Recent headlines would have you packing your briefcase and heading for greener pastures: ‘Canada lags the world financial markets; Canada is not living up to its economic potential; Canada is irrelevant.’ With incidents like Kraft firing 1,200 staff

and moving south, it does seem those

pastures lie in the U.S.

Is Canada too small to compete? Well if size matters, we’d all better brush up on our Chinese. No, the real win comes from innovation.

But sadly, innovation doesn’t seem to be woven into our fibre. Canada ranks 15th among Organization for Economic

Co-operation & Development (OECD) member countries in R&D intensity.

And it’s not about a country’s size. Sweden

is number one, Finland number three.

Don’t blame Uncle Paul, either; Canada has one of the world’s most generous R&D tax credits. We also have the most highly educated labour force in the world. Our biggest hurdle is mind-set.

A 2001 study by global management consultant A.T. Kearney found that of the 1,100 companies analyzed, there was a group that consistently delivered +18% annual revenue growth and 21.5% annual growth in shareholder value. These companies are called ‘value growers.’ Their common characteristics are innovation, risk-taking and geographic expansion.

Value growers focus on securing and stretching their core competencies. They invest – in good times and bad – in innovation and product improvements. In fact, these companies invest four times as much as those companies that focus on simple tonnage growth or profit. Loblaw Companies is one of the top value growers in Canada.

While many packaged goods companies have shuttered their Canadian new product and innovation groups, President’s Choice launches dozens of new items every year. Loblaw’s attitude toward new products is central to the brand experience. Several years ago when I worked on the brand, the client told me that PC was Loblaw’s loyalty program. Shoppers come back again and again because of the products they can only find at Loblaws. And PC is also exporting a number of successful SKUs to U.S. chains.

Canadian Tire would also likely be a ‘value grower’ had it been included in the study. With an aggressive new product development and innovation strategy, Canadian Tire has defended itself against the likes of Wal-Mart and Home Depot by pursuing a strategy of innovation. And yes, the couple is annoying, but the products are cool.

Success stories often start when a company’s management asks itself: ‘What business are we really in?’ Only when that’s defined in a simple and inspiring way can a company create a platform of sustainable growth. Had Loblaw defined itself simply as a grocery chain rather than as a ‘consumer advocate,’ President’s Choice would never have been launched.

Standing in stark contrast are Sears and The Bay. These entities must take drastic action. By offering average merchandise at average prices to the average consumer, the Canadian department store is becoming increasingly irrelevant as the market polarizes into premium and discount with consumers sidestepping the middle ground.

Firms need to think like an underdog. Underdogs realize they can’t outspend their competition so they focus and act more audaciously. Like FamiliPrix. The Quebec drug store chain’s success has come from redefining its brand and taking a different communications approach than its staid competitors. Cirque du Soleil redefined its category of entertainment and stretched its geographic limitations to become a global success. Jones Soda, meanwhile, has carved a niche for itself through its quirky identity, ever-changing packaging graphics and unique flavours (have you tried the Turkey and Gravy?)

Another way small innovators can succeed is by finding like-minded partners in distribution, implementation, or R&D. In the ad industry, indie shops have linked together through a virtual network to enable them to compete with global networks. By sharing information, a small independent shop can bring global perspective and resources to a client’s issue – without having to become part of a massive holding company.

It’s time to stop lamenting our size and our neighbour to the south. Without an entrepreneurial, underdog attitude you just might be the next in line for a pink slip.

Arthur Fleischmann is president/CEO of agency john st. in Toronto. He can be reached at afleischmann@johnst.com.