Canada’s AI Ecosystem at a Critical Juncture

by Charlotte BA
Montreal, Quebec - March 8, 2023
AI at Scale Rapports
In its AI at Scale report, Scale AI provides an in-depth analysis of the state of AI in Canada and in peer countries to identify potential scenarios for the evolution of the Canadian AI sector.
This is an excerpt from the AI at Scale report.
To read the complete report, please click here.

In its AI at Scale report, Scale AI leverages Harvard Business Review’s Innovation Value Chain framework to assess the Canadian AI sector from both the supply and the demand perspectives.

1. The supply side of AI products and services hinges on knowledge, talent and intellectual property (IP) availability, which derive from domestic R&D activities, a large pool of available talent and a vibrant start-up scene.

2. The demand side of AI revolves around industry investments in early adoption (i.e., AI pilots) and diffusion (i.e., organization-wide scaling of AI) of AI-based technologies and solutions to drive productivity gains or generate new revenues.

A Strong AI Supply

Over the last decade, Canada has established itself as an AI supply powerhouse. Pioneering government programs and reliable public funding allowed Canada to develop leading AI R&D institutions, contributing to the attraction of top talent from abroad and to the accumulation of a critical mass of AI researchers. While this has enabled Canada to achieve a leading role among the global AI research elite, one caveat is that foreign companies still own a significant portion of AI-related IP generated in Canada.

Based on this dense network of top-notch AI R&D expertise, Canada has created a strong launchpad for AI start-ups, incubators and accelerators. However, Canada struggles with scaling those start-ups as they face several challenges to survive and grow, primarily due to a lack of domestic demand and talent resulting from fierce competition from large technology companies.

A Weak Domestic Demand

On the demand side, Canadian firms are trailing their international peers. Still, they have been slowly closing the gap on early adoption over the last three years, as we are seeing a steady increase in the share of businesses that have experimented with AI. Comparatively, many successful early adopters have entered the diffusion phase and have become seasoned AI adopters in most of Canada’s peer countries. As many global competitors move beyond pilots to deploy AI across their organizations, overall adoption demand from Canadian firms remains relatively low, providing limited growth opportunities for Canadian AI service and solution providers.

Our analysis highlights that Canada will need more than its strength in AI research and start-up creation to sustain its global leadership. This country will need to enable large-scale business AI adoption and consumer acceptance by driving demand for AI products and services and creating significant commercial opportunities for Canadian AI start-ups and SMEs.

Developing Canada into an AI-fueled economy will require preserving Canada’s supply-side leadership in R&D and start-up creation while building a more robust industry demand side. If done well, this will unleash a virtuous cycle where talent gravitates towards existing talent: strong demand creates local opportunities and helps to attract and retain talent from abroad, fueling supply-side growth and vice versa. An AI-fueled economy can drive in massive productivity gains across sectors by making advanced solutions widely available for Canadian businesses, which fosters economic growth and international competitiveness.

Scale AI acts as a nationwide nexus fostering the entire AI ecosystem by encouraging and funding collaborations across academia, industry players, start-ups and SMEs from coast to coast to coast. Scale AI focuses on stimulating the demand side by co-investing with the industry in AI initiatives to assist in de-risking their early investments, and on supporting the supply side by enabling start-ups to reach their first customers and helping SME service and solutions providers to productize their offerings and recognize and leverage their intellectual property (IP). Scale AI’s ambition is to boost widespread demand for AI while continuing to support initiatives that push the boundaries of existing AI applications to grow Canada into an attractive destination for establishing and scaling AI businesses. Combined with the efforts and investments of other key stakeholders, we believe Canada can secure its global AI leadership and become a fully AI-powered economy.

To read the full AI at Scale report, click here.

Made possible through the
financial support of
Gouvernement du Québec
Gouvernement du Canada

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