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Alberta Research Council Inc Presentation Transcript

  • 1. Innovation is Impact John McDougall President and CEO Alberta Research Council Inc. November 2005
  • 2. Innovation Goals
    • Jobs and GDP growth
      • Grow and strengthen companies
      • Critical mass attracts and retains internationally renowned HQP talent
    • Efficiency and Productivity
      • Increased utilization of scarce human and capital infrastructure
      • Investment into high priority, state-of-the art, high impact, people, facilities and equipment
    • Innovation culture and expertise
  • 3. Five Myths
    • More research will make Canada more innovative.
    • More support to Canadian universities would substantially increase innovation and commercialization.
    • Canadian infrastructure is adequate to transform Canada into a leading innovative global economy.
    • Canada is dominated by small companies and so must focus its innovation and commercialization efforts on SME’s. Canada has a host of early stage companies that should be commercial successes.
    • There is a shortage of early stage funding in Canada.
  • 4. Myth 1 More research will make Canada more innovative.
  • 5. Where Innovation Comes from
    • New to world (10%)
    • New (to company) product lines (20%)
    • Additions to existing product lines (26%)
    • Improvements to existing products (26%)
    • Repositioning (new applications for existing products) (7%)
    • Cost reductions through modification (11%).
    The most successful products (profit wise) are new to firm and new to world. (Source: Cooper) Market-Pull (79% of successful innovation) Technology-Push (21% of successful innovation)
  • 6. Reality 1
      • Successful innovation is driven 80% or more by markets and firms.
    “ Strong innovative companies move beyond the simple dichotomy of ‘market pull’ versus ‘technology push’ to embrace both sides of the equation.” Conference Board of Canada “ Innovation is about commerce – meeting or creating market needs.”
  • 7. Myth 2 More support to Canadian universities would substantially increase innovation and commercialization.
  • 8. Canada Bets on the Universities
  • 9. It’s a High Risk Strategy
    • “ University research yields raw technology, results that cannot be directly commercialized because it is circuits, processes, components, etc.
    • Usually further investment is required for scale-up, packaging, clinical studies, prototypes, testing, demonstration, etc.”
    Ron Freedman, The Impact Group “ Canadian universities perform a larger share of national R&D than most G-7 countries and the share of university research funded by industry is also substantially higher than in any other country. Yet, Canadian is one of the weakest countries in generating benefits from innovation.” New Brunswick Research and Productivity Centre
  • 10. Critical Differences
    • Pharma and health innovation comes from universities because researchers live in teaching hospitals that give them market information.
    • No other sectors look at universities for technology in that way.
  • 11. Industrial R&D Reflects Receptor Capacity. In Canada, nearly 70% of industry funded R&D in 2002 was in ITC. Statistics Canada Nortel Receptor problem won’t be solved by pushing discovery infrastructure downstream .
  • 12. Causes of failure (Source: Cooper)
    • Technology push – 28%
      • Better mousetrap nobody wants
    • No user benefits – 24%
      • Me-too product meets competitive brick wall
    • One-up-man-ship – 13%
      • Competitor reaction foils launch
    • Technical Dog – 15%
      • Won't work or performance inadequate
    • Price Crunch – 13%
      • Price too high
    • Ignorance – 7%
  • 13. Reality 2 Academics will absorb whatever level of resource is provided. Pushing university professors to become entrepreneurs distracts them from their basic strengths and role.
  • 14. Myth 3 There is adequate infrastructure to transform Canada into a leading innovative global economy.
  • 15. National Infrastructure
    • Universities, CIAR
      • Basic & applied research
    • NRC - Nutrino, Nint, Steacie, etc.
      • Big science institutes
    • Government Labs – AFC, Env, NRCan, …
      • Sector specific R&D
    • I-CAN – ARC, CRIQ, IRAP, ITC, RPC, SRC
      • Market based technology & product development
    • R&D Intensive Enterprises
      • Product development and deployment
  • 16. Canada’s Commercialization Gap DISCOVER DEPLOY Invent Adapt Adopt Create Transform Use Diffuse Commercialization Gap DEVELOP, DESIGN and DEMONSTRATE
  • 17. Reality 3 Canadian innovation infrastructure lacks critical mass for market driven design, development and demonstration. Ratio of industry to public sector investment in R&D in most innovative economies (Finland, Sweden, US) is 3 or 4 to 1. Canada is currently considerably less at 2:1.
