Value in Motion

Where is Canada’s economy heading during a period of upheaval underpinned by global megatrends that are reshaping our world?

Disruptive technologies like artificial intelligence (AI), climate change, geopolitical tensions, demographic shifts and social inequality are creating new customer needs, markets and competitors and are blurring the boundaries between sectors. The changing shape of global industries is putting value in motion and creating opportunities for organizations from different sectors to capture by entering into innovative partnerships, embracing new business models and adopting powerful technologies like AI. New PwC research reveals the magnitude of these shifts:

The stakes are high for Canadian business leaders seeking to navigate the scenarios that could unfold while taking the steps required to protect and grow their businesses. Priorities include rapidly rethinking how they create, deliver and capture value by working collaboratively with other players; developing action plans to compete in new sectors; and deeply integrating technologies like AI into their businesses.

Shaping the future

A key step for leaders charged with shaping the future of their businesses is to deepen their understanding of the potential impacts of the megatrends on their organizations. They’ll also need to assess their strategies more often and develop scenarios and contingency plans so they can change course quickly, something that has become increasingly important at a time when large disruptive events, like the COVID-19 pandemic, are occurring more frequently.

The good news is some Canadian companies have already been meeting the moment by acting decisively to adapt and reinvent their business models as markets shift. But others have yet to confront growing signs of industry disruption, as seen in the AI adoption gap highlighted in our study. Canada faces the possibility of major disruption to our industries if we miss the AI revolution that’s transforming global business.

At the same time, the shifts underway do highlight unique opportunities for Canada. This country benefits from a longstanding trust premium that creates the possibility for competitive advantages for Canadian businesses. We can be leaders in developing responsible AI practices that enable greater adoption and allow the world to capture the full potential of the intelligence revolution. And at a time of resource constraints due in part to shifting trade and geopolitical relationships, Canada can build on its historic reputation as an honest broker on the world stage to further enhance our role as a reliable source of scarce supplies needed by our global partners.

A key driver of the industry reconfiguration we described is the need for new capabilities. Because few companies will have all of the resources to respond to the massive shifts created by the megatrends on their own, they’ll need to collaborate with other organizations so they can remain viable and grow.

These changes are at the heart of the shift towards business ecosystems based on nine domains of growth aimed at meeting fundamental human needs: how we move, make and build things; fuel and power our economy; and feed and care for ourselves and each other. Underpinning these six domains are the funding, connectivity and computing power and governance that support our industrial system in meeting these critical human needs.

These domains are simply another way of looking at how the economy is evolving. They reflect the notion that while customer wants, expectations and preferences will change, essential needs for things like food, shelter and transportation will remain.

Tracking the value in motion

As the chart below highlights, the opportunities for Canadian businesses to meet these needs in new ways are vast. Our economic analysis reveals that by 2035, substantial value will be generated across a wide spectrum of domains—spanning industries and transcending traditional sector boundaries in Canada.

To see where your organization could capture future growth, select your industry on the left-hand side of the graphic, which shows the value shift towards relevant domains in ten years on the right.

For some companies, industry reconfiguration may mean significant pivots to serve adjacent markets or compete in entirely new sectors, as illustrated by some of the large technology companies making moves into the nuclear energy space to secure the electricity needed for their data centres. Others will respond by pursuing acquisitions or expansions or turning to partnerships to combine their own capabilities with those of ecosystem players.

The impact of resource constraints

To illustrate why the domains are so critical to how companies respond to the shifts created by the megatrends, it’s useful to consider the issue of resource constraints. In a world increasingly marked by trade barriers and input and resource scarcity, companies can secure a competitive advantage by collaborating with organizations across the value chain to ensure long-term access to supplies, markets, capabilities, financing and customers.

Take the example of how the megatrends are impacting the Feed domain. It’s experiencing not only pressures on food production due to climate change and rapid urbanization but also shifts in consumer preferences towards healthy and sustainable products. One sector that will be critical in responding to these constraints and changing needs is mining, which can collaborate with other industries to increase sustainable supplies of inputs like potash that are key to navigating a world of shrinking arable land due to climate stresses and disruptions caused by geopolitical conflict. Also involved in the Feed domain are technology companies, which play an important role in developing and improving precision farming solutions that help farmers adapt to climate shifts and meet rising demand for food in an increasingly constrained environment. 

These are just some of the examples of how companies from different sectors can come together to address resource constraints related to a core human need. These arrangements can include not just mining and technology companies but also food processors; utilities that supply renewable power; financial institutions like insurers that provide a buffer against climate shocks; and retailers that serve the end customer.

Our findings on the value that’s in motion across the domains highlight both the risks and opportunities for Canadian companies. This can be seen in an increasingly winner-takes-most business environment in which a company or small group of organizations that secures an early edge in a key technology, capability or scarce resource captures a disproportionately large share of the value created, often leaving little room for competitors.

