Dr. Douglas Barber

Engaging industry in the innovation agenda

By Dr Douglas Barber

The idea of defining a new category of “innovation-intensive” company based on R&D intensity emerged from the federal government’s 2001 Throne Speech. That goal is for Canada to move into the top five innovative economies of the world by 2010. Canada would be much more prosperous and the standard of living of all Canadians would be significantly higher if this goal were achieved. Our traded economy would increase by about $160 billion or by 50% and our Gross National Product would increase by between 10% and 20% at minimum.

To achieve the goal, the private sector would have to win all of those new, largely export, revenues and would have to invest at least 132% of these revenues in the innovation required to fuel the growth. That would be about 70% of the increment required to get us to the goal. The additional 30% increment of public tax-based investment needed in innovation would be sustainable only through the success of the private sector.

How many innovation-intensive companies do we have in Canada? If the country as a whole will need to spend over 3.1% of GDP on research and development by 2010, then let’s look at companies that are spending 3% or more of revenue now. To be conservative, let’s also restrict ourselves to those firms spending less than 50% of revenue on R&D. Finally, to ensure we include significant contributors on this time scale, let’s only include firms spending $3 million or more.

I was shocked to learn that the number of these innovation-intensive enterprises, on which Canada’s ability to move into the five top innovative economies of the world hinges, was a group of about 120 companies. They are primarily in Information and Communications Technology and in Biopharma areas. These companies could take us to the goal by growing revenues annually at an average rate of 15% and investing on average 13% of revenue on the innovation to fuel the growth.

I was, however, more shocked to learn that the leaders of these key innovation-intensive enterprises were notable in their absence from the consultations around Canada’s National Innovation Strategy. With assistance from Industry Canada, the Information Technology Association of Canada and Dr. Jeffrey Crelinsten, president of Research Infosource, I decided to engage at least 30 of them. I presented the above view of how the innovation-based goal could be reached, and asked them three questions. First, do you see yourself as a player in achieving this goal by 2010? Secondly, what changes could Canada make that would help you. And thirdly, would you be prepared to be an advocate for these changes?

What we learned from those thirty plus conversations with CEO’s, was that:

• these companies are all committed to growth by innovation,
• most believe that they have the potential to be a participant in Canada reaching that goal
• they are global players with a small base of business in Canada,
• they are loyal Canadians torn by the economic imperatives that tend to take their enterprises out of Canada as is the case for most small countries,
• they are convinced that Canada’s economic and commercial culture needs significant change, and
• they are prepared to represent these views to Canada’s leaders in circumstances where real communication can occur.

We also heard many specific things that Canada could do that would be helpful to them. Many of those fell into three broad themes:

CULTURE – WHAT’S IMPORTANT?

Canadians must become more understanding and supportive of their commercial enterprises. They need to become more competitive and aggressive in the global economy. They need to be more supportive of their global players and more comfortable and even proud of them excelling in their commercial choices. Our commercial leaders in innovation-intensive industries feel isolated and even alienated. Only a change in values, understandings and beliefs about what’s important will improve the situation.

EDUCATION AND TRAINING

Canada must become more strategic in preparing its people for the competitive knowledge-based economy. The pool of suitably skilled and knowledgeable people needed for the innovation-intensive enterprises of Canada is already too small and lacking in key areas of learning for knowledge-based commerce.

PUBLIC SUPPORT

There must be increased strategically competitive public support for innovation-intensive enterprises. Every successful developed economy does this better than we do. It requires innovation to do what’s needed in ways that are not labeled as subsidies. In Canada, we support start-ups quite well but we need to find ways of supporting medium-sized enterprises that keep them growing and prospering in Canada.

Reaching these goals will require strong leadership, vision, concerted actions and cooperation among different groups. This research indicates a strong need for the leaders of our federal and provincial governments to meet individually with CEOs of Canada’s innovation-intensive firms.

At present, these committed individuals are not connected to the national innovation discussions. They are generally not aware that they are key players in reaching Canada’s innovation-based goal but, when approached, they have a wide range of ideas – both short-term and long-term – about how to facilitate business and global activity.

The goal and vision set for Canada over two years ago is remarkable in its potential to unite Canadians in reversing the declining economy and standard of living we’ve been experiencing over the last 30 years. Reaching that goal will require realism and focus of a kind we have not been able to bring ourselves to embrace in the recent past. Canadians are intelligent, resourceful people who have demonstrated an unusual ability to support their leaders. This group of innovation-intensive enterprise leaders is prepared to be part of the new leadership energy that this goal and vision requires.

Dr. Douglas Barber is the former CEO of Gennum Corp and author of the new report, “Can the Private Sector Get Canada into the Top Five Innovative Economies of the World by 2010?: Views from Leaders of Canada’s Innovation-Intensive Firms”.