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Thoughts On Innovation In Canada

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  • 1. Some Thoughts on Innovation in Canada
    Peter Hackett
    Executive Professor, School of Business, University of Alberta
    Fellow, National Institute for Nanotechnology
    phackett@ualberta.ca
  • 2. CULTURAL FACTORS
  • 3. Jane Jacobs, The Massey Lectures, 1979

    The experience of Canada has been that the largest and most quickly obtained fortunes, whether private or public, come from resources – furs, timber, apples, fish, coal, iron, nickel, gold, silver, grain, cobalt, uranium, aluminum, potash, hydro-electric power, oil. Societies, like individuals are shaped by their experiences. Canada’s get-rich-quick economic experiences have helped shape all the country’s major institutions: the national government, the provincial governments, the banks and other financial institutions. They have shaped the way venture capital is used, the ways subsidies are used, the kinds of development schemes considered most attractive, and the thinking of almost everyone in authority. These are not easy things to change. Even most of the Canadian nationalists who object to foreign ownership of branch plants here do not seem to be aware that ownership is a superficial matter if Canada, in reality, does not create industry and develop branch plants of its own.
  • 4. Canada is a very rich country
    Canada is rich in natural resources and our natural resources are in great demand
    Canadian dollar closely tracks the price of oil
    Natural resources will remain in demand
    Canada will prosper as a smart supplier of resources to the world
    Canada lacks the incentives to attend to growth in other sectors of the economy
  • 5. INNOVATION
  • 6. Knowledge and innovation systems
    The value of innovation is a product of twovery different things, knowledge and an innovation system
    Highly qualified people provide the vectors between these two
    An innovation system consists of the actors and the policies that define a local commercial advantage
  • 7.
    If I had a seaweed of a different colour, I could sell it.Louis DeveauFounder, Acadian Seaplants Ltd.
  • 8. COMERCIALIZATION
  • 9. Technology and commercialization
    From time-to-time, new knowledge is embodied in a new technology.
    Companies listen to their customers and scan the world for technologies and knowledge to incorporate into products for their customers to buy.
    Technologies are not commercialized; products are.
  • 10.
    … the students as graduates will commercialize everything they learn – whether discovered in Canada or discovered somewhere else. They will form the society of our future based on the education they’ve experienced. Mike LazaridisCEO, Research in Motion
  • 11.
    In the 20-year history of Research In Motion, I have licensed exactly two technologies from university research teams. Over that same period I have hired more than 5,000 students as co-ops, interns, and full time employees. I’ve even hired some of their professors. When I decided to build radios and introduce CAD into our engineering processes, I didn’t go looking for patents. I went looking for great people and found them in our universities. Mike LazaridisCEO, Research in Motion
  • 12. Missing a culture of commerce
    “While Canada is second to none in technology, there is a significant lack of commerce skills among our technology entrepreneurs. Companies often find themselves dependent on U.S. and other foreign nationals for executive talent especially for customer-facing experience and skills. If we are to succeed, the notion that technology coupled with sufficient venture capital will lead to success in the knowledge economy must be complemented by a deeper understanding of the human dimensions of enterprise and of the value exchange that is commerce.”
    “The disappearance of firms was not due uniquely to the inexperience of the technology-focused founders. The suppliers, supporters and specialized partners in the financial, legal and public sectors also lacked the essential commerce skills, experience and enterprise savvy to contribute to success. Developing enterprise competence in these groups would substantially improve Canada’s success in knowledge-based commerce.”
    Douglas Barber and Jeffrey CrelinstenUnderstanding the Disappearance of … R&D Performing Firms, 2009
  • 13. STRUCTURAL FACTORS
  • 14. High knowledge industries are a small fraction of the economy
    Statistics Canada, 2003 Data
  • 15. Structural barriers to innovation
    Canada is “upstream” in many North American industries.
    This positioning is the result of Canada’s resource endowment and development history as a commodity supplier and technology adopter. Canada’s upstream position in many continentally integrated value chains limits contact with ultimate end-customers – who are a strong source of motivation and direction for innovation – and shapes the nature of business ambition in many sectors.
    Canada’s domestic market is relatively small and geographically fragmented.
    Small markets offer lower potential reward for undertaking the risk of innovation and tend to attract fewer competitors, thus providing less incentive for a business to innovate in order to survive. On the other hand, the innovation success of countries like Finland and Sweden shows that the disadvantage of a small domestic market can be offset by a strong orientation toward innovation-intensive exports.
    Innovation and Business Strategy: Why Canada Falls Short, CCA 2009
  • 16. GOVERNMENT INTERVENTIONS
  • 17. Canada lags in PhD production…
    OECD Data, Conference Board of Canada
  • 18. …despite growth in expenditures on R&D in Canadian universities
    Research Infosource
  • 19.