  • 18. Myth 4 Canada is dominated by small companies and so must focus its innovation and commercialization efforts on SME’s. “ Canada has a host of early stage companies that should be commercial successes.”
  • 19. Corporate R&D in Canada – 2001 R&D Expenditure $3 M — “ Only 228 firms in Canada currently have the size, R&D intensity and revenue to be R&D leaders.” ITAC >0% 3% 50%    R&D Intensity (R&D Expenditure/Sales in %) (from Research Infosource Inc.) 139 COMPANIES Sales: $1.34 B AV $9.5 M 0.4% of Total R&D: $139 M AV $1.0 M 1.1% of Total R&D Intensity: 10.4%         141 COMPANIES Sales: $537 M AV $3.8 M 0.2% of Total R&D: $903 M AV $6.4 M 6.9% of Total R&D Intensity: 168.4% 120 COMPANIES Sales: $72.8 B AV $607 M 21.5% of Total R&D: $10.3 B AV $85.7 M 78.8% of Total R&D Intensity: 14.1%         121 COMPANIES Sales: $264 B AV $2.2 B 77.9% of Total R&D: $1.74 B AV $14.4 M 13.3% of Total R&D Intensity: 0.66%
  • 20. Fundamental Challenges
    • Increasing product development, manufacturing and exports by globally competitive Canadian enterprises.
      • Limited number of globally competitive innovative SME and manufacturing enterprises.
      • SMEs have a lot to gain from research and innovation but are typically unwilling to invest in perceived “high cost, low value” research without government help .
    • Innovation intensive organizations spend 5-10% of sales on R&D.
      • $5 million R&D requires $50 – 100 million in new sales.
    • SMEs require infrastructure to support innovation.
      • Innovation infrastructure requires patient capital to build, equip and sustain it while business evolves to the new higher level of activity.
      • Thinly distributed innovation infrastructure and lack of critical mass in Canada limits capacity to transform ideas into commercial reality.
  • 21. Business Factors
    • Most companies plan to sell or be bought out. VCs encourage early sale for a “quick exit”.
    • Government programs support R&D, but offer little marketing and other business development support at home or abroad.
    • Working with Canadian regulatory agencies can pose challenges compared to other countries.
    • CEOs of many R&D intensive firms lack necessary knowledge and experience in commerce.
    • Post-secondary institutions pass on technical and scientific knowledge, but do not prepare these graduates for human relationship challenges in marketing, sales and management.
  • 22. Reality 4 Canada has a paucity of skilled entrepreneurs capable of transforming new ideas into products and services that customers want. For maximum impact, medium and large companies also need to play major roles. “ A narrow focus on the technology side of the enterprise rather than commerce, a shortage of people with management, marketing and sales skills, and a societal distrust and suspicion towards commerce have created numerous challenges for CEOs of “greenhouse” firms. ” Barber and Crelinsten 2005
  • 23. Myth 5 There is a shortage of early stage funding.
  • 24. Commercialization Elements Function Structure Personnel Finance Infrastructure Knowledge Individual Scientists Grants University NBO’s Prototypes Products Markets Teams Business Engineers Finance Marketing Contracts Seed Venture Debt IRAP Incubators Development Labs Corporation BDC IPO Cluster Production Sales Sales Engineers Accelerators Tech Transfer Discovery Place Innovation Place Market Place Colleges PRO’s
  • 25. Access to Capital
    • Sources of Capital
      • Equity, loans, asset sales, cash flow, etc.
    • Most R&D firms finance their operations from investors and lenders rather than sales.
    • Access to capital is an issue when capital market fails to supply funds at terms acceptable to business borrowers.
      • The institutional supply of venture capital in Canada grew dramatically in the 1990s.
      • It fell off in the past 5 years due to weak returns.
    • Failure to provide funds may be legitimate.
      • Business may not be credit worthy for reasons including ability to repay; commitment and character of proponents; prospects for the industry sector and availability of collateral.
