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COVID-19 – Reinventing our governance and operating models. The Turning Point for Canada and Québec?

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ALAIN DUDOIT

COVID-19

Reinventing our Governance and Operating Models

The Turning Point for Canada and Quebec?

RAPPORT BOURGOGNE 2222020RB-04 RB

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The Burgundy Reports are synthesis documents written by CIRANO researchers and invited fellows on issues of general interests. Their aim is to encourage discussion and public debate on current issues.

Les Rapports Bourgogne sont des documents de synthèse portant sur des questions d’intérêt général produits par des chercheurs et des fellows invités du CIRANO. Ils contribuent à alimenter la réflexion et le débat public sur des questions d’actualité.

CIRANO is a private non-profit organization incorporated under the Quebec Companies Act. Its infrastructure and research activities are funded through fees paid by member organizations, an infrastructure grant from the government of Quebec, and grants and research mandates obtained by its research teams.

Le CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisations-membres, d’une subvention d’infrastructure du gouvernement du Québec, de même que des subventions et mandats obtenus par ses équipes de recherche.

CIRANO Partners – Les partenaires du CIRANO Corporate Partners – Partenaires corporatifs Autorité des marchés financiers

Bank of Canada Bell Canada

BMO Financial Group

Business Development Bank of Canada Caisse de dépôt et placement du Québec Desjardins Group

Énergir Hydro-Québec

Innovation, Science and Economic Development Canada Intact Financial Corporation

Laurentian Bank of Canada Manulife Canada

Ministère de l'Économie, de la Science et de l'Innovation Ministère des finances du Québec National Bank of Canada

Power Corporation of Canada PSP Investments

Rio Tinto Ville de Montréal

Academic Partners – Partenaires universitaires Concordia University

École de technologie supérieure

École nationale d’administration publique HEC Montréal

McGill University

National Institute for Scientific Research Polytechnique Montréal

Université de Montréal Université de Sherbrooke Université du Québec

Université du Québec à Montréal Université Laval

CIRANO collaborates with many centers and university research chairs; list available on its website. Le CIRANO collabore avec de nombreux centres et chaires de recherche universitaires dont on peut consulter la liste sur son site web.

© June 2020. Alain Dudoit. All rights reserved. Tous droits réservés. Short sections may be quoted without explicit permission, if full credit, including © notice, is given to the source. Reproduction partielle permise avec citation du document source, incluant la notice ©.

The observations and viewpoints expressed in this publication are the sole responsibility of the authors; they do not necessarily represent the positions of CIRANO or its partners. Les idées et les opinions émises dans cette publication sont sous l’unique responsabilité des auteurs et ne représentent pas nécessairement les positions du CIRANO ou de ses partenaires.

ISSN 1701-9990 (online version)

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Foreword and Acknowledgements

Although the content of the document focuses on the Government of Canada. the issues identified are relevant to Quebec since its government has implemented policies that complement those of the federal government, hence the title. These policies are the subject of regular analyses and contributions, from CIRANO.

I would like to thank the following people for their comments and suggestions: Alain Barrier, Michel

Drouin, Pierre Joncas, Nathalie De Marcellis-Warin, Luc Pinard, Ari Van Assche, Thierry Warin, Dave

Waters, Joelle Zoghbi, Yolaine Dudoit-Correa, and Pauline Flandrois. I remain solely responsible for the

text and any errors it may contain.

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Table of Contents

Abstract

Introduction

Part I: Nature of the crisis and implications

Part II: Reinventing our governance and operating models Part III: Roadmap to the new normal

3.1. The foundations of the innovation-based recovery plan:

“Not reinventing the wheel” nor maintaining the status quo 3.1.1. Some innovation policy instruments

3.1.2. Need to upgrade the nine economic strategy tables and the five innovation superclusters - two examples

3.2. For the consolidated deployment of five economic recovery strategic taskforces:

3.2.1. Strategic taskforce: public health 3.2.2. Strategic taskforce: digital technology

3.2.3. Strategic intergovernmental taskforce: the internal market 3.2.4. Strategic taskforce: the national transport network and trade corridors

3.2.5. Strategic taskforce: international trade and supply chains 3.3 Governance and coordination of strategic taskforces

Conclusion

Annex I- Background: The Nature of the Crisis

A) Context/early warnings and state of preparedness B) Necessary audit and lessons learned

C) Crisis management - international dimensions D) Anticipated implications

Annex II

Economic Strategy Table - Health: Overview Report (excerpts) Economic Strategy Table - Digital: Overview Report (excerpts)