    Ontario has structural problems. Its manufacturing sector has been eroded by global competition. Growth in its workforce will soon grind to a near-halt; already the province falls far short of producing enough workers with graduate-level degrees to help drive the province’s growth and standard of living. It’s a problem for the entire country; Canada ranks roughly 25th among industrialized countries for the number of PhDs per capita. There is a cost to turning inward.EditorialThe Globe and Mail, November 16, 2010
  • 20. Low direct assistance to companies
    Innovation and Business Strategy: Why Canada Falls Short, CCA 2009
  • 21. Government expenditures on business R&D in 2004
    2004 GBERD was $636M or 14.1% of $4,513M GERD
  • 22. Government support of companies
    There are over 530 government programs in support of innovation in Canadian industry
    Some give fiscal support: IRAP, SDTC
    Some give fiscal support to partners
    Some give advice
    How effective is the 500th most effective program
    SOURCE: GFUNDS ONLINE, Global Advantage, 2010
  • 23. Weak venture capital performance
    The first three values for Canada are for 1995-2001 (seven years), 1995-2002 (eight years), and 1995-2003 (nine years), respectively.
    SOURCE: CVA, 2007; NVCA, 2008.
    Innovation and Business Strategy: Why Canada Falls Short, CCA 2009
  • 24. The impact of interventions in the venture capital arena
    Government policies created a number of subsidized investment vehicles in Canada
    The rate of making investments was mandated
    Return-on-investment (risk) assumed a lesser role
    Companies receiving investment did not succeed
    More stringent venture money was displaced
    The smart in smart money is more important than money
  • 25. US venture capital is different
    “The interesting thing about academia is that its more interesting to the people in it than it is to anyone else …”
    “In Silicon Valley, we build businesses around an idea and then we figure out how we will make money…if you want something to really work you cannot hire people who are motivated by a pay check”
    “Venture Capital exists everywhere but the companies that have been best at using it are in Silicon Valley – because we work well together and because we are more likely to be compelled by a big idea and put monetization second.”
    Alexander Karp,
    Co-founder and CEO of Palantir
  • 26. Canada’s Innovation Strategy of 2002
    Skip to English content | Passer au contenu Français
    The Innovation in Canada Website has been archived.
    An archived version of the Innovation in Canada Website is available for historical purposes in the Government of Canada Web Archive which is maintained by Library and Archives Canada.
    Le Site Web L'Innovation au Canada est maintenant archivé.
    Une version archivée du Site Web L'Innovation au Canada est disponible à des fins historiques aux Archives Web du Gouvernement du Canada et entretenu par le biais de Bibliothèque et Archives Canada.
    Date Modified: 2008-11-24 Date de modification : 2008-11-24
    Important NoticesAvis importants
    Weak national agendas
    GOOGLE “Canada’s Innovation Strategy”
  • 27. 1981 1986 1991 1996 2001 2006
    Canada’s Innovation Strategy 2002
    Move from 15th to 5th in BERD
    Implied $200B of innovative products
    In fact BERD has declined
    Innovation and Business Strategy: Why Canada Falls Short, CCA 2009
  • 28. Summary…
    Production rate of PhD falls far below other developed countries. Despite increased spending Canada falls further behind.
    Government interventions to increase VC supply have been counterproductive.
    Government support of industry R&D is fragmented and ineffective.
  • 29. …Summary
    Efforts to mobilize national attention to the issues have not met with success.
    Fragmentation between Federal and Provincial levels has not served the interests of Canadian innovation.
    This patchy record is only tolerated because of Canada’s natural resource wealth
    Government may be irrelevant
  • 30. UNIVERSITIES
  • 31. Canadian universities 2000-2009
    Research Infosource
  • 32. Share of national research income
    Research Infosource
  • 33. Share of national research income
    Research Infosource
  • 34. Alberta stationary for a decade…
    Research Infosource
  • 35. While BC was on the rise…
    Research Infosource
  • 36. Alberta losing leadership in West
    Research Infosource
  • 37. Alberta universities: a flat decade…
    Research Infosource
  • 38. BC universities were on the rise…
    Source: Research InfoSource
  • 39. Summary
    Research expenditures at Canadian universities tripled over the decade
    Research intensity has tripled at leading universities
    British Columbia and Ontario have made the greatest gains
    Little change in relative rankings of individual universities
  • 40. INSTITUTIONS
  • 41.
    People, not institutions, are intrinsically innovative. Institutions are not intrinsically innovative; rather the reverse. Peter Hackett A Creative Economy in Canada?
    Research Money, 24 (2010) July
  • 42. Waterloo: An entrepreneurial university
    COOP model is ubiquitous. Students are engaged with industry throughout their education.
    Professors are expected to consult with industry.
    Professors own the IP generated from their research.
    SOURCE: David Wolfe
  • 43. NINT: Building ($40M)
    NRC
    • ResearchPrograms
    • 44. Innovation Program
    • 45. Incubator
    University AlignedNanotechResearchPrograms
    NRC/UofASharedNanotechFacility
    ($40M)
    National Institute for Nanotechnology
    Interdisciplinary
    Global Scale
    $40M
    NRC
    Fellows
    $20M
    Adjuncts
    $20M
    $40M
    $2M/a
    $?M/a
    $12M/a
    DESIGN: Hackett and Church, early 1999
  • 46.
