaned the country’s weak productivity growth for over 50 years, yet this does not appear concretely as a policy objective in federal budgets or departmental plans. As written now, objectives and metrics are functionally immaterial to Canada’s success and warrant much improvement.”

Above all, Plant suggested, Canadians from all walks of life — rather than just an elite cadre of technically minded experts — should see themselves as part of a national drive to economic success.

“There are more careers in Canada in M&S than in R&D,” his report found. "However, one would never guess this by government’s continued focus on STEM. Furthermore, this is an area where Canada is challenged with hiring employees and where there may be a brain drain to the US. A set of programs could be developed with a robust design that focuses on humanities grads and the need for M&S. This could reverse how humanities programmes have been denigrated and potentially increase the supply of M&S personnel.”

Read more: “An upskilling firm gets upskilled” 

“Everyone talks about the knowledge economy and the innovation economy and what we’re moving into. But the unit of production that exists in this economy is people — their intelligence, their thinking.”

— A.J. Tibando, Executive Director, Palette Skills

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