Canadas Innovation Strategy: The Innovation Engagement Process and Follow-on Actions Prepared by Lois Stevenson The Innovation Secretariat Policy Sector,

Canada’s Innovation Strategy:

The Innovation Engagement Process and Follow-on Actions

Prepared by Lois Stevenson

The Innovation Secretariat

Policy Sector, Industry Canada

Innovation

• Canada’s goal is to be recognized as one of the most innovative countries in the world.

• Canada’s Innovation Strategy:

– Knowledge Matters: Skills and Learning for Canadians

– Achieving Excellence: Investing in People, Knowledge and Opportunities

• 2001 Objectives:

– assess the national challenge

– propose national goals, targets and federal priorities for action

– leverage complementary commitments by partners

The process through which new economic and social benefits are extracted from knowledge

–OECD definition

Canada’s standard of living declining relative to the U.S.

• Canada’s standard of living is high in relation to the rest of the world

• But we have a significant gap compared to the U.S. – our major trading partner and key competitor

• The income gap is mostly due to Canada’s relatively weaker productivity performance

• Innovation is the key to improving productivity

Standard of Living and Productivity*Canada Relative to the U.S.

US=100

1981 1984 1988 1992 1996 200070

75

80

85

90

95

100

Productivity in Canada

Real Income in Canada

* Productivity is measured as real GDP per hour worked and real income is measured as real GDP per capita.

Sources: Statistics Canada and U.S. Bureau of Economic Analysis

Canada progressing toward a more innovative economy

• Canada’s innovation performance near the bottom in the G-7

• But business, academia and governments investing aggressively in innovation

• On the right track, but we need to build on our strengths to realize our potential

Canada's Innovation Performance (Average Annual Rate of Growth, 1981-99*))(

* Or latest year available; figures adjusted by the size of labour force or economy.

Source: OECD, Main Science and Technology Indicators, 2001/2

1

1

1

1

6

4

3

2

6

4

5

5

5

4

Rankingamong G-7

Canada U.S.

Technology balance of payments

External patent application

Human capital devoted to R&D

Business-funded expenditure on R&D

R&D intensity

National patent applications

Government expenditure on R&D

0 5 10 15 20-5

% per year

Key Innovation Challenge Areas

• A multi-pronged effort will be required to address Canada’s innovation challenges:

– The knowledge performance challenge (R&D)

– The skills challenge

– The innovation environment challenge

Knowledge Performance Challenge

• Private Sector: – 57% of Canada’s R&D: Fastest pace of growth in G-7

– Challenges: industrial structure, firm size, foreign ownership, concentration

• Universities:– 31% of Canada’s R&D: Strong ties to private sector

– Challenges: faculty retirements, indirect research costs, small university research specialization, commercialization, supply of highly qualified people

• Governments:– 11% of Canada’s R&D

– R&D is key to maintaining modern and effective regulatory and investment policies

– Challenges: researcher retirements, keeping pace with scientific developments

Canada ranks 14th in R&D performance among OECD countries. We need to increase investments by all three sectors. Goal is to be among top five by 2010.

Commercialization Gaps

• Strong growth in venture capital investments in recent years; unused supply– But the Canadian industry needs to tap into new sources of

capital and offer more specialized services.

• 80% of manufacturing companies are introducing new and improved products & services to the market- But Canadian firms trail in their ability to capture the economic

benefits of innovation.(innovations have smaller overall impact on sales)

• Canadian firms compare well internationally in number of strategic alliances formed– But they need to develop more of the technology alliances that

are key to innovation.

Proposed Targets for R&D

• Promote the creation, adoption, and commercialization of knowledge

– By 2010, rank among the top five countries in the world in terms of R&D performance.

– By 2010, at least double the Government of Canada's current investments in R&D.

– By 2010, rank among world leaders in the share of private sector sales attributable to new innovations.

– By 2010, raise venture capital investments per capita to prevailing U.S. levels.

The Skills Challenge

• Ensure an adequate supply of people who create and use knowledge

• Canada has a highly educated workforce, but skill shortages are looming (global phenomenon)

• To meet our 5th place R&D target, we need to double the number of research scientists and engineers in Canada.

• We also need to develop strong managers who can lead Canada’s economy through a business transformation.