    I believe so much in this model that I’ve picked an area of research I believe is fertile for Canada – quantum information theory and quantum computing – and have invested heavily in it. It’s a fresh, green valley just waiting for us to claim. I have put $133 million so far into the Perimeter Institute for Theoretical Physics and the Institute for Quantum Computing at the University of Waterloo. Mike LazaridisCEO, Research in Motion
  • 47. Institute for Quantum Computing
  • 48.
    MESA+ must remind industry of the cruel and conveniently overlooked fact that when it focuses on the comfortingly familiar activities of cash management, engineering improvement of existing ideas and commoditization of its products, it loses proprietary advantage , cost advantage, margin, and ultimately the business itself. Universities and industry must cooperate – to mutual advantage – around nano to keep fresh ideas and fresh minds coming.George M. WhitesidesHarvard UniversityMESA+ Scientific Advisory Board
  • 49. Summary
    Institutions are challenged to maintain relevance in face of global change
    There is a feeling that the pace of institutional innovation is too slow
    Those institutions that adapt and seek out more effective models will be the leaders of tomorrow
  • 50. INDUSTRY
  • 51. Industry expenditures on R&D
    Research Infosource: Top 100 R&D performing companies
  • 52. Expenditures on R&D
    Research Infosource : Top 100 R&D performing companies
  • 53. -1.8
    -1.3
    -0.8
    -0.3
    Canada-USA BERD intensity
    Innovation and Business Strategy: Why Canada Falls Short, CCA 2009
  • 54. First year patents for drugs approved
    Friedman, Nature Reviews Drug Discovery, 9 (2010) 835
    SOURCE: FDA Orange Book
  • 55. Where were new drugs invented?
    Friedman, Nature Reviews Drug Discovery, 9 (2010) 835
    SOURCE: FDA Orange Book
  • 56. Canadian technology billionaires
  • 57. TSX Top 1000 companies in 2009
    123 companies overall
  • 58. Companies in the Top 1000
  • 59. Summary…
    A strong and effective innovation system in energy and mining with a positive BERD intensity advantage
    Weak venture capital sector and fragmented support for building small companies
    Weak supply of HQP destined for business
    Despite this many examples of successful entrepreneurs and technology companies
  • 60. …Summary
    However, outside of the energy and mining sectors, there are weak systems of innovation at both the national and local levels
    Consequently single firms, e.g., Nortel, JDS Uniphase, QLT… rise to prominence and dominate our outlook and view of the future
    We need to attend to systematic growth of firms that are significant in global markets
  • 61. THE REMAINS OF THE DAY
  • 62. Global research (1981 to 2009)
    All publications
    Materials science
    EU-27USAASIA PACIFIC
    Engineering
    Molecular Biology and Genetics
    Thompson- Reuters Web of Science
  • 63. Global research in transition
    Share (%) of world publications
    2004-2008
    EU-27USACHINA
    Thompson- Reuters Web of Science
  • 64. Growth of nanoscience papers
    Thompson Reuters Web of Science
  • 65. Emergence of China
    Thompson Reuters Web of Science
  • 66. Emergence of India
    Thompson Reuters Web of Science
  • 67. Big shift to Asia
    Thompson Reuters Web of Science
  • 68. By 2004 quality is uniformly high
    Thompson Reuters, Web of Science
  • 69. Nanoscience grows in Canada
    Thompson Reuters Web of Science
  • 70. But global share begins to decline
    Thompson Reuters Web of Science
  • 71. Rating Nations on Nanotechology
    Nanotechnology Activity
    Technology Development Strength
    David Hwang, Lux Research, August 2010
  • 72. Entrepreneurs
    “The universal in starting an indigenous economy is getting firms under way…”
    “The magic of Singapore and of the Indian and Chinese economies is their adoption of the entrepreneurial economy.”
    Carl Schramm
    CEO Ewing Marion Kaufman Foundation
  • 73. Entrepreneurship in China
    “China needs 300 million jobs – only small companies can provide them”
    Jack Ma
    Founder and Chairman Ali Baba
  • 74. Global developments
    Urbanization in China, 300 million people moving to the cities
    Many small companies will be created
    Those companies will scan the world for technology to incorporate into products for sale around the world
    India, Brazil, Turkey… will do the same
    How will Canada respond?
  • 75.
    Canada, rich from natural resources, will likely remain rich for a while. Canada has to live as a rich society if it is to attract and retain the people who will build the creative economy. Living rich comes with responsibilities. Rich societies live rich by making large investments in the education of their people and by taking on issues of global human development. Peter Hackett A Creative Economy in Canada?
    Research Money, 24 (2010) July
  • 76. A balanced scorecard…
  • 77. Summary
    Need to greatly increase the supply of PhDs
    Need to pay attention to commercial skills and industry engagement
    Incent the ROI of venture not the supply
    Radical overhaul of industry support programs
    Individuals not governments will make the difference
    NEED A SENSE OF URGENCY
  • 78.
    Many men easily do without truth but none is strong enough to do without illusions.Gustave Le Bon (1841-1931)French social psychologist