  • 26. Public Issues Commercial Banks Non-Financial Corporations Later Stage VC Wealthy Family Fund s Private Investors Family and Friends Personal Savings Seed & Early Stage VC Government Programs Chart 1.1 - Sources of Capital for Emerging Companies Stage of Company Development   Source: Davitech Consulting Inc., Report on Barriers to Technology Commercialization, July 1996 Stage 1 Stage 2 Stage 3 Knowledge Acquisition Concept Investigation Basic Design Prototype Building Market Entry Manufacturing Ramp-up                                                                 Perceived Gap      
  • 27. Risk Management Strategies
    • New product game puts investment at risk with high levels of uncertainty.
    • Risk management strategies poorly understood
      • High uncertainty limits amount that will be risked
      • Decreasing uncertainty leads to increased investment
      • All or nothing decisions often result in nothing
      • Pay for relevant information to reduce risk
      • Provide for "bail out" points
      • Build an experienced management team
    • It’s all about building confidence.
  • 28. Reality 5 There is an abundance of capital but it seeks “adequate” returns. “ Canada needs people who do commerce to win in the knowledge economy.” Barber and Crelinsten 2005
  • 29. Summary
    • Innovation is driven 80% or more by markets and firms.
    • Pushing professors to be entrepreneurs distracts them from their basic strengths and role.
    • Canada’s innovation infrastructure lacks critical mass for market driven design, development and demonstration.
    • Canada has too few entrepreneurs capable of transforming new ideas into products and services that customers want. Medium and large companies will need to play major roles.
    • Capital seeks “adequate” returns.
  • 30. Fundamental Conclusions
    • System Structure - OK
      • But pieces not working together
    • System Balance – wrong
      • Subsidize technology for the rest of the world
    • Focus – absent or misplaced
      • Market assessment and capacity to follow thru
      • Clusters – small scale or driven externally
    • Culture - Canada is not the US
    • Management capacity and skills - weak
      • Marketing, entrepreneurial management
    • Capital – absent or unwilling?
      • Deal flow - weak
  • 31. I-CAN will improve Canada’s ability to be a globally competitive innovative economy.
  • 32. I-CAN will improve the balance DISCOVER DEPLOY Invent Adapt Adopt Create Transform Use Diffuse Commercialization Gap DEVELOP, DESIGN and DEMONSTRATE
  • 33. Advanced Materials Manufacturing in Alberta – Innovation, Invention and Investment Ron R. Wallace, Ph.D. Vice-Chairman, Ceramic Protection Corporation InnoWest, November 16, 2005
  • 34. “ The realities of the market today – intense international competition, the rapid pace of technological development, and the ease with which investment and knowledge flow around the world – mean it is more important than ever for companies to strengthen competitive capabilities based on productivity and innovation.” Canadian Manufacturers and Exporters, August 1, 2001
  • 35. Outline
    • Accomplishments of Ceramic Protection Corporation
    • Role of the Alberta Research Council
    • Lessons learned
  • 36. Accomplishments
    • Ceramic Protection Corporation
      • Founded in Calgary by venture capital investors – 1989
      • TSX-Venture Exchange – 1996
      • Toronto Stock Exchange – 2005
    • Technological innovations in advanced materials manufacturing, focused in wear management and defense markets
  • 37. Quarterly Sales & Earnings
  • 38. ARC – Helping Companies Grow
    • ARC instrumental in development of advanced ceramic materials technology and manufacturing in Canada:
      • Entered Joint Research Venture with ARC to develop technologies, stabilize manufacturing processes and make ballistic tiles and plates
      • Developed methodologies for certification of mechanical properties of ballistic ceramics
      • Received first and only Canadian acceptance from Canadian Army and other industrial end users for ballistic testing and certification
  • 39. Role of Alberta Research Council
    • ARC provided basic research and applied materials testing, allowing material breakthroughs
    • Acquisition of highly skilled professionals by ARC was first and most important step in developing a public R&D capability for advanced ceramics in the province
  • 40. Factors in Successful Collaboration
    • Funding higher education
      • Canada not included in world’s top universities
      • Global competition fierce and growing
    • Enhancing innovation by attracting highly-skilled personnel
      • Canada well placed to succeed
    • Policy development in support of enhanced R&D
      • Include impact of high taxes and judicial and regulatory factors
      • May have received less than urgent consideration at the national level.
