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H. Douglas Barber,
O.C., Ph.D., D.Sc., F.C.A.E., P.Eng.
Distinguished Professor-in-Residence
McMaster University

Can R&D Save Canada?


Can R&D save Canada is a legitimate question in relation to Canada’s economy because our position in the prosperity of nations has been in decline for thirty years. Our performance in the world’s knowledge-based economy runs a continuous deficit subsidized by our resource-based economy. Is there a silver bullet that will transform that picture?

Our public investments in education and research place us in the top ranks of the developed economies. However, we place in the bottom ranks in our performance in the knowledge-based economy. There is something wrong with this picture.

Our private sector enterprises, populated by people who are the product of our public sector investments, make investments in R&D that place them in the bottom ranks (Canada's business expenditure on R&D ranks below the OECD average). It is easy to conclude that this is the problem and increased private sector R&D will save Canada.

However, the short answer to the question is “no”. It’s like asking if a bigger propeller could have saved the Titanic. No single component can do it alone. We all know that a delightful dinner is about getting it all together in the correct proportions, at the right time in the right ambiance. Canada is a prosperous country. With 6.5% of the world's resources that would be expected. However, to reverse the decline we need to succeed in the knowledge-based economy where developed minds are the asset. This will be a challenge with 0.5% of the world's population.

In the knowledge-based economy, with few minds, Canada must be very selective and very good in creating value for the world if it is to increase trade and prosperity. To prosper we must specialize and utilize the world’s knowledge and technology to create the best value for our global customers. In special areas we will add significantly to the world’s knowledge and technology. But we will always have to draw on the world’s supply of knowledge and technology because, with 0.5% of the world’s minds, what we can do is limited.

To prosper sustainably we must succeed so well in our specialties that we become the number one, or at worst number two, supplier. We then must use the intimacy and confidence we have cultivated to understand our customers' evolving needs. That understanding becomes the base for continuing to adopt, develop, and adapt what we do to remain the best supplier.

Commerce is a very complex system of relationships, resources and capabilities. In this system the technical and scientific skills of R&D are necessary but not sufficient for success. Indeed, in successful knowledge-based enterprises, R&D is typically less than 15% of what needs to be done and it has to be responsive to customer and business needs.

Unless R&D is an integrated part of the whole enterprise it can be a spoiler instead of a builder. Many start up and early stage enterprises in Canada fail for this reason. Trained in Canada's research environment, they can be unaware of the other essential elements of their business and fail to focus on customers. We seem to have an endemic arrogance about research, development and technology that prevents us from modifying our models of successful knowledge-based commerce to balance all the elements.

Successful commercial enterprises receive their funding from customers. Sales income funds all the activities in this complex system. It is not possible to increase R&D expenditures outside of that context. If we asked the question “Can Increased Profitable Sales Save Canada?” we could answer affirmatively with high confidence. Our capabilities in science and technology are strong. Our capabilities in commerce are amongst the weakest in the developed world. Simply put that means we do not value sales. So we don’t have the drive to understand and develop skills for the human and cultural dimensions of the multinational value exchange that the knowledge-based economy requires.

How good could it be? Canada in 2004 was tied for 16th place in the world in R&D spending as a fraction of GDP. If we were in 5th position, as a successful R&D business investor, our export sales would be up over $100 Billion and highly skilled jobs up over 500,000.

Can R&D save Canada? Not without people who can navigate the complex system of relationships, resources and capabilities – both human and technical – required to create value for global customers and be among the best.

The solution is to strengthen our capabilities in commerce while maintaining our strong capabilities in science and technology.

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Jeffrey Dale
President & CEO
Ottawa Centre for Research
and Innovation

Completing the Cycle: Transforming Research Back into Money


The Ottawa region provides a community perspective on how to create and sustain a globally competitive economy based on innovation. R&D is just part of the cycle of innovation - all aspects of the ecosystem must be present for our economy to flourish. I will use Ottawa as an example, but we will win or lose this challenge as a nation.

Ottawa is blessed with strong public academic research based in our universities and colleges. Many federal research laboratories are located here. Public investments in R&D total over $1B annually in our region.

Nortel, largest R&D performer in Canada, has its main global research centre here. Many of Nortel’s innovations and the innovations of many local start-ups come directly from research that was started in our public institutions. Some 32 of the top 100 Corporate R&D spenders in Canada have R&D operations here. The Ottawa Region ranked first in the last year’s RE$EARCH Infosource survey on Research Communities, having the highest per capita private sector investments in R&D. We ranked first in Canada with the highest percentage of natural and applied science and related occupations in our workforce. From a pure promotional perspective, R&D is a powerful tool we use in our economic development efforts.

