Holding rank as top world AI hub requires more investment

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There’s good news and bad news when it comes to Canada being globally recognized as a top innovation hub for artificial intelligence, and that has implications for corporate decision-makers when deciding how and when to adopt the technology.

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Canada ranks among the top five pioneers of AI across 73 global economies, with a significant investment in AI talent, according to the AI Maturity Matrix, published in November 2024 by Boston Consulting Group Inc. (BCG). It is also among the top countries with a robust national AI strategy and several government agencies focused on AI development and regulation.

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But Canada’s perpetual underinvestment in AI, coupled with the strict federal regulatory requirements proposed in the Artificial Intelligence and Data Act (AIDA), has some concerned that innovation will significantly stall, while prompting even more homegrown, top-tier AI talent to head elsewhere for better paycheques and opportunities.

Munir Nasser, managing director and partner at BCG in Toronto, said Canada has “chronically underinvested in its AI innovation ecosystem,” citing that AI startups here receive less than three per cent of North American AI venture funding.

This lack of funding has contributed to a substantial talent drain, he said, with AI professionals increasingly leaving for the United States and global companies where compensation can be 20 per cent to 60 per cent higher than their Canadian counterparts.

In an effort to get Canada further along the AI innovation trajectory, the Government of Canada announced a $2.4-billion package to support the AI sector as part of its 2024 budget.

Approximately $2 billion is to be allocated to AI infrastructure and business development initiatives as part of the AI Compute Access Fund, including “computing capabilities and technological infrastructure,” which will facilitate AI research, help to scale startups, and provide other support for AI organizations. Some $200,000 is set to accelerate the adoption of AI in other sectors, such as agriculture, health care and manufacturing.

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Jas Jaaj, global AI Ecosystems & Alliances leader and managing partner of AI at Deloitte Touche Tohmatsu Ltd., said this is an excellent start, but a key step will be for the government to set clear incentives for businesses to extract the best outcomes to improve productivity across the board.

He also advises that companies get aligned with government on incentives and outcomes to be able to come up with “win-win propositions” that both sides will feel comfortable pursuing.

For the business sector in particular, he said that will require a willingness to experiment, while “rethinking and remapping” traditional ways of operating to help tackle the productivity crisis currently underway in Canada.

“Whenever we’re at the cusp of a paradigm shift like this with a disruptive technology, there will be a need to try different things in measured ways … and be comfortable that not all these scenarios will work,” he said.

While corporate Canada awaits AIDA policies to come into effect, Jaaj said he is seeing businesses start to self-regulate by building guardrails based on jurisdictions such as Europe where regulations are already in place.

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“That’s the approach we recommend in the near term so we don’t freeze and (can) continue to make progress,” he said.

For Canada’s corporate sector to stay at the forefront of AI innovation, Jaaj said companies also need to have the foundations and controls in place to be confident in the data they will be accessing for future AI solutions.

“Many organizations carry what we call technical or data debt, which means they have not invested in the right capacity and velocity in the past to make sure they have a well-governed data environment, and now is the time that catches up with them,” he said.

Some companies forging alliances with made-in-Canada AI solution providers and partners are already reaping the benefits. By working with Ottawa-based AI startup MindBridge Analytics Inc., KPMG Canada was able to embed AI capabilities in its Clara cloud-based audit platform to get deeper insights that drive better analysis.

“It started in Ottawa and it led to a tool that is now being run on audits across the world in KPMG,” Bryant Ramdoo, partner and national Audit & Assurance Innovation leader at KPMG Canada, said.

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The firm has also taken advantage of cutting-edge AI learning opportunities in Canada to upskill its workforce. In 2018, it partnered with Simon Fraser University to deliver a digital academy program with a customized curriculum that allows its employees to get a Master of Science in cognitive analytics.

“(The university) continues to develop content that is highly relevant to financial reporting, auditing and incorporating the newest technologies,” said Ramdoo, who was part of that first graduating class. “Sometimes we’re shy about it, but we’ve got really great examples (in Canada) of best-in-class in both the technology and people side.”

Munir also lauds Canada’s talent ecosystem for representing a “tremendous competitive advantage” with direct potential to drive higher productivity and economic transformation across sectors. Yet to continue to be an AI innovator, he said Canada needs to embark on a huge change management exercise in the foreseeable future.

“It’s not just about increasing productivity, but about unlocking creativity and getting our leaders and ecosystems excited about what AI can bring to the Canadian economy and our day-to-day lives,” he said.

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