Investing in AI-driven competitiveness

Understanding where we are today

AI adoption is accelerating at an unprecedented rate, with organizations worldwide shifting from simply integrating AI into existing processes (+AI) to reimagining their operations around AI-first strategies (AI+). Currently, Canada is at a pivotal moment: those who embrace AI will gain a competitive edge over those who don’t. Following the announcement of the $2.4bn investment to increase job growth in Canada’s AI sector, it becomes crucial for business and government leaders to act strategically. So, how can Canadian leaders continue to enhance the nation’s global standing?

Government leaders and business executives must stay abreast of the five key trends shaping AI adoption in Canada today.

1. Agentic AI: Transforming government operations

Agentic AI, which enables intelligent autonomous agents to execute tasks relatively independently, presents a great opportunity to automate activities and processes in government. These AI systems can learn and improve with every interaction, reducing costs and improving experiences for citizens. The integration of AI-driven automation can enhance service delivery and strengthen public trust in digital governance. By using Agentic AI, Canada can build trust in digital governance by providing faster and reliable services, helping shape a more responsive government.  

2. Addressing technical debt

A major challenge in AI adoption is the increasing amount of technical debt: outdated systems and architectures that increase the cost and complexity of modernization. To remain competitive, organizations must prioritize infrastructure upgrades to support AI initiatives, helping ensure long-term agility and innovation. When Canadian organizations take a proactive approach to IT modernization, they set themselves up for long-term success, allowing them to fully leverage AI’s potential for tremendous impact.

These modernization initiatives should consider adopting a hybrid cloud architectural approach. Hybrid cloud combines and unifies public cloud, private cloud, and on-premises infrastructure to create a single, flexible, cost-optimal IT infrastructure.

3. Establishing Canada as a hub for AI excellence

Geography plays an integral role in AI development. Positioning provinces, regions, and cities as AI innovation centres attracts investment and talent, fostering collaborative ecosystems. By promoting research and development of AI technologies within Canada, the nation can continue to build a bustling AI sector that attracts top talent and valuable partnerships. This environment creates jobs and ensures that Canada capitalizes on opportunities driven by its own skilled workforce. Without such a focus, Canada risks losing talent and falling behind in the global AI race.

4. The rapid pivot to AI

Organizations must move past experimentation and shift towards implementations that lead to positive measurable ROI. By embedding AI into core business strategies, organizations can boost efficiency, streamline processes, and unlock new paths for growth. AI adoption is being driven by companies who understand its potential to reduce costs, improve decision-making, and deliver better customer experiences. Those who fail to adopt AI risk falling behind competitors who are already embedding AI into every aspect of their operations.

5. AI-driven innovation

AI is reshaping traditional business and governance models, requiring bold leadership to drive innovation. Statistics Canada found that technology adoption and innovation was the leading factor that improved their operational efficiency over the last year. Governments must recognize that adopting AI-first strategies is needed to improve public service and meet citizens’ evolving needs. Innovation through AI can reshape the fabric of Canadian governance, making it more citizen-centric and future-ready.

IBM’s model for transformative AI integration in public sector operations

IBM’s own experience successfully integrating AI technology exemplifies its transformative potential in the public sector. Leveraging the trusted AI platform watsonx, IBM has optimized operations across various departments including finance, legal, and HR, demonstrating tangible improvements in productivity and cost efficiency. A prime example is AskHR, an AI-powered digital assistant that has automated over 765,000 HR tasks, reduced operational costs, and freed up human resources personnel to concentrate on higher-value responsibilities. IBM’s approach to AI implementation emphasizes safety, security, and ethics, rejecting applications that fail to meet stringent guidelines. This robust governance model enables trustworthy AI output, and establishing strong partnerships with a shared vision for AI adoption can significantly enhance productivity, improve service delivery, and optimize resource allocation.

Three models of AI consumption

Understanding how organizations consume AI is crucial for ensuring that Canadian enterprises remain competitive.

1. The “baked-in” model allows users to leverage AI-enhanced features in commercial applications. While beneficial, it does not provide a competitive edge, as the same AI tools are available to everyone.
2. The prompting model allows organizations to access AI through third-party providers, using APIs or chat interfaces. While this enables AI utilization without heavy infrastructure investments, it limits control over data security, model governance, and long-term differentiation.
3. The platform model is the most strategic approach (AI+) which involves developing proprietary AI models tailored to business needs. Organizations that customize AI models while maintaining governance and data control can scale AI adoption securely and responsibly. Choose your platform wisely – platforms matter.

Overcoming AI adoption barriers

We stand at a crossroads in AI adoption. The Canadian Chamber of Commerce’s Business Data Lab highlighted that top barriers to slow adoption of AI were high costs and a lack of skilled workers and warned that if we don’t accelerate adoption of AI, we risk falling behind global competitors. Investing in AI reskilling and infrastructure modernization is not just about remaining competitive, it’s about securing the nation’s economic future. Organizations and government institutions must take proactive steps to support AI-driven growth, to help ensure that Canadian expertise in AI stays within Canada and drives sustainable development. Now is the time to act. By embracing AI-first strategies, fostering local innovation, and prioritizing governance, Canada can establish itself as a global leader in AI. The future of work, public service, and economic prosperity depends on how we navigate this transformation today. The question is not whether AI adoption is necessary, but how quickly Canada can lead and reap the productivity benefits in the global AI landscape.

For more insights on how governments can prepare and transform, you can read this report from the IBM Institute for Business Value: Building future ready governments

About the author

Bob Conlin, Managing Director, Technology, IBM Canada

As IBM’s Technology Managing Director for the Canadian Federal Government, Robert Conlin is responsible for client success and growth.

He has 22 years of sales and management experience spanning microelectronics and enterprise software within the Telecommunications and Public Services industries in Canada.

Since 2007, Robert has had ascending roles and built diverse and highly successful national teams focused on Digital Transformation opportunities within the Canadian Public Services.

Robert is a graduate of Carleton University in Ottawa with a Bachelors of Commerce w/honors.