While R&D is a key strength of our region it is also our biggest challenge.

Ottawa and Canada have been very good at converting money into research, but we need to be equally effective at converting our research into globally competitive products and services.

As Canadians we are quick to ask our Federal and Provincial governments to provide solutions to this challenge, but public policy is not enough. Canada needs leadership and vision from all sectors of our economy to drive toward a future based on innovation and global competitiveness.

We need to celebrate entrepreneurship and our entrepreneurs. We need to be proud of their successes and supportive when they fail. We must enthusiastically promote the creation of new knowledge and the development of a multi-skilled workforce. Our post secondary education system must deliver on both of these goals. We need parents, students, faculty and businesses to create a culture of life long learning.

Success in a global economy means adapting to change. California’s Silicon Valley reinvented itself several times despite having a high cost structure. Innovation strengthens the ability to survive a downturn and refresh the industrial base of a region.

The Federal Government recently released Mobilizing Science and Technology to Canada’s Advantage. Government cannot provide all of the solutions to create a Nation of Innovation, but it can set a policy framework that will support innovation.

Research is the birthplace of ideas and knowledge but ideas must create new wealth. It is critical that we continue to “prime the pump” and support public investments in R&D. Federal and provincial governments need to provide predictable and sufficient funding to our granting councils and federal labs to support the creation of new knowledge. Certainly there are funds flowing into public research institutions, but the manner in which it is done and lengthy timeframes weakens the overall investment by causing uncertainty and inconsistency.

For 25 years we have had the federal Scientific Research and Explorative Development (SR&ED) Tax Credit program to encourage our private sector to invest in R&D. Once a globally competitive program, today it is out of date. Start ups still benefit, but the program fails to encourage much of our industrial economy from investing in R&D. The Department of Finance recently announced a review of the program. This is encouraging. Industry must now step up and provide input.

Many of our R&D performers in Canada will tell you that while they create knowledge and new innovative products and services in Canada, they are often unable to secure public institutions as reference customers. As a result, many ideas funded by Canadians have been commercialized in markets elsewhere. This is a complex issue, but hiding behind NAFTA’s procurement rules is not a solution. We need to support innovation created in Canada. We need to create a procurement system at the federal, provincial and municipal level that recognizes a “Canadian Innovation Advantage”. As taxpayers we are all paying for our investments in R&D, let’s follow through and realize the return on our investments.

Canada has had no difficulty harnessing its natural resources and selling them to the world. Huge wealth resulted and continues to do so. Now it is time to invest our wealth in our future. R&D can save Canada, but only if we complete the cycle of turning Money into Research and Research back into Money.

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Mike Lazaridis
President and Co-Chief Executive Officer
Research in Motion

Prepare Our Population Broadly for Success


This year Research In Motion (RIM) will devote more than $250M to research and development, an investment that will earn us a place in RE$EARCH Infosource’s top ten Canadian R&D performers. We will outspend our industry peers on a size adjusted basis and continue to deliver the quality of experience and innovations that our customers associate with the BlackBerry brand. We also joined the ranks of the ten largest handset manufacturers in the world.

Recent RIM achievements include the launch of BlackBerry smartphones with great style and advanced functionality including GPS, WiFi and sophisticated multimedia capabilities. We just announced BlackBerry Unite!, a special product for families and small groups. BlackBerry has recently become the first wireless platform in the world to achieve Common Criteria EAL 2+ security certification.

Our company’s future depends on how well we turn ideas into marketable products and services. RIM continues to pursue advances in our field with tenacity, determination and the best people available. But R&D alone cannot create a successful company. At RIM we are also experts in product management, manufacturing, supply chain, quality control, alliances and partner relations, customer service, finance, marketing, organizational development and all of the related functions that contribute to a complete, high quality customer experience and rapid growth. Our approach to the development of each of these, however, shares common elements with our R&D organization.

Most importantly, there is a determined commitment to recruit, develop and retain the very best people we can find. When we launched BlackBerry in 1999 our entire staff was just 250, including all the people who designed, built, and sold our products. Today we number more than 7000. I am proud to say that despite such rapid growth our hiring standards have not fallen at all – in fact they have increased. Paradoxically, it is not easy to get a job at RIM even though we are growing rapidly.

We are also meticulous about our work. In the challenging field of wireless R&D, rigor is an absolute necessity. That same approach of thinking through problems, bringing theory and experience to bear, running the numbers and acting on the basis of fact is deeply rooted at RIM. Even the choice of the name “BlackBerry” followed a rigorous process involving expert consultants, detailed searches, and focus group testing.

