Dr Alan Cornford

Ripping the Cover Off Innovation

By Dr Alan B Cornford

All nations are endeavouring to increase their innovative capacity and competitiveness. Canada is no exception. Notwithstanding that we all accept that prosperity will increasingly depend on the knowledge-based economy, there is a problem. There are a few myths that surround innovation.

The first is that increasing spending on R&D will increase innovative capacity. In general it will NOT, unless it is the right kind of R&D and unless there is the correct mix between private R&D and public R&D. Bakers know this — if the proportions of ingredients are wrong, an angel cake can easily become a pancake and the party is over before it begins. We have the wrong mix of innovation ingredients in most parts of Canada today, nationally and regionally. In fact, the present R&D mix is hindering the economic development of three of the country’s four regional economies and hence it contributes little to Canada’s innovative capacity.

The second myth is that most innovative ideas emanate from R&D — they do NOT. While “state change” ideas are most often derived from R&D, more than 80% of innovative ideas come from employees, customers, competitors and the marketplace. That is not to say that they do not need further R&D before commercialization — they do. But this is predominantly private sector applied, adopted and adapted R&D.

So, if we look at present Canadian innovation investment profiles, there are some serious deficiencies. There is a profound absence of public investment in developing our industrial “receptor capacity” for accepting, applying and commercializing publicly generated R&D ideas, as well as those from the marketplace. The national balance between private and public R&D is not competitive internationally and it is worse in the provinces. Present commercialization efforts related to public R&D from our universities and government labs (based on year 2000 public R&D investments of $8 billion) generate less than 3% of all Canadian innovation capacity outputs. That’s correct — less than only 3% of all outputs from 100% of public spending which is approximately 40% of all R&D spending in Canada.

The third myth — innovation seems to have been seen as an investment “input” game –— more money provides more innovation competitiveness. Wrong. It is an “output” game — local wealth generation (the output) is the only real measure of success.

Increased spending on GERD (gross expenditures on R&D) is little more that a self fulfilling promise — the wrong treadmill that many nations are on. GERD expenditures influence innovative capacity by only 10% according to the US Council on Competitiveness 2) whereas the BERD (Business expenditures on R&D) is 150% — 15 times the impact on innovative capacity. Canada cannot spend its way out of, or into, this one. As Al Pacino said in “And Justice for All” — “there is really something wrong here!” … in our innovative strategy.

A fourth myth is that there are limited venture capital dollars available. There is actually plenty of VC financing available that is looking for good deals. There is not enough “deal flow” of well packaged “financable” deals to interest the VC’s. Nor is there enough constant volume to encourage more of them to locate in some regions and provinces and keep busy. The annual deal flow in most provinces can be counted on our fingers and toes (except in Ontario and Quebec). Good deal flow will generate more access to capital.

Also, most regional private/public R&D ratios are non-competitive. Some are actually in decline. Provincial objectives for increasing KBE (knowledge based enterprise) sector contributions to GDP (gross domestic product) therefore cannot be realized under current policies.

So, the intent of this piece is to “rip the cover off” —– to look very carefully and critically at a few of the more important factors that most influence innovation. The stage is then set to develop more effective strategies to achieve Canadian national and regional objectives.

In a future article, I will provide a regional “diagnostic” analysis that is a context for a “prescriptive” piece leading to appropriate “policies”. The “innovation doctor” will perform a diagnostic, a prescription, and then propose a long term wellness program for the health of innovation in Canada.

Dr Alan Cornford is a Vancouver-based technology entrepreneur. He previously served in the BC government as ADM for S&T and was president/CEO of Simon Fraser University’s SF Univentures Corp