Generative AI, suddenly, is everything, everywhere, all at once.

In the Okanagan Valley, the city of Kelowna is using AI to automate permit applications and answer questions about municipal bylaws, hoping to speed up building processes in the face of a housing crunch¹. In Edmonton, global engineering giant Stantec has developed an AI-powered tool to analyze massive data sets on river flow, land use and water runoff patterns to help mitigate flood risk for infrastructure projects². In Halifax, Dalhousie University researchers are training computers with thousands of photos and audio recordings of dairy cattle to see if their facial expressions, or something in the way they moo, offers a clue to how they are feeling—contented cows are known to produce more milk.

Artificial intelligence is the transformational technology of our time, with seemingly no end of applications as it accelerates a fourth industrial revolution fueled by data and electrons. Massively powerful, amazingly versatile, and only partly understood, AI uses technology to do things that usually require human intelligence. It scours massive datasets to look for patterns, solve problems and perform tasks.

Investing in Gen AI, along with other technologies, would not only help close the productivity gap; it could add to higher wages and help Canada compete in an increasingly digital and data-driven world.

Its latest iteration, Generative AI or Gen AI, uses machine learning to train computers to create things— write reports, code software, design molecules and produce art³. Gen AI has raised concerns about privacy, misinformation and ethical implications. It’s also posing a challenge to electricity supplies as each ChatGPT request to use one example consumes 10 times the amount of energy as a Google search.

By the same token, Gen AI holds the potential to get Canada’s economy growing again through accelerated innovation and productivity. The big question is whether Canadian businesses and public sector organizations will seize the moment.

Canada’s productivity rate—the amount we produce for each hour worked—has been declining in recent years, and is now 30% below U.S. levels. A key reason is a decline in capital spending and investments in intellectual property (which is now about 40% less than the U.S.). Our manufacturing sector invests just a quarter of what the U.S. does by the same measure⁴. Investing in Gen AI, along with other technologies, would not only help close the productivity gap; it could add to higher wages and help Canada compete in an increasingly digital and data-driven world.

Canadian businesses need to move now or risk getting left behind. What’s needed most of all is a change in mindset.

In business, such investments can make workers—be they white collar, green or blue—more productive by saving time and streamlining routine tasks. A study by Microsoft found coders who used Gen AI tools could complete tasks in 56% less time than non-users, and the time taken for writing tasks was reduced by more than a third (37%)⁵. Estimates for how much time it could save range from 100⁶ to 125 hours per worker per year⁷, boosting labour productivity by 8% by 2030.

What business wants from Gen AI is to help save employees time to work on more important tasks and create more value. A survey of Canadian start-ups by the Conference Board of Canada found 63% said implementing AI would not reduce headcount and 30% said they weren’t sure⁸. (Two-thirds said it has already made them more competitive).

The productivity boost from Gen AI could add $180 billion per year to the Canadian economy by 2030⁹, with another $5 billion coming from the creation of new Gen AI products and services¹⁰. The Conference Board sees it adding almost 2% to Canada’s gross domestic product with tech centres like Toronto, Waterloo and Vancouver gaining the most¹¹.

Why then are Canadian businesses so far behind in adopting Gen AI? A recent report from the Canadian Chamber of Commerce revealed that one in seven Canadian businesses, or 14%, are using Gen AI or have plans to use it soon. Almost three out of four, or 73%, are not even considering it yet. The reasons are what one might expect for any revolutionary new technology—cost, concerns over data safety, doubts that workers have the skills to use it, and fear of making a mistake.

Fear of AI is not limited to those who run businesses or public sector companies. Polling shows less than a third of Canadians (32%) trust AI systems, compared to 39% globally and 40% in the U.S. Only 28% of Canadians believe current regulations are sufficient to make AI use safe¹².

The risks may be too big to ignore, but so too, are the benefits. To be part of the Gen AI generation, Canadian organizations will need to close the “readiness gap.” Because ready or not, the next technological transformation is coming. It may already be here.

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The Growth Project

A new generation of ideas for the Canadian economy.

We surveyed innovators and AI specialists, convened roundtables of business leaders across key sectors, and developed an analytical framework to assess vulnerabilities across the Canadian economy. Finally, we offer recommendations to help with the adoption of Gen AI to ensure its impact is positive and productive for all Canadians.

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To read the full report, visit rbc.com/thoughtleadership

To read more from The Growth Project series, visit rbc.com/thegrowthproject

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References:

1. Microsoft – AI in Canada: Meeting the opportunity and governing AI in Canada, 2023.
2. Microsoft – AI in Canada: Meeting the opportunity and governing AI in Canada, 2023.
3. Microsoft – Canada’s Generative AI opportunity, 2024.
4. RBC – Canada’s Growth Challenge: Why the economy is stuck in neutral
5. Microsoft – Canada’s Generative AI opportunity, 2024.
6. Microsoft – Canada’s Generative AI opportunity, 2024.
7. Conference Board of Canada – Real Talk: How Generative AI Could Close Canada’s Productivity Gap and Reshape the Workplace—Lessons From the Innovation Economy, 2024.
8. Conference Board of Canada – Real Talk: How Generative AI Could Close Canada’s Productivity Gap and Reshape the Workplace—Lessons From the Innovation Economy, 2024.
9. Microsoft – Canada’s Generative AI opportunity, 2024.
10. Microsoft – Canada’s Generative AI opportunity, 2024.
11. Conference Board of Canada – Real Talk: How Generative AI Could Close Canada’s Productivity Gap and Reshape the Workplace—Lessons From the Innovation Economy, 2024.
12. Microsoft – Canada’s Generative AI opportunity, 2024.

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