Brenda Herchmer is the owner of Grassroots Enterprises, a community development consulting company.Canada’s Productivity Problem is Social, Not Just Economic
This week, I had a meaningful conversation with a guy who cares deeply about his work in community economic development. While clearly hardworking and innovative in his thinking, he was honest in admitting that the barriers he encountered while attempting to implement systemic, creative, practical solutions often left him frustrated, angry, and maybe even a little depressed.
Sadly, it’s not uncommon.
We keep hearing that Canada has a productivity and innovation problem. We respond with tax credits, big bets on research and development (R&D), and another round of strategy documents. And yet, the gap with peer countries continues to widen.
What we don’t talk about nearly enough is that innovation is deeply social, and we’re chronically under‑investing in the smaller, social, and community‑rooted entrepreneurs and organizations who could change that.
Over the past few years, I’ve met a growing number of people like the guy I talked to this week. They are often our mavericks or positive deviants – the social and systems innovators, small-scale entrepreneurs, and community builders who focus on the root causes of challenges related to community and economic development.
They are talented and committed. They are also exhausted, isolated, and, frankly, often lonely. They’re not short on ideas. They’re stuck in systems that weren’t designed with them in mind.
Canada’s Innovation Problem Is Hiding In Plain Sight
Canada’s innovation and productivity challenges are now well‑documented: slow productivity growth, weak business R&D, and a stubborn gap between us and the top‑performing countries.
At the same time, only about one in four Canadian Small and Medium Enterprises (SMEs) report engaging in any form of innovation, and activity is heavily concentrated among larger firms. Canada has already recognized “Small and Medium Organizations (SMOs)” as important actors for impact and innovation in its international development policy. Still, we’ve rarely brought that lens to bear on debates over domestic innovation and productivity.
That’s a problem because both SMEs and SMOs form the backbone of our real-world problem-solving capacity. SMEs face structural barriers to innovation – limited access to talent, capital, and know‑how, and an often risk‑averse culture.
Social enterprises and co‑ops, for their part, report higher rates of innovation and technology adoption than the average SME, yet sit on the margins of mainstream productivity conversations. When most of our policies and programs are optimized for large established players and those already plugged in, we shouldn’t be surprised when the broader system stagnates.
Innovation Is Social – and Diversity is a Productivity Strategy
If you spend time in real communities, you see that innovation rarely starts in a lab. It starts in relationships: trust, networks, and the ability to bring different kinds of people and knowledge together to address real problems and opportunities.
The research shows that more diverse communities and organizations tend to be more innovative and perform better. A Statistics Canada study of 152 urban areas found that greater cultural and industrial diversity is strongly associated with higher levels of innovation, with some diversity “shocks” increasing it by up to 80%. Global evidence shows that organizations with more diverse leadership teams are significantly more likely to outperform in innovation‑related revenue and long-term value creation.
In other words, who is in the room – and who feels safe to contribute – is not a “nice to have.” It’s increasingly the engine of competitive advantage. Yet our innovation architecture mostly treats diversity and social infrastructure as peripheral. When we don’t invest in diverse SMEs, SMOs, community‑rooted problem‑solving, or the networks that hold innovators together, we’re not just missing a social justice opportunity. We’re leaving productivity on the table.
Innovation is More Social Than Solo
We often imagine innovation as a lone genius in a garage. In real life, it looks much more like a kitchen table covered in sticky notes – messy, shared, and built on relationships and trust.
Real innovation is collaborative, relational, and messy—less garage, more kitchen table.
Innovation happens when diverse people, sectors, and perspectives collide in ways they never could on their own. Trusted relationships, informal networks, and a willingness to think “we” instead of “me” are what turn good ideas into real change. One of my colleagues suggests, “the weirder the mix, the better the fix.”
What Ernesto Sirolli Got Right
This is where Ernesto Sirolli’s work from years ago remains valuable. His Enterprise Facilitation model is a community‑based approach to entrepreneurship built on a simple idea: development must be homegrown – starting with the passion and ideas already present in a community, not with prefabricated programs flown in from elsewhere.
In practice, it looks less like a pitch competition and more like a barn‑raising. Enterprise Facilitation is person-centred rather than program-centred and bottom-up rather than top-down, transforming passion, skill, and motivation into viable local businesses. Read more about Sirolli at this link.
It respects entrepreneurs as partners, honours their passion, and mobilizes the community’s social capital around them. That’s what “social innovation infrastructure” looks like when it’s done well – and it’s just as relevant to SMOs and social enterprises as it is to SMEs.
The Loneliness of Mavericks
Many of the mavericks I’m meeting across Canada and beyond are, in their own way, trying to do Sirolli‑style work inside systems that barely recognize it. They describe being “too practical” for traditional academic or policy spaces, but “too systemic” or “too social” for conventional business programs. They spend as much time translating their work into a language that funders understand and navigating gatekeepers as they do actually innovating.
That loneliness is not a personal failing. It’s a design problem. We’ve built innovation systems that reward scale, technology, and incumbency – and then wonder why smaller, social, or unconventional innovators, whether in SMEs or SMOs, struggle to be seen.
So, What Do We Do?
When most of our policies and programs are optimized for large, established players and the already‑plugged‑in, we shouldn’t be surprised when the broader system stagnates.
If we’re serious about treating social, diverse, community‑rooted innovation as a core productivity strategy, we need to make some shifts.
Put real money behind smaller and social entrepreneurs and organizations.
Dedicate a clear share of innovation funding to smaller, community‑based enterprises and organizations – SMEs, SMOs, social enterprises, co‑ops – with plain‑language processes, relational support, and flexible timelines. Build evergreen local funds that blend grants, patient capital, and outcome‑based finance, with community leadership at the table. Support models such as Enterprise Facilitation and other local enterprise support approaches that focus on people and relationships rather than just one‑off projects.
Treat social infrastructure as innovation infrastructure.
Fund local intermediaries, hubs, and networks that convene entrepreneurs, social purpose businesses, social profits, Indigenous communities, municipalities, and residents around shared challenges. Support demonstration communities where social, policy, and business experiments can be tested and scaled in real places.
Make diversity an explicit innovation lever.
Embed equity, diversity, and inclusion expectations into major productivity and innovation programs, not as compliance but as strategy. Invest in pathways and supports for underrepresented entrepreneurs and organizations – including peer networks, culturally relevant training, and trauma‑informed approaches.
Build supports that fit SMEs and SMOs.
Scale embedded‑talent programs that help SMEs and SMOs design and implement innovation projects they can’t staff internally. Instead of forcing everyone to become full‑time systems hackers, create regional innovation catalysts whose job is to help smaller businesses and social‑purpose organizations navigate funding, procurement, and partnership opportunities.
Measure what actually matters.
Expand our indicators to track social innovation, inclusive entrepreneurship (reducing the barriers faced by groups that are often excluded from business ownership, including women, immigrants, people with disabilities, and low‑income individuals), and community‑level systems change – not just patents and venture dollars. Start asking different questions in boardrooms and meeting rooms: Who is already solving this problem? Who is missing from the room? How do we support the innovators and entrepreneurs rather than reinvent around them?
I don’t believe Canadians are less innovative or less hardworking than people in higher‑performing countries. I do believe we’ve made it too hard for the right people to lead innovation.
If we want to close the productivity gap, we need to stop treating smaller, social, and community‑rooted innovators and organizations as side stories. They’re not nice to have add-ons after the big bets are made. They are one of the most under‑leveraged assets we have.
Posted on 03-12-26Previous entry: Systems Innovation Isn’t Working: These Two Missing Ingredients Explain Why