Top trends affecting Canadian businesses
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What lies ahead for Canadian businesses in the next decade? How can they prepare today for success tomorrow?
These are critically important questions for entrepreneurs who are navigating a rapidly evolving business landscape. To find answers, BDC commissioned Juniper Consulting to study the dominant trends that will shape the business environment between now and 2030.
The study found several trends that will affect all industries. The most important of these is the role technology will play as a dominant driver of change.
Technology can fuel growth, innovation and efficiency, but failure to harness it can threaten the survival of a business.
Other key trends identified in the study include:
- the changing nature of work, especially in the wake of the COVID pandemic
- the aging of the population and Canada’s increasing dependence on immigration for population growth and to fill labour shortages
- mounting sustainability challenges in a time of climate change
- shifting market dynamics ranging from slowing economic growth to intensifying foreign competition to a transition to a services economy
The study zeroed in on several important Canadian industries to look at what lies ahead for them. Here, we look at the findings for three of the largest—retail, manufacturing and construction.
Top trends for the retail sector in Canada
The retail industry accounts for more small and medium-sized businesses than any other in Canada and those companies employ more Canadians than any other sector.
It’s no secret e-commerce is driving big change in the retail sector. But the change doesn’t stop at online shopping. Entrepreneurs also have to contend with rapidly evolving consumer preferences, increasing competition and the need to invest in new technology.
New rules of competition
Over the next decade, the retail landscape will become even more competitive. Canadians have already reached peak consumption with a myriad of purchasing options in every category and more entrants are coming into the market thanks to the low cost of starting a retail operation and increasing foreign competition.
Big retailers will continue to dominate the mid-price market while emerging consumer preferences will polarize the market between the extremes of either luxury or value products.
Meeting the demands of the future consumer
Customer needs and desires are evolving quickly, and retailers need to keep pace by using digital tools to identify and track their preferences. For example, online ratings and reviews will be increasingly important for gaining insights into customer expectations and using them for competitive advantage.
The rise of the experience economy
Younger generations are showing a marked preference for spending their money on doing things rather than owning things in what’s become known as the experience economy. This trend is pushing retailers to explore how they can respond to “experiential” desires. For example, companies are involving customers in co-creating products through online surveys, and they are sponsoring more instore events and courses.
Younger people also prefer to spend their money on access to goods and services rather than ownership. Hence, the rise of the sharing economy and a trend toward renting rather than owning. This trend reflects increasing environmental consciousness that is also leading to a preference for eco-friendly and reusable products.
Location, location, location: digital, physical and hybrid
To be successful in the future, retailers must offer an excellent experience across all channels—digital, physical and hybrid digital-physical. Consumers are comfortable moving back and forth between digital and physical shopping and creating a seamless brand experience across channels is essential for success.
What Canadian retailers should do
- Your company will face pressure to move to the high-end or low-end of the market due to societal shifts and big player dominance of the mid-price market. You will have to adapt your brand and products accordingly. If you choose not to migrate, you should be increasingly bold in your market differentiation to maintain share.
- You will need to improve your understanding of your customers by making more effective use of data from online interactions and ratings. This will help you stay on top of shifting customer preferences and expectations.
- Invest in technology to present a consistent and frictionless omnichannel shopping experience. Providing tech-enabled customer experiences will be critical to your ability to thrive in the coming decade.
Top trends for the manufacturing sector in Canada
Manufacturing represents 10% of Canada’s GDP and 68% of merchandise exports. While the automotive and aerospace sectors are the linchpins of this sector, production of heavy equipment, machinery and other goods are also important. Small and medium-sized businesses make up a greater share of the manufacturing sector in Canada than in peer nations.
Over the next decade, the key trend affecting SMEs in the manufacturing sector will be the accelerating pace of technological innovation under the umbrella of what’s known as Industry 4.0. Other key trends include growing customer demands for product customization and other services.
Transition to Industry 4.0…then to 5.0
Although definitions vary, Industry 4.0 is generally described as the greater use of robotics, the Internet of things (IoT), data analytics and artificial intelligence to improve productivity, customer service and innovation.
Industry 4.0 advances have been gaining momentum around the world since 2010 and the benefits for manufacturers are impressive. For example, sensors connected to the Internet can provide continuous monitoring of a wide range of production metrics, giving managers a holistic view of operations in real time. Another example is the rise of predictive maintenance where sensors are used to avoid downtime and potential damage from equipment failure.
The benefits of Industry 4.0 add up quickly and will separate high performers from laggards. Over time, Industry 4.0 will become a necessary requirement and companies that fail to adopt it will be driven out of business. Unfortunately, Canadian manufacturers are falling behind competitors in other countries that are embracing these advanced manufacturing technologies.
The next leap ahead—Industry 5.0—is already on the horizon. It involves bringing humans back into the production process by having them work alongside advanced robotics in smart co-working environments.
