But there was a problem. Compressors were so heavy and bulky that they needed to be towed behind a truck. That's where Vancouver Island's VMAC came up with a better idea. That idea revolutionized the mobile compressor industry and created a robust international business for VMAC.

The company developed a rotary screw compressor technology in the late 1990s that made air compressors lighter, more powerful and compact enough to fit under the hood of a truck.

"There weren't a lot of folks pushing the envelope of this technology," says Jim Hogan, President and co-founder of VMAC. "They were either complacent or not technically savvy enough. So we took advantage of that opportunity."

Today, VMAC's full line of compressors and systems can be found in thousands of vehicles worldwide. And with 10 of its 70 employees focused on R&D, the new products, improvements and efficiencies keep coming. The company, which does most of its design, engineering and manufacturing at a three-hectare facility in Nanaimo, has won multiple awards for its manufacturing excellence and business savvy.

VMAC (Vehicle Mounted Air Compressors) is among the thousands of Canadian companies that are developing new products or improving existing technologies, processes, designs and marketing to solve problems and reach new customers. Now, the challenge is to persuade thousands more-particularly small- and medium-sized businesses-to do the same.

"To stay competitive these days, entrepreneurs should invest in their capacity to innovate," says Jean-René Halde, President and CEO of the Business Development Bank of Canada. "In other words, they should invest in things that enable them to constantly improve their products and services, and how they produce them. An investment in information and communication technologies is a good place to start."

"Innovation can also mean, for example, improving processes to cut costs and taking that money to buy a new piece of equipment. Or trying a new marketing idea."

The latter is just what VMAC has done. You wouldn't expect a manufacturer of air compressors to go hog-wild with Internet marketing. Yet, not only is VMAC on Twitter and Facebook, it has also developed a series of ninja spy movies for YouTube as a way of generating customer interest in the launch of a new technology.

Investing in equipment is a good start

A report card released earlier this year by the Conference Board of Canada gave Canada a D for innovation, ranking the country 14th among 17 industrialized nations. The grade reflects inadequate levels of R&D and investment in capital assets, such as property, machinery and information and communications technologies.

"Companies that invest cleverly in capital assets reap the benefits in terms of higher productivity, innovation and competitiveness," says Conference Board President Anne Golden.

Canada's D rating was also based on its ability to turn R&D advances into money-making products and services.

"There's a lack of savvy in terms of the marketplace and a failure to commercialize new products and services to the same extent as other countries," Golden says. "We need to boost our ambition, individually and collectively."

It's not just Canada's competitors in developed countries that are embracing innovation. Halde notes that emerging markets such as China and India are innovating at break-neck speeds. He describes this as a "terrible threat" for Canada.

"The world is turning up the heat on us," he says. "Other countries are becoming more competitive and more productive and we're not noticing it yet. Companies can't afford to wait until their markets have disappeared."

While there is no magic bullet to solving Canada's lagging innovation performance, there are reasons for optimism. Golden says the operating environment in Canada is becoming more favourable for small companies. This includes improved local, provincial and national policies on a series of fronts such as taxation, regulation, education, infrastructure and intellectual property protection.

"Our tax policies have undergone quite a bit of reform in the last decade and they're creating a more positive environment for business to succeed," she says. "Canada's image internationally is also good right now as a result of our sound banking regulations and financial success."

While government policies help, Halde says that the greatest source of innovation will always be business leaders with a sustained commitment to doing things better and a willingness to seize opportunities.

"I believe the fundamental challenge Canada faces is one of mindset," says Halde. "Companies of all sizes must understand that their company's competitiveness depends on their capacity to innovate and to adjust their investment decisions accordingly. Embrace risk-taking and aim higher. Aim for the top."

Such was the case at VMAC, which was founded by Hogan and Tony Menard, both engineers who were determined to deliver reliable, high performance products that are lightweight, compact and durable. Constantly changing truck designs keep VMAC on its toes, sometimes with only a few weeks' notice to adapt their compressor to fit into smaller engine compartments.

"I've developed my own philosophy about innovation," says Hogan. "It may sound corny, but you have to think you're smart and try things.

"If you don't, your competitors eventually will. The prize goes to the people with the guts to try."

How to adopt an innovation mindset

1. With your team's help, develop an innovation strategy on how to improve your products or services, your processes, your marketing strategy, your business model and your supply chain. Then keep it up to date.
2. Tap the creativity of your employees. They have intimate knowledge of your business and industry and will often be your best source of ideas.
3. Look for ideas and feedback from suppliers, customers and other stakeholders. It could be as simple as changing a process, adapting a product to a new market or exploring new ways to reach customers.
4. Invest in capital assets that improve your competitiveness, especially information and communications technology. The high Canadian dollar can make this a particularly good time to invest.
5. Don't look for the magic bullet. Focus on continuous incremental improvements.
6. Study innovation, change and creativity. Educate yourself. Go to conferences and travel.
7. Take action on new ideas. Even if they fail, have faith that you're on the path to innovation.