• Three key sources of highly qualified people:–New graduates

–Immigrants

–Current workforce

Proposed Skills Targets

• Develop the most skilled and talented labour force in the world – Through to 2010, increase the admission of Master's and

PhD students at Canadian universities by an average of 5 percent per year.

– By 2002, implement the new Immigration and Refugee Protection Act and regulations.

– By 2004, significantly improve Canada's performance in the recruitment of foreign talent

– Over the next five years, increase the number of adults pursuing learning opportunities by 1 million.

The Innovation Environment Challenge and Proposed Targets

• Ensure that Canada's stewardship regimes and marketplace framework policies are world-class

• Improve incentives for innovation – By 2010, complete systematic expert reviews of

Canada's most important stewardship regimes.

– Ensure Canada's business taxation regime continues to be competitive with those of other G-7 countries.

– By 2005, substantially improve Canada’s ranking in international investment intention surveys.

Community-Based Innovation Challenges and Proposed Targets

• Work together to stimulate the creation of more clusters of innovation at the community level and unleash the full innovation potential of communities across Canada. – By 2010, develop at least 10 internationally recognized

technology clusters. – By 2010, significantly improve the innovation

performance of communities across Canada. – By 2005, ensure that high-speed broadband access is

widely available to Canadian communities.

The Public Engagement Process - 2002

• February 2002: released Innovation Strategy Papers – set directions to 2010

• May – October: asked Canadians for their views on targets, priority actions, recommendations

• Two overarching objectives of engagement process- Mobilize Canadians to make commitments - and turn them

into action - so that Canada becomes one of the most innovative countries in the world

- Examine Government’s Strategy to accomplish this goal - then tell us if we’ve got it right.

http://www.innovationstrategy.gc.ca

The Engagement Process…Outreach

• Established special Innovation Secretariat • Over 10,000 Canadians participated in:

– 33 regional events– Meetings with over 80 sectoral groups– Over 40 expert, best-practice, and interest group roundtables– Diversity of streams, e.g. sectors, regions, youth, provinces

• Some 600 online responses from individuals and SMEs • Over 250 formal submissions received from

organizations representing hundreds of thousands of Canadians (posted on line)

• Several federal government departments involved

What did Canadians say…

• Confirmed major directions set out in Innovation Strategy papers

• Suggested modifications to certain targets and milestones– Move faster in certain areas (e.g. regulatory reform)

– Modify performance measures in certain cases (e.g. R&D intensity)

– Provide more clarity (e.g. cluster strategy)

• Pointed out deficiencies (e.g. insufficient focus on commercialization efforts; skilled trades)

What did Canadians say…

• Recognition that many stakeholders must collaborate• Government cannot act alone; innovation is everybody’s

business; role for all key stakeholders• Sense of ‘readiness’ to move forward – Canadians

mobilized; ready to commit; wanted ‘fast action’ • Views summarized in Canadians Speak on Innovation

and Learning• Analysis of key issues and recommendations by stream• Over 2000 recommendations; 5 key horizontal issues

with 93 recommendations for prioritization at National Summit (National Summit Discussion Guide)

2. Enhance the Innovation Environment

- Support innovation in the tax system

- Speed regulatory reform- Modernize the IP system

1. Improve R&D and Commercialization

3. Strengthen Learning Outcomes

- Access to learning opportunities- ‘Innovation’ in the learning system- Careers in skilled trades- Lifelong learning

4. Build an Inclusive & Skilled WorkForce

- Increase labour force capacity - Integrate immigrants in the

workforce- Invest in workplace training

5. Strengthening Communities

- Development and growth of clusters- Build learning communities- Extend broadband access - Strengthen rural and Aboriginal

communities

- Research capacity- Commercialization outcomes - Access to capital

Priorities in five key horizontal areas…

Going into the National Summit, certain priorities were clear…

• Have to improve R&D performance of private sector firms– How to stimulate a tripling of investment by 2010?

