Superclusters doing “good things” for Canada’s innovation ecosystem despite criticisms, says former federal deputy minister

Canada's five superclusters have strengthened the innovation ecosystem but it is too soon to judge their long-term performance, says a former federal senior official responsible for the creation of the superclusters initiative.

The federal government announced five innovation superclusters in 2018 with a five-year investment of $950 million to be matched by private sector investment. Led by industry, the superclusters were designed to address weaknesses in Canada's innovation system, including under-investment in research and development by the private sector and lack of commercialization of novel products and services.

However, the Parliamentary Budget Officer and some business leaders have criticized the superclusters for not spending federal funding quickly enough to launch projects and meet the initiative's GDP and job growth targets.

John Knubley, deputy minister of Innovation, Science and Economic Development Canada (ISED) from 2012 to 2019, argues that the superclusters should be assessed by a broad innovation policy framework and with a longer time frame than their initial five-year mandate.

Now three years old, the superclusters “have been successful in terms of business investment, network effects, international partnerships and training. They’ve really done some good things,” Knubley told Research Money.

“As we move forward, they need to be given more time. They need to be looked at through a much broader innovation policy lens,” he said.

Knubley, now a consultant and a fellow at the Brookfield Institute for Innovation + Entrepreneurship housed within Ryerson University, analyzed the superclusters in a new report.

The superclusters are: Digital Technology in British Columbia; Protein Industries Canada on the Prairies (focused on plant-based food products); Next Generation Manufacturing Canada, or NGen, in Ontario; Scale AI in Quebec (focused on artificial intelligence) and Ocean in Atlantic Canada (focused on the ocean economy).

Knubley said the superclusters have surpassed their target for matching business investment in projects and are getting about $1.40 for every dollar of supercluster spending. Across the five superclusters, $510 million in government funding has leveraged industry investments totalling more than $1.2 billion, as of January 2021.

In terms of building more collaborative innovation networks, there are now nearly 5,000 businesses out of more than 6,000 member-organizations in the five superclusters. Of the announced projects with 870 partners, more than 470 are small and medium-sized enterprises.

As for furthering training of a workforce for a digital economy, the superclusters are supporting inclusive STEM (science, technology, engineering and mathematics) programs for women and Indigenous people, as well as funding incubators and accelerators, Knubley said.

In international partnerships, the superclusters are attracting countries that want to work with them. For example, the Digital supercluster, industry partner Terramera in Vancouver, and the Asia Pacific Foundation of Canada have signed an MOU to advance genomic technology to combat a wheat-killing fungus and develop other agricultural technologies.

Independent, third-party evaluation needed

In a report last October, Parliamentary Budget Officer (PBO) Yves Giroux said the superclusters weren’t spending their federal funding fast enough. Giroux predicted it was “highly unlikely” the initiative would achieve its 10-year targets to increase GDP by $50 billion and creating 50,000 new jobs.

However, Giroux's report relied on outdated data that didn't account for seven months of accelerated activity by the superclusters and used a limited number of performance indicators, Knubley said.

“The PBO assessment of the superclusters was at the very least premature and, in any case, based on a narrow evaluation framework, as if the purpose was merely projects,” Knubley said. “This [superclusters initiative] is as much about capacity building as it is about developing projects.”

Knubley said it is now time, “given the general lack of understanding of the scope and nature of superclusters,” to engage an independent third party to establish an ongoing evaluation framework to guide the superclusters’ strategies and communications.

He said performance metrics should focus on the key objectives of the superclusters’ programming related to demand-side innovation and cluster building. This includes:

• benefits of new integrated technology solutions;
• collaboration, including support for small- and medium-sized enterprises (SMEs) and other network effects;
• business-led investment in R&D;
• talent training and retention;
• creation of IP and other intangible assets; and
• commercialization of innovative products and services.

“Above all, the superclusters should be judged by how they move the needle on Canada’s innovation performance,” Knubley said.

$60 million in new funding a “vote of confidence”

The 2021 federal budget included an additional $60 million over two years for the Innovation Superclusters Initiative. ISED is still working on criteria for how the new funding will be allocated.

“I thought that the $60 million investment was a real vote of confidence by the Government of Canada in this program,” Sue Paish, CEO of the Digital Technology Supercluster, said in an interview.

Paish added that she was pleased that Ottawa recognized the importance of digital technologies by proposing in the budget to invest $4 billion in a new “Canada Digital Adoption Program” to help up to 160,000 SMEs buy new technologies that they need to grow.

The Digital supercluster has fully invested its original funding and has already evaluated several project proposals that are not yet funded. “As soon as new [government] investment is available, we’ll have projects active,” Paish said.

Bill Greuel, CEO of Protein Industries Canada, said the $60 million for the superclusters “is a great opportunity for the superclusters that have committed most if not all of their funds to keep the momentum going."

Jayson Myers, CEO of NGen, said he hopes the new money will go to support superclusters that have fully invested their initial federal funding, but still have a list of proposed projects awaiting support.

NGen still has about $150 million worth of unfulfilled funding requests in its pipeline, Myers said. That includes projects in areas that Ottawa has identified as innovation priorities, such as battery technology, biomanufacturing, industrial decarbonization and new robotics applications.

Supercluster CEOs urge Ottawa to evaluate superclusters’ real-world impacts

The three supercluster CEOs interviewed by Research Money suggested several performance metrics that should be used in an independent, third-party evaluation, including:

• Intellectual property assets created, protected and leveraged by supercluster projects.
• Supporting SMEs’ ability to grow and scale.
• Ability to build and integrate collaborative innovative partnerships and business opportunities from projects, both within Canada and internationally.
• Health care benefits and environmental impacts.

For example, the Digital supercluster and its partners have already created 350 “foreground IP” assets (IP generated by the projects) and have multiple patent applications.

More than 170 SMEs are participating in the Digital supercluster’s projects, with 70 percent of the supercluster’s funding going directly to SMEs. Of NGen’s 225 partners participating in projects, 204 are SMEs.

In response to a request from Ottawa, NGen and the Digital superclusters pivoted to provide substantial funding to COVID projects to quickly get personal protective equipment, ventilators, virus test kits, disinfecting robots and other medical products to hospitals and frontline workers.

Myers said it “would be great” to have an independent third party evaluate the superclusters’ economic, social and environmental impacts. He, Greuel and Paish pointed to projects co-funded by their superclusters and industry that have made substantial impacts or have the potential to do so.

An NGen project led by Hamilton-based ArcelorMittal Dofasco involves transforming steel production by developing a digitized system that decides the optimum time to pour a vat of molten steel. Such a solution for hazardous liquids processing could be applied to chemicals, pharmaceuticals, food processing and other sectors, and exported globally, Myers said.

Protein Industries Canada has similarly invested in “transformative projects,” including using genomics to increase protein content in 20 million acres of canola crop on the Prairies, Greuel said. “If we can push protein content up by four percent in canola, that’s billions of dollars to the industry,” because of the new markets it will open up, he added.

A Digital Technology supercluster project that developed interactive digital mental health therapy tools for frontline health workers is now being accessed by 30,000 workers in just one health region, and is being expanded to school teachers across Canada, Paish said.

Another Digital supercluster project led by Vancouver-based Canexia Health created a blood test to identify cancer tumour DNA circulating in the bloodstream before a tumour starts to form. The test is an alternative to surgical tissue biopsies put on hold by COVID.

“Canada needs to place bets on policy like the superclusters if we are going to win in the innovation landscape,” Paish said.

Sources: Brookfield Institute report by John Knubley and interviews with supercluster CEOs.

R$