The challenge for Canada is to make sure Canadian companies are part of the group of winners by harnessing this country’s unique strengths to make the most of growth opportunities within and across the domains. For companies, a critical step is to assess where their business can play a role in the domains and the partnerships that can help them serve unmet needs.

As companies broaden and deepen the ecosystems where they collaborate and compete, there's also an opportunity to work more closely with governments and academia to stimulate innovation. That can benefit Canada, not just its companies, by boosting the country's share of leading-edge intellectual property that can further increase productivity and growth.

Emerging opportunities for Canadian businesses

Canadian businesses also have emerging opportunities arising from Canada’s efforts to navigate the trade challenges the country is facing. The Canadian government is looking to unlock massive amounts of public and private capital to reconfigure the economy and increase the country’s long-term economic resilience by focusing on Canada’s economic advantages in specific sectors.

These sectors, which already have a strong foundation in Canada, include minerals, defence production, infrastructure, housing, energy and innovation. Canadian companies that align with these priorities will be in a strong position to access funding and support, which in turn can help them drive business model changes aimed at capturing growth opportunities across the domains.

So what are some of the scenarios for companies in key Canadian sectors looking to capture the value that’s in motion? Below, we outline some of the opportunities for different sectors across the domains.

For Canadian companies, AI technology is critical to making their businesses more viable, productive and competitive. The effects of the adoption gap can be seen in the chart below. It shows the overall compound annual growth rate, between 2023 and 2035, for the domains in both Canada and the United States under the Trust-Based Transformation scenario. Canadian growth is slower except in the Build domain, reflecting the productivity impacts of lower AI adoption in this country and highlighting the need for Canada to catch up.

Compound annual growth rate, 2023–35, Trust-Based Transformation scenario

Actions for Canadian companies

What can Canadian businesses do to help narrow the AI adoption gap? With the right government support, combined with partnerships with researchers, academia and other industry players, companies can make sure their investments in technologies like AI and quantum computing go further in developing and adopting solutions that solve real problems, capture new markets and transform business models.

Companies do need to be ready to devote more resources to research and development and can consider new approaches to scaling innovation. This could include setting up an AI-first subsidiary with a mandate to experiment with and pursue new ways of creating, capturing and delivering value, even if it disrupts existing business models. Companies can also tap the creative energy of their teams by encouraging their people to experiment with AI tools so they can come up with the innovations specific to their roles and expand adoption throughout the business.

Public policy changes required

At the same time, many of the solutions involve public policy changes. Governments can, for example, adopt procurement policies that prioritize buying goods and services from promising Canadian AI companies, which can help innovative domestic players grow and scale their businesses. Governments also play a key role in stimulating and supporting investment in the compute infrastructure that helps AI ecosystems flourish.

Related to these policy changes is the need for government actions to support quantum solutions in tandem with AI technology. This is a unique opportunity for Canada that we should move quickly to seize. To do so, governments need to be ready to adapt regulations around AI and quantum technologies in a way that allows for the mitigation of unintended consequences while also positioning Canada to compete with other countries that focus more on enabling innovation. Policies to make Canada more attractive to workers with skills in AI and quantum computing will be especially critical given the tendency of innovative companies to cluster and stay in places where they can find a critical mass of key talent.

An additional important action for governments also relates to the overarching issue of trust in AI. Companies will be more willing to adopt AI if it works effectively, is responsibly deployed and is therefore deeply trusted. This is why it’s important to address the drivers of trust in technology, especially at a time of growing concern about ways AI can be misused for malicious activities like cyberattacks and privacy breaches. In short, adoption is inseparable from trust and security, which heightens the imperative for governments to work closely with businesses to build confidence in what AI can do while increasing efforts to address and reduce the risks.

Our findings highlight a clear call to action for Canada to embrace the innovative spirit, entrepreneurial mindsets and determination that helped drive rapid Canadian growth in the past. We have a long history of achievements—such as our contributions to the foundations of AI technology and innovations in energy production—that seemed daunting or even impossible from the outset.

While our research highlights some challenges for Canada, there are clear strategic advantages resulting from the global megatrends and the industry reconfiguration playing out within the domains.

Much of our analysis focused on actions Canadian governments and businesses can take, but this is also a moment where individual leaders can make a big difference. By understanding the forces at play and what they mean for their businesses, leaders can create a plan for fundamentally reshaping their organizations that positions them to compete with their global peers no matter how the scenarios we outlined turn out. Now is the time for leaders to look beyond familiar industry and sector lines to reinvent their business models and build what’s next. With so much value ready to be captured within and across the domains, the urgency—and the opportunity—for Canadian leaders to define the future has never been greater.

^{1 GDP figures noted in this article are in 2022 Canadian dollars}