  • 41. Lessons Learned
    • “ Economists now recognize that 80% or more of long-term economic growth is driven by technological innovation.” Josty (2003)
    • National Summit on Innovation and Learning (2002) recommended priorities for Government of Canada:
      • Ensure decision making for new and existing policies and regulatory priorities
      • Ensure that Canada’s business taxation regime is internationally competitive
      • Brand Canada as a location of choice
  • 42. Myths Surrounding Innovation
    • Increasing spending on R&D will increase innovation capacity
    • Most innovative ideas emanate from R&D
    • Innovation is an investment or ‘input’ game – more money provides more innovation competitiveness
  • 43. Alberta Ahead in Innovation Game
    • Experience of CPC, ARC a predictable outcome of the policies for taxation, investment and innovation already at work in Alberta:
      • Substantial investments in university and government research sectors
      • Many highly skilled immigrants making Alberta a destination of choice
      • Alberta renowned for its enlightened corporate taxation and favoured treatment of entrepreneurs
  • 44. Alberta Advantage Working
    • As demonstrated by the CPC/ARC case study:
      • Alberta-based firm achieved material technological advances in manufacturing for US export market
      • Acquired a US-based manufacturer
      • Maintained corporate presence in Canada
      • Achieved enhanced listing on a Canadian exchange
      • Provided notable returns to investors
    • Pool of venture funds and investment capital has increased in Alberta
  • 45. Canadian Model
    • Canadian Chamber of Commerce in September:
      • Recommended corporate taxation rate be cut from 21% to 20% in 2006, with a further 1% reduction in each of following three years to attract business
      • Noted Canada’s productivity climbed an average of .9% per annum since 2000, as compared with 3.5% in the US
  • 46. Productivity Gap = Income Gap
    • “ As expenditures are increasingly channeled into less and less productive activities, it has a negative impact on economic growth….”
    • Canadian Chamber of Commerce
  • 47. Local Wealth True Measure of Success
    • Economic experience of Alberta and agencies like ARC demonstrates the potential outcomes of adopting more enlightened policies for research and innovation
  • 48. Acknowledgements
    • Alberta Research Council Inc./Joint Research Venture Program
      • Dr. Partho Sarkar
      • Dr. John Zhou
      • Ms. Karen Beliveau
    • National Research Council/Industrial Research Assistance Program (IRAP):
      • Mr. Roger Woods
      • Mr. Alex Dixon
      • Mr. Andy Gilliland
  • 49. Helping Canadian Companies Become Globally Competitive Trevor Cornell Chief Operating Officer, Manitoba Industrial Technology Centre
  • 50. Manitoba Manufacturing Sector
    • Largest industrial sector
    • Approximately 13% GDP
    • Diverse – aerospace, food, apparel, furniture, buses….
    • Approximately 1500 manufacturers
    • 85% employ < 50 staff
  • 51. Sector Challenges
    • Productivity (2002) 7 th among provinces
    • Productivity growth (10 year average) ranked 8 th in Canada
    • Rapid exchange rate change
    • Increasing offshore competition
    • Skills shortages
  • 52. Manitoba’s Imperatives
    • Improved R&D for products/processes
    • Increased product commercialization
    • Adoption of new (existing) technologies
    • Introduction of best practices
    • Improved staff skills at all levels
  • 53. Initiatives
    • Advanced Manufacturing Initiative (AMI)
      • Managed by CME
      • Lean training
      • Establish company consortia
      • Share best practices
      • Publish “productivity” information
      • Promote careers in manufacturing
  • 54. Initiatives (cont’d)
    • Research and Innovation Fund
    • Smartpark at University of Manitoba
      • TR Labs
      • Composites Innovation
      • Centre
      • Industrial Technology Centre
        • Product design/development
        • Prototyping/testing
      • Vehicle Technology Centre
  • 55. ITC Services
    • Product design/
    • development
    • Virtual reality/simulation
    • Vibration analysis
    • Noise analysis
    • Testing
    • Calibration
    • Inspection
  • 56. ITC (cont’d)
    • SCC and CLAS
    • accreditation
    • ISO 9001 registered
    • Manufacturing sector
    • focus
    • Product development
    • Process improvements
  • 57. I-CAN
    • Easier access to technical services across Western Canada
    • Better links between service providers
    • Comprehensive database of services available across provinces
    • Seamless and effective network
  • 58. I-CAN
    • Will help companies
    • Improve products/processes
    • Improve productivity
    • Become globally competitive
  • 59. Helping Canadian Companies Become Globally Competitive Laurier L. Schramm, President and CEO Saskatchewan Research Council “ Applied Research – Making Technology Happen” Laurier L. Schramm Saskatchewan Research Council
  • 60.