I believe that Canada has an almost limitless opportunity to prosper over the coming decades if we concentrate on what we do at RIM: producing and attracting the very best people, supporting their work fully, and applying ourselves rigorously to the problems and opportunities we face.

Our investments in university research over the past fifteen years, for example, have already initiated a virtuous circle. Generous funding of research and state of the art research facilities attract great researchers. They in turn attract great students who gain new knowledge and capabilities through their studies and interaction. Upon graduation they enter society and commercialize – in the broadest sense – everything they have learned. The added wealth created by commercial activity generates the capacity to reinvest in research and the cycle continues.

A critical point is that commercialization is done mainly by graduates after they leave the university. We must not fall into the trap of forcing our research universities to commercialize directly. That is the job of the private sector.

Look at Waterloo. Through our success in business, my partners and I were able to establish the Perimeter Institute for Theoretical Physics and the Institute for Quantum Computing at the University of Waterloo. To date, we have raised nearly $500 million from private philanthropy and generous matching support from our governments to jump start this venture.

From a standing start Waterloo has become one of the world’s preeminent centres for quantum research, an area that will have profound impact on semiconductor technology, cryptography, and nanotechnology. We have attracted incredible talent to the region and now boast the largest concentration of quantum researchers in the world. For impatient skeptics who say “show me the ROI” we are already witnessing early returns from Waterloo’s famous entrepreneurial community – including high value job creation, investors and company builders alike. This virtuous circle will complete and reseed itself many times over.

Now is the perfect time for Canada and Canadians to invest boldly in our collective future. The dollar is strong, our natural resources are in demand, and our public finances are solid. Private companies that do R&D at levels below their industry’s norms should take stock and join the game. Our governments should significantly top up our research granting councils and encourage additional, meaningful philanthropic and public investments like we have made in Waterloo. And above all, we should continue to strive to have the best prepared population in the world.

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David Naylor
President
University of Toronto

Innovation in Canada: Can We Reverse the Politics of
Thin-and-Thinner?


How ready is Canada to develop a stronger innovation economy? Not very, according to a recent report from the Conference Board. In patents per-capita, Canada languishes in 14th place out of 17 OECD national comparators. And our R&D spending in relation to GDP ranks 12th, due largely to lagging private sector investment. Canada is second only to the USA in per capita venture capital investment. But individual US investments are typically three times greater; and Canada, alone in the OECD, invests a bigger percentage of its GDP in early stage financing than in expansion financing. In other words, our investments start thin and get thinner. The thin-and-thinner metaphor, unfortunately, also applies to the way we prepare our citizens for the global knowledge economy. Canada ranks 18th out of 27 OECD nations for university participation rates. As well, compared to the United States, Canada awards a third fewer doctoral degrees and half as many master's degrees per-capita.

Despite those warning signs, we have many of the right ingredients. Successive federal governments and some provincial governments have primed the research pump effectively. Our natural resource base is generating healthy revenues to support diversification. Our tolerant and compassionate society remains a magnet for talented immigrants. Furthermore, as Toronto’s Richard Florida has cogently argued in response to Thomas Friedman’s thesis, the world of innovation is not so much flat as spiky. Urban clusters drive the global knowledge-based economy, and about 80% of Canadians now live in urban areas. We also have outstanding researchers and impressive capacity in our universities and academic hospitals to educate the next generation of innovators. As one marker, ISI Thomson data show that researchers at the University of Toronto publish more than their counterparts at any institution in North America except Harvard. Moreover, in quality of research outputs, many Canadian universities compete credibly on the world stage. The challenge, in other words, is not so much turning dollars into research, but turning research into dollars.

What then can governments do?

First, governments should fund basic research and related personnel more generously. From lasers to Teflon, countless economically-important advances have piggy-backed serendipitously on basic research. Those research dollars must flow primarily on the basis of excellence adjudicated by peer review. Second, governments should simplify the mandates of public research agencies. Research agencies today are often asked to review and fund targeted research, promote commercialization, and oversee matching programs and networks with industry. They do not excel at these tasks, and certainly lack resources for such expansive mandates. They are also on the wrong side of the supply-demand equation for commercialization.

Commercialization success depends instead on institutional investment in technology transfer, business-savvy leadership, and enough scale to draw investors and industrial partners. That’s why it makes sense for governments to create jurisdiction-wide commercialization agencies and related infrastructure to foster convergence for knowledge translation.

Third, governments should tread carefully when funding industry-oriented research. These programs carry risks of market distortion and conflicts of interest. Collaborative programs for SMEs can be effective; and strategic funds targeting key sectors are hard to gainsay in a small country. But all such initiatives require meticulous oversight from both a value-for-money and scientific perspective. And, given low private spending on R&D, the key role for government is probably the creation of a portfolio of tax incentives aligned to research investment.

