Minister of National Defence David McGuinty (left) and COVE CEO Melanie Nadeau (right) during the announcement of Canada’s first Maritime Defence Innovation Secure Hub (DISH) at COVE in Dartmouth, N.S. on November 21, 2025/COVE

By Melanie Nadeau

August 17, 2026

Canada’s Defence Industrial Strategy (DIS) is six months old today. Since its release, the government has been working to develop sovereign capabilities in Canada, including via negotiations to produce new Airborne Early Warning & Control (AEWC) aircraft with Bombardier and Saab, and an expanded fleet of armoured vehicles with London, Ontario’s General Dynamics Land Systems.

These are important and worthwhile initiatives, but they also hint at a limitation of the DIS: the strategy is set up to support large prime contractors, many of which are foreign subsidiaries, rather than Canadian-owned and -operated small and medium enterprises (SMEs). Far more needs to be done to ensure that Canada’s SMEs will flourish under the DIS.

A key objective of the DIS is the development of national champions in the following sectors: aerospace, ammunition, digital systems, in-service support, personnel protection, sensors, space, specialized manufacturing, training and simulation, and uncrewed and autonomous systems.

Understandably, this has led the federal government to focus its initial efforts on large, established firms. Canada already has successful companies in these sectors, and these firms benefit from many advantages, including research and development budgets, regular access to the military and global defence markets, and privileged access to federal ministers and officials.

But Ottawa risks becoming too comfortable relying on these established companies at the expense of building new companies in a wider variety of sectors. Emphasizing and working with dominant defence companies is the path of least resistance; one Canada has followed for decades.

Fostering truly sovereign capabilities and branding Canada as a leader in defence innovation requires working with underdogs and upstarts, not just the usual suspects.

One reason for our national blind spot is that the DIS lacks the mechanisms to identify viable SMEs and prepare them to participate in the competitive world of defence procurement.

Instead of encouraging SMEs to develop their own innovations and solutions, Canada’s default has been to push them toward working with large prime contractors, who often have head offices in the United States or in Europe. This has allowed many SMEs to turn a profit and grow, but it leaves Canada with fewer innovators and builders.

Fostering truly sovereign capabilities and branding Canada as a leader in defence innovation requires working with underdogs and upstarts, not just the usual suspects.

To get around this problem, Ottawa needs to empower defence incubators and accelerators. They are best placed to identify SMEs with the highest potential, reduce risks through operational testing, and connect companies with the Canadian Armed Forces to ensure that the military is getting the capabilities they want and need.

There have been initial steps toward empowering and encouraging incubators and accelerators, notably through the establishment of Defence Innovation Secure Hubs (DISH), but far more must be done to recognize and support those whose mission is to identify and support worthy SMEs who do not know how to break into defence.

One way to make this happen is to leverage the expertise of the DISH. The validation and testing done with Canadian SMEs at the DISHs should be complemented by accelerated procurement pathways. Those closest to Canada’s small businesses and innovators should be the ones charged with guiding them to market and helping them navigate Ottawa.

Rather than making effective use of the DISHs, Ottawa now provides a concierge service through Innovation, Science and Economic Development Canada (ISED) for companies who want to work in defence. This assumes that companies are already well positioned to sell to the military, which is simply not the case for many new entrants. And it reflects an older way of thinking, where industry was expected to come to the government to pitch what they could do.

It worked, as long as the government did not want a role in managing the development of the defence sector. Now that Ottawa is committed to building new champions, this approach will not do.

The government must establish better ways to scout and support the smaller firms that will drive real innovation and become new national champions. The DISH provides the obvious path forward. Put bluntly, those who know and work directly with new defence SMEs  should be helping them get to market and supply our military.

That can be achieved by incorporating DISH insights and innovation more purposefully and directly into the procurement process so that Canada’s most innovative defence-related SMEs can contribute to this historic, all-hands-on-deck mission.

Canada’s big defence firms should be a source of pride. They are leaders in several sectors that will be key for Canada’s defence industrial ambitions. But Ottawa should not overlook Canada’s smaller companies and innovators. They will be Canada’s next champions, if we give them the chance.

Melanie Nadeau is CEO of COVE.