• Have to improve commercialization outcomes from government-funded and private sector R&D– Get more R&D ‘off the shelf’ and into the marketplace

• Have to improve the regulatory environment for innovation

Certain priorities were clear (2)…

• Have to deal with impending skills shortages in several areas– HQP; world-class researchers; scientists

– Commercialization experts

– Skilled trades and technical specialists • Have to help communities of all sizes improve their

‘innovation and learning’ capacity so they can improve innovation performance

Other imperatives…

• Stronger culture of innovation in all parts of Canadian society

• Harmonize regulatory regimes and technology assistance programs across levels of government

• Develop all kinds of collaborative networks (e.g. large firms-SMEs; sector-sector; universities-SMEs; R&D institutes-industry)

• New partnership arrangements (e.g. international consortia; anchor firms-SMEs; public-private sector R&D)

• Break down ‘silos’ everywhere

The National Summit…

• Objectives of Summit

– To agree on the basis of Canada’s Innovation and Learning Action Plan

– To set a concrete path for moving forward

• Government ready to take action on key priorities – Speech from Throne/Budget

– Need advice from leaders on how to do this

– Precisely what, who, how, and when

November 19-20, 2002, Toronto

• Over 520 private sector CEOs, business, industry, labour and community leaders, senior government officials, educators, R&D performers, politicians

• Workshops on 5 key horizontal issues to prioritize the 93 recommendations

• Four special panels on environment; biotechnology, life sciences, health innovation; communities; immigration

• Plenary feedback session to report on top 3-4 recommendations from each workshop

Summit Outcomes

• ‘Early action’ announcements (e.g. Prime Minister’s Five-Point Action Plan on Innovation)

1) Make Canada a learning society (Learning Institute)

2) A knowledge society that invests in ideas

3) Clusters to bring ideas to market

4) Smart Regulations to spur innovation

5) Diversity of talent and an urban strategy

• List of 18 priority recommendations with proposed implementation strategies

• Minister’s DECK on ‘Priorities for Action’

• Ministerial commitment to reconvene in 2 years; develop benchmarking indicators to measure progress

• Results published in Summit Summary Report

18 Priority Recommendations (1-3)

• R&D and Commercialization

1. Strengthen receptor capacity

2. Expand R&D funding to universities, CFI, Research Chairs

3. Broaden/deepen mandate of successful technology programs

• 2003 Responses– Establish WG; contract

scoping paper

– $190M BDC innovation fund

– MOU with AUCC; MC on Indirect Costs

– New research funding in 2003 Budget

– Expanded IRAP funding

– Review of landscape

18 Priority Recommendations (4-7)

• Innovation Environment4. Reduce/eliminate capital tax

5. Improve SR&ED tax credits

6. Develop tax-based instruments for seed stage investments

7. Accelerate regulatory reform to 2005

• 2003 Responses– Eliminate capital tax by 2008

– Review underway

– Working group on Venture Financing gaps

– External Advisory Committee on Smart Regulations

– Review of sector specific regulatory reforms

18 Priority Recommendations (8-11)

• Learning Culture8. Establish Canadian

literacy development system

9. Integrate innovation-related skills in curriculum

10. Adjust student financial assistance system

11. Expand capacity in post-secondary system

• 2003 Responses– Canadian Learning Institute

funded

– The Practice of Innovation project for use in universities

– Additional budget allocated

– Roundtable on colleges and SMEs (March)

18 Priority Recommendations (12-14)

• Skilled, Inclusive Workforce12.Target under-employed

groups; use of PLAR; access to apprenticeship, coop, and training programs

13.Incentives to increase in-house & apprenticeship training in industry; expand programs through industry, government, educational partnerships

14.Plan to recognize foreign credentials

• 2003 Responses– HRDC

– Sector action plans under review

– $41 million program

18 Priority Recommendations (15-18)

• Strengthen Communities15. Collaborate to prepare

community innovation action plans and strategies

16. Support growth of clusters

17. Extend broadband to rural and remote areas

18. Support enhanced learning capacity in rural and Aboriginal communities

• 2003 Responses– Best Practices Workshop

on Community Innovation Strategies

– MC on NRC Clusters

– Funding for MaRS (medical cluster)

– Extension of Broadband for Rural Development Program

– HRDC/enhancements to ABC program

Conclusions from Process

• The importance of innovation was never in question• Government actions must correspond to advice received

during the engagement process• Communities and sectors are ready to move, but they are

waiting for government to act as well • Resources needed for follow-up work• The approach must be integrated• Partnerships must be established with enterprises and

communities• The Summit gave credibility to the Innovation Strategy,

but implementation process just beginning

Moving forward…post-Summit

• Revitalization of the PM Advisory Council on Science and Technology (ACST) – examine research landscape