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2

As we reflect on the implications of this pandemic for all levels of society, the Burgundy report, " COVID-19 Economic Policy Options for Managing and Recovering from the Crisis in Quebec and Canada ", by Henri-Paul Rousseau, recently published by CIRANO3, offers a timely contribution to this consideration. This is also the case with the report published by the Public Policy Forum proposing a challenge-based industrial strategy for Canada4. The mobilization of CIRANO’s network of researchers is underway. It is responding to calls from several

organizations to help the Government of Quebec in its immediate decision-making, particularly with respect to public health issues. This mobilization must continue and expand, given the many complex and critical challenges facing us. These initiatives are part of an impressive worldwide movement to share data, analyses, and knowledge in real time to defeat the coronavirus. They will contribute to more effective management of strained health systems and the considerable socio-economic challenges that arise from this crisis, while reducing the risk of economic depression. They all call for national and international cooperation that is commensurate with the major global challenge facing all of us.

3 Henri-Paul Rousseau, COVID-19 - Economic Policy Ideas for Managing and Exiting the Crisis for Quebec and Canada, Burgundy Report, CIRANO, March 2020

4 New North Star II A Challenge-Driven Industrial Strategy for the Age of Intangibles

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6

The new distancing imperative dictated by COVID-19 reinforces these trends for the long term and imposes new public policies in Canada. This will not be the last public health emergency to threaten Canada and the world.

The gradual phase of fragile deconfinement will be followed by a long period of distancing in all areas of social and economic activity.

This new situation is leading to the emergence of new operating models based on digital technology. We must act now and responsibly accelerate this necessary transformation.

Annex I provides more details in support of this synthesis on the context of this crisis: its early warnings; our state of preparedness; the necessary audit and lessons to be drawn from the management of the crisis; its international dimensions and anticipated implications.

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9

An agile organization thus adds velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions19. The adoption of such an agile organizational model must be compatible with the fundamental principles of

parliamentary democracy, such as ministerial responsibility, accountability, and sound management of financial and human resources.

Such a conceptual model promotes the ability to adopt and implement citizens/service users’ centric strategies, structures, processes, people, and technologies through, among other things, simplified and targeted interactions quickly and effectively. It values collaboration, teamwork, and innovative organizational management.

This heavy trend in innovation based management is accelerated by the COVID-19 crisis and requires us to transform our current governance and operating models towards an agile organizational model such as the one illustrated in the McKinsey & Company article referenced in this document and adapted for this synthesis in the following two graphs and table:

Graph 1: Traditional Hierarchical Organizational Model: Government and Departments

19 W. Aghina, K. Ahlback, A. De Smet, G. Lackey, M. Lurie, M. Murarka, C. Handscomb, The five trademarks of agile organizations, McKinsey & Company, 22 January 2018. See also: G. D’Auria, A. De Smet, Leadership in a crisis: Responding to the coronavirus outbreak and future challenges, McKinsey & Company, 16 march 2020

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10 Graph 2: Agile organization model

The main characteristics of agile organization models according to this McKinsey & Company analysis can be grouped into five categories of management practices to be implemented; they are directly relevant to the public service and are summarized in this table:

Table 1: Five characteristics of the agile organization model (adapted from McKinsey & Company)

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12

Henry M. Paulson Jr.24former U.S. Secretary of the Treasury, recommends a modern National Marshall Plan that should include massive public and private investment to rebuild and create the infrastructure of the future.

According to him, this program can play an important role in stimulating recovery, creating jobs, and boosting the market. But it must be forward-looking, not only repairing and maintaining roads and bridges, but also investing and making regulatory changes to create a first-class national digital infrastructure.

It is a similar approach that Canada needs to take in the proposed recovery plan. It is the approach that informs the roadmap proposed in this document.

At this stage, we have little information on the role that will be played by the new Industrial Strategy Council announced on May 8 by the Minister of Innovation, Science and Industry, the Honourable Navdeep Bains.25

According to the press release, this council will have an advisory role to assess the scope and depth of COVID-19’s impact on industries and inform the government’s understanding of specific sectoral pressures. It will provide economic policy recommendations to the appropriate federal ministers. This additional advisory body will build on the strong foundation already established by the economic strategy sector tables.

In this perspective, it is useful to highlight that the report of Canada's Economic Strategy Tables, "The Imperative of Innovation and Competitiveness: Seizing Opportunities for Growth," stems from thirty-four meetings held in Canada from October 2017 to July 2018 between ninety CEOs and federal deputy ministers and contains thirty-two recommendations, most of which remain to be implemented (based on information available to date). The report highlighted the move to Phase II in 2018:” Moving into Phase II, we need to maintain our momentum. That means engaging our sectors into action, sustaining the table apparatus, refreshing our membership, and connecting with superclusters, all levels of government and educational institutions. Basically, making change happen ".

