How large enterprises can close the innovation gap

This is the first installment of a new monthly interview series called Innovation at Scale, in which noteworthy leaders share ideas and experiences for driving change inside large and established Canadian organizations.

Grace Lee Reynolds has ideas for how Canada’s biggest businesses can get more innovative. Dozens, in fact.

As CEO of the MaRS Discovery District innovation hub—a role she assumed in early 2025, not long after returning to the organization where she spent most of the 2010s—she spends her days surrounded by some of the most exciting startups in the country. She sees ambitious technical founders embodying Canada’s disproportionate R&D prowess and challenging what’s possible in life sciences, defence, cleantech, AI and more.

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Reynolds gets what startups do best. And in the new reality of near-daily shifts in the technological, geopolitical, and economic world orders, she sees a real opportunity for large and established Canadian institutions to harness more of their magic.

We spoke to Reynolds from the MaRS Centre in downtown Toronto.

MaRS is in the business of innovation. If you ask a dozen different people what it means to innovate, you might get a dozen answers. What’s your interpretation?

Innovation is about solving a problem. It’s different than ideation or invention. You may have an idea, and perhaps you produce something that’s a representation of that idea. But the innovation lies in defining the problem you are trying to solve, finding the product or service or path or process to solve it, and actually putting in place processes and tools to make those changes.

Taking it a step further, the innovation economy is about ensuring you’re building economic value from the change you’re putting into place. That’s true if you’re a startup, and that’s true if you’re a larger enterprise.

Are you seeing innovation becoming more strategically important to Canadian organizations in the “elbows up” era?

I think the headline here is about competitiveness in the global economy.

Our organizations, especially larger ones in traditional sectors, need to compete globally—and not just south of the border. Innovation is naturally part of that: They can’t keep doing the same types of things, because they aren’t going to be able to to progress and do better than companies that are coming out of other markets. That goes across many different industries.

But many large organizations struggle to ingest innovation.

Why is that?

The soundness and the stability of many large enterprises can make it difficult to innovate or adopt new things. They tend to focus on what’s working now and what’s stable. The mindset is often about filling a need, versus thinking about the problem they need to solve or the outcome they want to be able to get to.

It’s not like large enterprises or organizations are out there saying, “We don’t want to do anything,” but we do see a lot of their innovation efforts stall at the pilot stage. They’ll try something, discreetly, as a project, usually as a smaller team within the larger organization. But when they try to extend the application or the adoption of that pilot, that’s where the challenge is.

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When you’re operating at scale, there has to be a really intentional leadership view around adoption of innovation as a strategy. It is really hard for innovation to flourish organically in a large organization that is already a system in and of itself.

What does that kind of intention look like, practically?

Here’s one example: We’ve been involved with Ontario Power Generation, a very large organization with a very important mandate. They recognized the need to be able to innovate beyond what was natural in their normal course of business. So, we worked with them to identify the specific operational business problems they wanted to solve, then we ran a challenge with our ventures to work through potential solutions. That program worked because it wasn’t about just hitting criteria based on a formula. It was about changing mindsets to understand the different types of considerations that can factor into a solution.

TD Bank also comes to mind. A few years ago, the bank acquired Layer 6, an AI company that was located here at MaRS. They’ve since become TD Layer 6. They function as the AI development group within the bank overall, and recently announced a partnership with Cohere. That’s an example of an organization saying, ‘We understand what we want to do, and we want to move quickly. Let’s partner.’

Many large enterprises might prefer to keep innovation an internal affair, for competitive, risk, or other business reasons. How can they triage the pros and cons of partnering with a startup?

I don’t want to say ‘It depends,’ but: It depends. There’s not only one way to innovate. Super-innovative large enterprises with a high level of technical capabilities are often able to innovate in-house, though there may be a question of speed. But other large enterprises who clearly understand that there’s something they need that they don’t have might want to look for a partner. Again, so much of it really is about problem definition on the part of the larger institution.

What do startups stand to gain from partnerships?

Canadian startups need customers to be able to thrive. Without customers to adopt their new technology or processes, our whole startup innovation economy stagnates.

First customers are such an important validation for young companies, especially as they’re trying to sell into other markets, where ‘Why aren’t you selling into your own market?’ is often the first question asked. Having a Canadian customer as a first adopter really de-risks these companies and increases their chance of success.

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Also, when startups—especially those in deep tech and sciences—get into large strategic partnerships with foreign organizations, we often see them asked to relocate.

These are important issues to address, when you’re thinking about the long-term health of the Canadian economy. It’s not a situation we can change overnight. But we need to start thinking about it, so that in 20 years, it’s the norm for Canadian companies to stay here, with a strong set of Canadian customers-slash-adopters, and go global from there.

And in the meantime?

In the shorter term, we want a resilient Canada. In this time, this environment that we find ourselves in right now, it is really important that we find more ways to embed innovation at scale in our larger enterprises, because it can really make a difference.

This interview has been edited and condensed.