What it will take to get to Industry 4.0
Canadian manufacturer will have to overcome obstacles to catch up to other countries in the adoption of Industry 4.0 and keep pace with 5.0 advances. Chief among these obstacles is a lack of resources, including capital. SMEs will have to make careful decisions about the size and scope of their investments. Fortunately, some companies may be able to leapfrog over Industry 4.0 to become early adopters of Industry 5.0, saving capital and getting out in front of the technological race.
Advanced manufacturing requires a shift in technical skills and management practices to unlock its benefits. In the coming years, a factory’s workforce will have to include data analysts, programmers and robotics technicians. This means companies will have to widen their recruitment efforts to find these workers. At the same time, managers will have to get up to speed on the new operating environment and workers will have to adapt to new routines and technologies.
Manufacturing as a service
Customers increasingly want manufacturers to deliver customized, on-demand products. Customization starts with having the right tools to make tailored products in short lead times.
Among the new tools are virtual and augmented reality devices, which can be used to co-create products with customers. Designers can demonstrate their products virtually and adjust digital models in real time. Customization can also be achieved at a larger scale by using data analytics and AI to identify patterns in customer choices and preferences.
Another opportunity is for manufacturers to offer products as a service. For example, a maker of heavy equipment could contract the use of its equipment on a per-hour-of-use basis rather than sell it in a one-time transaction. In this way, the manufacturer creates an ongoing relationship with the customer, providing continuous cash flow and opportunities to add more business.
What Canadian manufacturers should do
- Get moving on Industry 4.0. Robotics, IoT sensors, cloud networks and AI will be an essential requirement by 2030. You should also explore how to integrate Industry 5.0 innovations into your operations and whether you can even leapfrog over Industry 4.0.
- Tomorrow’s manufacturing is going to require different skills. Adopt new employee recruitment methods and open channels to high-skill candidates while introducing retraining programs for existing employees to fill skill gaps.
- Manufacturers should look at how they can serve customers better through customization and reduced lead times. Converting your business model to provide services rather than making one-time transactions will also be a promising avenue for many companies.
Top trends for the Construction sector in Canada
The construction industry has been a pillar of the Canadian industry for more than a century. Today, there are close to 150,000 SMEs in the industry, employing some 1 million workers. However, the construction sector has been slow to embrace change. As a result, it’s missing out on opportunities and exposing itself to competitive threats.
What and where to build
To keep pace with Canadian society, construction businesses have to think about both what and where to build. While it is hard to predict the long-term effects of the pandemic, it is clear that the Canadian population will continue to grow and very likely that most of that growth will be in cities and suburbs.
There will be a need for more affordable housing, transportation and utility infrastructure. This will create both challenges and opportunities for construction companies in major metropolitan areas as well as in smaller, less expensive centres that have experienced rapid growth since the pandemic.
As immigration resumes, it will once again become a driver of population growth and could reshape demand for housing. For example, there could be a shift towards multi-generational housing in line with non-western cultural traditions. Meanwhile, younger generations will place a high value on affordability while baby boomers will look to downsize from family homes to condos or retirement residences. The convergence of these trends could mean the existing housing supply will be transformed to increase density in cities.
Additionally, the COVID pandemic has permanently changed work patterns. There will be reduced demand for commercial real estate as remote work becomes the norm. People are also seeking more space where they live to accommodate home offices. At the same time, office layouts may need to be rethought to make permanent space for physical distancing.
Adapting to climate change
The construction industry is responsible for major environmental impacts. According to the World Economic Forum, it’s the largest consumer of resources and raw materials and buildings are responsible for 25% to 40% of global energy use and, therefore, are a huge source of greenhouse gas emissions.
Sustainability will be an important focus for the industry in the future, including the use of new materials and processes to reduce environmental impacts. At the same time, the industry will have to make buildings and other infrastructure more resilient to withstand the higher frequency of natural disasters caused by climate change.
Incorporating new technology
The construction industry has been hesitant about adopting new technologies and, as a result, labour productivity has stagnated. Incorporating more technology will not only enhance quality and safety but also help to mitigate labour shortages.
Examples of the technology available to construction companies include modelling software, aerial drones and 3D printers. SMEs with limited resources may want to explore gaining access to technology through partnerships with larger companies or by sharing equipment with other smaller firms.
As is the case with manufacturing, construction businesses will have to seek out employees with the skills to work with new technologies and retrain their current workers. This is a tough challenge because the competition for tech talent is particularly noticeable in the construction industry.
What Canadian construction companies should do
- Construction companies should prepare to scale up to meet increased demand created by population growth. SMEs should also keep a close watch on evolving consumer preferences and incorporate them into new offerings.
- Entrepreneurs should emphasize sustainability in their operations and projects, including material reduction, waste reduction and using recycled materials and more efficient assembly methods. As extreme weather events increase in scale and frequency, SMEs should also explore ways to make their projects more resilient to natural disasters.
- Construction companies need to invest in new technologies, hire tech savvy employees and increase the skills of existing workers.