The pandemic is forcing us to move into “Phase III”: accelerating the implementation of the relevant policy measures and recommendations in the sectors most critical to exit from the crisis and to reset the economy badly hurt by COVID-19. The title of this new advisory board is intriguing: it focuses on post-COVID-19 industrial strategy. However, the question remains open as to the scope of its mandate:

• Will it confirm a traditional "business as usual" consultation scenario? or

• Will it be equipped to take on the critical role of accelerating the transformation required by this major crisis and mobilize the necessary reinvention of our models of governance, operations, and collaboration?

The credibility and impact of this council will depend not only on the nature of its mandate but also on its autonomy of action, the independence of the expertise it will benefit from, and the transparency of its activities. These

considerations are developed in section 3.3. of the document.

24 H. M. Paulson Jr., 7 principles for a post-coronavirus economy, The Washington Post, April 10, 2020

25 Minister Bains announces the creation of the Industrial Strategy Council, Innovation, Science and Economic Development Canada, May 8, 2020

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15

Table 2: Summary of Innovation Policy Measures - Government of Canada

NATIONAL PUBLIC SERVICE TRANSFORMATION30

STRATEGIC INNOVATION FUND BEYOND 2020 AND PUBLIC SERVICE RENEWAL

INNOVATIVE SOLUTIONS CANADA DATA STRATEGY ROADMAP FOR THE FEDERAL PUBLIC

SERVICE

INNOVATION CANADA DIGITAL OPERATIONS STRATEGIC PLAN 2018-2022 VENTURE CAPITAL CATALYST INITIATIVE RESPONSIBLE USE OF ARTIFICIAL INTELLIGENCE (AI)31 EXPORT DIVERSIFICATION STRATEGY AND

TRADE POLICY (ECONOMIC AND FISCAL

STATEMENT 2018)

IMPACT AND INNOVATION UNIT OF THE PRIVY COUNCIL

OFFICE

TRANSPORT 2030-ASTRATEGIC PLAN FOR THE FUTURE OF TRANSPORTATION IN

CANADA

The implementation of these various policy measures is accompanied by an effort to streamline the delivery of more than 90 federal programs that support business innovation. They are consolidated around four flagship platforms:

the Industrial Research Assistance Program (IRAP); the Strategic Innovation Fund; the Canadian Trade

Commissioner Service (including the merger of several trade promotion programs); and the regional development agencies.

Moreover, tax policy as well as regulatory reform and the removal of barriers to the internal market are expected to support this national innovation strategy. Various departmental plans32 have been developed after consultations and launched separately under the responsibility of specific portfolios.

A number of these initiatives by the federal government, as well as those taken by the Government of Quebec and other jurisdictions, are essential to the success of this undertaking to emerge from the crisis and reset the economy through innovation and accelerated digital transformation. Under the circumstances, it would be unproductive to wipe out all these initiatives.

30 The collective desired outcome of these internal initiatives is a more agile, inclusive, and better equipped public service.

31 Digital Disruption White Paper Series, Responsible Artificial Intelligence in the Government of Canada

32 Departmental Plans 2020-2021, Treasury Board of Canada Secretariat

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16

3.1.2. Need to upgrade the nine33 economic strategy tables and the five innovation superclusters The Economic Strategy Tables put forward an ambitious plan for the long-term growth of Canada's innovation- driven economy. These tables chaired by industry leaders focused on six key sectors: advanced manufacturing; agri- food; clean technologies; digital industries; biosciences and health; and clean resources of the future.

The original six tables made a total of 32 recommendations, which are contained in the report of the "Canada's Economic Strategy Tables “The Imperative of Innovation and Competitiveness"34. The sectoral reports for each of these tables are accessible from this interactive table:

ADVANCED MANUFACTURING HEALTH

CLEAN TECHNOLOGIES THE AGRI-FOOD SECTOR DIGITAL INDUSTRIES RESOURCES FOR THE FUTURE

Because of the pressures associated with the pandemic, Minister Bains also confirmed the addition of two new Tables, representing the retail and transportation sectors. when he announced the establishment of the new Industrial Strategy Council on May 8. With this latest addition, the minister has a total of 14 collaboration and/or consultative platforms under his responsibility:

Figure 3: Industrial Strategy Council

33 The seventh Sectoral Economic Strategy Table on Tourism, dates back to the March 2019 federal budget. Two more tables were added on May 8, 2020: Transportation and Retail Trade.

34 Report of Canada's Economic Strategy Tables: The Imperative of Innovation and Competitiveness, Innovation, Science and Economic Development Canada

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