Finally, let’s remember that well-educated people are Canada’s most important resource for catalyzing knowledge-based industries. We cannot diversify our economy unless we boost our output of Masters and PhD graduates dramatically. Thus, there is an acute need for the creation of regional and provincial systems that are appropriately resourced and diversified to support excellence in graduate education.

In a very short essay, these policy options are necessarily truncated and framed in simplistic terms. Some of these ideas may also run counter to conventional wisdom and political preferences in our fractious federation. I am fearful, however, that Canada’s enviable standard of living and vaunted social programs will not be sustainable in the long haul unless we abandon the politics of thin-and-thinner in favour of the spiky topography of excellence and innovation.

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John Roese
Chief Technology Officer
Nortel

Are the Glory Days Gone for Good?


Are the glory days of Canada’s leadership in communications research and development gone for good? As the CTO of one of Canada’s largest communications technology company, that’s a question I ask myself a lot.

Our ability to compete globally as a nation is predicated on many things, but near the top of the list is our ability to innovate. And to innovate is to invest in – and excel at – R&D. Canada was for many years considered a world leader. It was right here in Canada where Information and Communications companies built national networks that were the envy of the world. Wireless, fibre optics, high-speed Internet access – all brought to Canadians by Canadian innovators. But now we are slipping behind. A recent Conference Board report card benchmarks Canada as 14th out of 17 countries in innovation because of a lack of focus and drive. Moreover, in this new millennium, the widening productivity gap relative to our major trading partner, the U.S., largely reflects slower innovation, lack of scale economies and business organization, according to Statistics Canada.

Few would dispute that productivity and competitiveness are driven by technological progress and deployment of information communications technologies (ICT). ICT as an enabler of broad economic development has surpassed that of the value of the sector itself. It is little wonder according to the Economist Intelligence Unit that many governments around the globe are devoting considerable energy to the growth of ICT. The Economist study places Canada 9th among 22 top tier countries in ICT competitiveness.

Achieving this strategic focus becomes more critical with each passing day. Why? Because the communications industry is moving towards a new era where our fully connected society will become a hyperconnected one. The number of network connections will far exceed the number of people using the network. We refer to this trend as Hyperconnectivity. Imagine if every chronically ill patient could cost-effectively receive real-time medical monitoring at home through sensors that continually feed vital signs into a broadband network, alerting emergency personnel if a health condition suddenly deteriorates. This is just one of many examples of the benefits of living in a Hyperconnected era.

For Canada, there is significant opportunity to shore up our competitive fortunes both globally and at home if we act now, just as the wave of Hyperconnectivity is beginning to form. Hyperconnectivity must create opportunity, not chaos, in the knowledge economy. We must develop and pursue a coordinated strategy that brings the benefits of both Hyperconnectivity and ICT to every Canadian business, of every size, in every sector. The volume of R&D investment in Canada must increase and all levels of government must work to grow it further.

But merely doing more R&D on its own will not save Canada. We need to better leverage our R&D distribution channels, effectively moving knowledge from researchers in universities and government labs to the innovators in industry. We need to focus more on transforming ideas into products for the marketplace. Canadian public policy must rally around restoring technology innovation as a Canadian strength – one we will not relinquish in the face of global competition. The challenge presented by the Economist Intelligence Unit Report is simple: if we are to be competitive, then Canada must strengthen its innovation eco-system and make it a strategic focus of public policy at all levels of government.

A starting point is to move quickly on restoring the incentive mechanism of the federal R&D tax credit program, making it accessible to all companies performing R&D in Canada by introducing the refundability option recently recommended by a Parliamentary Committee. Other elements of the eco-system that many nations are addressing (and that Canada must too) include high speed broadband such as WIMAX, 4G and LTE, innovation support through government procurement, human capital, intellectual property rights, collaborative research funding, and an investment-friendly business environment. Such public policy would be well served to recognize that the international success of Canadian companies in R&D has a large pull-through effect on start-ups and small businesses at home.

I certainly applaud the Prime Minister and his Government’s commitment to improve Canadian innovation in the recently released Science and Technology Strategy. We now need to collectively build on this progress. We need to address the importance of ICT as the core competency for competitiveness in this hyperconnected era and to recognize that ICT - where we must choose to lead on R&D, innovation and commercialization - underpins all other sectors.

So the answer to my question – “Are the glory days gone for good?” – is an obvious “no.” But we have to act quickly and decisively by improving our strength in ICT, which will go directly to enhancing Canada’s overall competitiveness globally and our standard of living.

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