• Working groups in key areas – Risk Capital, Benchmarking, Receptor Capacity

• Sectors/communities to develop/implement innovation action plans

• Efforts to benchmark innovation performance• Annual review of progress

Maintaining Momentum – 2003 +

• Lots of collaborations have to be built• Stimulating actions of other players?• Engagement of provincial/territorial/municipal

governments?• Fostering of partnerships between academia,

government, business/industry?• Stimulating innovation activity at regional level? • The role of Innovation Agenda in government’s key

priorities? Top 2 for Industry Canada 2003-04

Supporting SMEs

• Input from Engagement Process– Support spin-off firms from technology clusters– Develop entrepreneurial skills at universities and colleges– Better access to technology commercialization programs– Make experts available for SMEs (eg. mentoring) – Make R&D tax credits more accessible to SMEs – Fill gaps in early stage seed financing for innovative

projects– Help SMEs collaborate with large firms– Make more guidance available to manufacturing SMEs

How Innovating Firms See Policy Constraints

• Government Procurement Policies – as early adopters• Regulatory and Tax Regimes – need simplification• Intellectual Property Ownership Challenges – more

awareness; greater consistency• Access to Government Assistance Programs –

simplification, easier access for SMEs• Government’s Ability to Assess Areas of New

Technology – knowledge enhancement• Access to Distribution Channels – competition issues• Securing Alliances and Partnerships – help broker links

A Closer Look - Lessons Learned from Seven Innovating Firms

• Research, profiles, video vignettes, studio interviews

• Put a ‘face’ on innovation

• World-first; world-only innovations

• Identify stages of innovation journey, priorities at each stage of the process

• Barriers to innovation

• Strategies for achieving innovation outcomes

• Implications for government and other action

Characteristics of Innovating Firms

• Driven by curiosity, passion of founders• Seek help from universities, government programs and

key global investors to further the firm’s business strategy• Bring in needed R&D and/or management expertise• Straddle stages of the innovation process (4)• Intense, laser-like focus on solving a particular

technological problem – often customer or market driven• Use outside consultants to help create an internal

disciplined process or ‘roadmap’ to deliver on objectives• Have intellectual property/patent strategies• Work to move science/technology to market application• Global from the start

Insights About Innovation Journey• Innovation isn’t easy; takes a long time to get to market• The journey:

– Costs a lot of money – who pays?– Depends on lots of non-financial resources– Is full of trial and error– Requires discipline and focus/early market validation

• Need good patent and IP protection advice• Need skill in developing strategic partnerships• Have to manage transition challenges through stages• Serendipity plays a big role• Timing is critical issue – readiness of technology,

market, company capacity• Innovation isn’t just about technology development…

Barriers to Innovation

• Costly to educate the market when ‘first in’ – takes time and cost to build demand, credibility; any positive efforts to encourage adoption of new technologies are welcome

• Difficult to find qualified graduates who can work with technology and apply business management skills

• Gaps in capital for higher risk innovations• Certain new technologies do not have champions in

Canada, as they do in the US• Canada lagging US and EU in patent approval process,

environmental standards

Role of Canadian Government in SME Innovation Success

• Government procurement contracts to early R&D efforts

• NRC, IRAP, TPC, BDC, Regional Agencies in funding early stage developments

• Technology transfer offices (IPMP)• Information about suppliers, complementary

technologies, technical advice, IP • Profiling firm/technologies on international basis• SR&ED tax credit system• Spinning new technologies out from government

research labs (NRC,CRC)

Intellectual property policies /processing of patents/patent advice

Role-models; award programs; innovation BP challenges (U of T)

Funding of university incubators, innovation/tech transfer centers

Support for clustering and networks (NRC, HITE, CATA)

Universities

Research institutes

Access to R&D tax credit program

Pre-seed funds, early stage VC and angel funds

Encourage Techno-starts and spin-off firms

Entrepreneurship education for engineers and scientists

Government labs

SMEs and Disruptive Technologies - Innovative Entrepreneurship