    • Technology and business evaluations
    • Full cycle product development and support
    • Rapid prototyping, pilot-testing
    • Intellectual property management
    • Commercialization
    Inventors, Entrepreneurs, SMEs Laurier L. Schramm Saskatchewan Research Council
  • 61. Doepker Industries
    • SRC services for Doepker:
      • Manufacturing assessment studies,
      • Action plan for improvements,
      • Development of training processes,
      • Management information systems,
      • On-going productivity support
    • Doepker has now grown and diversified:
      • Multiple plants (Canada and US)
      • Product diversification,
      • Entry into global markets
    Laurier L. Schramm Saskatchewan Research Council
    • Doepker Industries is a leading manufacturer of highway trailers in Western Canada.
  • 62. Impact Audit Reports Laurier L. Schramm Saskatchewan Research Council “ SRC’s involvement helped us identify and implement changes faster than we could have done ourselves – those changes then allowed us to weather an industry-wide downturn.” Dave Doepker Doepker Industries
  • 63. Manufacturing Sector
    • E-Zeewrap 1000 dispenser product
    • Product development and design
    • Decreased manufacturing costs 75%
    • Sold across North America
    Laurier L. Schramm Saskatchewan Research Council “ SRC redesigned the E‑ZEEWRAP dispenser from metal to injection molded plastic. This helped decrease our manufacturing costs by 75 per cent.” Jim Scharf, President Jim Scharf Holdings
  • 64. Manufacturing Sector
    • Acutec Systems Ltd.
    • Problem: level detection in oilfield tanks
    • Solution: an automated electromechanical gauge
    • Public spin-off formed:
      • TSX Venture Exchange
      • Titan Logix Corp.
    • Continuing to work with Acutec on products to convert digital data and analog signals to voice
    Laurier L. Schramm Saskatchewan Research Council “ SRC is a valuable resource. They took us from concept through to product development, and helped us through the whole process.” John Grimes, President Acutec Systems Ltd.
  • 65.
    • Spanning all key strategic economic sectors:
    • Agriculture and Biotechnology
    • Health
    • Energy and Energy Conservation
    • Mining and Minerals
    • Manufacturing and Value-Added Processing
    • Collaboration, partnership, consortia,
    • joint ventures, subsidiaries
    Larger Company Support Laurier L. Schramm Saskatchewan Research Council
  • 66. Oil and Gas Sector
    • Improved heavy oil recovery process
    • Reduced energy and water demands
    • Consortium approach coordinated through PTRC and supported by Nexen, Husky, CNRL, and governments
    • Synergies and leverage in combining the unique RD&D strengths of SRC and ARC
    Laurier L. Schramm Saskatchewan Research Council
  • 67. Oil and Gas Sector
    • Solvent vapour processes are highly field-specific and therefore RD&D intensive
    • “ Size of the prize” is large:
      • Heavy oil resource > 26 B bbls
      • Incremental recovery of 20%
      • Avoid over 400 M tonnes of CO2 emission
      • Sequester ~175 M tonnes of CO2
      • Avoid ~2 B bbls of fresh water
    • Collaboration is the key
    • Exportable Canadian technology
    Laurier L. Schramm Saskatchewan Research Council
  • 68. I-CAN Partners Help Build Competitive Advantage
    • I-CAN member organizations work with business and industry
      • Individual inventors and entrepreneurs,
      • Small and medium size enterprises,
      • Major enterprises
    • To provide:
      • Increased production
      • Added value
      • Improved productivity
      • New products and services
      • Competitive advantage, globally!
    Laurier L. Schramm Saskatchewan Research Council