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79th Annual Summer Conference, August 5–8, 2010

Now What? Innovation and Global Competitiveness

Speakers: ANNE GOLDEN, President and CEO, Conference Board of Canada (bio); ROGER MARTIN, Dean of the Rotman School of Management, University of Toronto (bio); TOM JENKINS, Executive Chairman and Chief Strategy Officer for Open Text™ Corporation of Waterloo (bio)

Moderator; BOB RAMSAY, President, Ramsay Inc.

Summary by Stoney Baker, CIPA Youth Scholarship Recipient

Bob Ramsay

  • Assume question in the title, now that recession is ending, safe to get back to our internationally recognized low levels of innovation, while we talk about it. this panel will make the case that the real watershed is finally becoming innovative, instead of inventive.
  • Irony of being a rich country yet poor at innovation and the creativity that creates that wealth.
  • Need more intellectual capital, and more intellectual capital.
  • Speakers with firepower to make sense of the complexity.
  • The speakers clearly want to push to the front…neither public nor private on its own can succeed in this effort.

Anne Golden

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Great to be back, invited to talk about Canada boosting productivity for long-term success. Only route is in innovation in our economy. No consensus on what is to be done, and who should do what. Today will show why we’re not succeeding and how to meet this challenge.

  • The growing gap between USA and Canada has been growing since NAFTA.
  • Can Canada close the difference in productivity with the USA? Won’t be easy.
  • If US productivity to grow at same rate, to meet it, ours would have to be 3.4%. Growth is essential for our society. Not only moving too slowly, but wrong direction.
  • Can we change this direction? I’m going to ask you to picture a triangle – at the bottom are all the global factors (commodity, catastrophic events, etc.) – don’t have control. Now move up, here we have control (tax, competition, openness to trade, urbanization, infrastructure) – generally determined by our government. Now the top, here individuals have control (education, workforce, firm’s culture around innovation).
  • Conclusion – Canada’s productivity gap is our failure to commercialized our research, development, inventions and intentions.
  • If there is consensus that this is the problem, why no progress?
    1. Failure to launch – don’t cash in on creativity. Why Canada not commercializing? Half a dozen measures – opening Canadian industries to competitive measures. Improving level and quality of machinery and equipment. Investing more in capital. Focusing our infrastructure in our major cities, where most innovation occurs. Unleashing organizational and managerial capacity. Removing barriers to trade. Harmonizing to international standards.
    2. Governments shying away from choosing niches. Focus on lab not the market. Governments should choose areas. Suggest clean energies, water management.
    3. Business leaders haven’t stepped up to the plate. Top triangle. Businesses don’t invest in R+D. public sector is doing its part. Why aren’t business leaders investing?
    4. Platform is not viewed as burning. Canadians have not had to view the system as broken. Commodities have allowed us to avoid dealing with this. All need to accept that Canada becoming less competitive.
  • Ms. Golden’s three priorities? 
    1. Canadian government working with industry should support a number of small industries (regenerative medicine, water management, clean energy). Put a price on carbon, and align for new technologies.
    2. Governments should invest strategically in infrastructure in major cities. And invest in relieving cross boarder bottlenecks. End transportation gridlock.
    3. Boost the investment in state-of-the-art equipment. Need to incentivize business to step up to the plate. Canadian investment in startups, not there for companies later. Cumbersome regulatory process. Takes 30 months to get patents approved in Canada, compared to 10-month average in other developed countries.
  • But at the core of all this comes the question of how to change the mind set. Canada needs to acquire more entrepreneurial spirit.
  • Canadians have what we need to succeed.

Roger Martin

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On the innovation front, the usual is not happening. The public policy approach – do research, get the right answer, then talk about it for 5 years, and then change starts to happen. Takes a long time for these things to filter through and get to the place they need to be. Been working on the issue of innovation for 9 years! Nothing. Everywhere other than Canada is having substantial impact.

  • What is the problem? We have no innovation policy. We have an invention policy. And invention and innovation are different. Invention is new-to-the-world discovery or creation, driven by inventor. Defined by how unique, based on individual skills. Innovation creates new value for customers, broad range of marketing, operation and technical skills. No policy for this. Put $613 million to work on creating new jobs through innovation. Of that money, 40% was for invention. 57% into things with no utility for innovation. 3% into things that would potentially be useful for innovation. Only $15 million has a shot of being useful on innovation.
  • The problem with the narrowly defined invention driven job growth is that it just isn’t very big. Innovation should be throughout the economy. The trouble is that scientific research looks for creations that are curiosity based, and likelihood that this will meet with consumer needs is very small. In medical industry, there may be a closer connection.
  • Another thing is that an innovation strategy is not about funding venture capital. Venture capital is broken. Let’s not bet our innovation strategy into something that is not working. Been a profoundly bad investment for 11 years; shows no sign of coming back.
  • One of the things we tend to do is blame it on business. So far, Canada has waited to see what has worked elsewhere and then did it here later behind a tariff wall.
  • We’ve been training people about how to innovate for the last five years. This will be the key.

Tom Jenkins

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And now for something completely different – a witness from outside Canada. Spent most of my adult life outside Canada, for global markets. Most of my career I’ve ignored Canada. As a business person, go where the biggest part of the market is. It is sort of instructive though – my company, a billion-dollar multinational and most of you wouldn’t know it, because we don’t really have anything to do with Canada. There might be something to that. I would abstract that more – I’m a Waterloo tech guy. Most Waterloo folks ignore Canada when it comes to business.

  • Things I’ve learned on my journey – asked by provinces and Canadian government to sit on panels to review Canada’s position. We’re an incredibly asset-rich country. Therefore, not compelled to be pushy or competitive. Productivity is something you are forced to do, because you have to keep up. You don’t wake up in the morning thinking you should do it. Productivity is brutal and competitive and tough. Canada has created a lot of protected sectors – no less than six. Should be more clear by what we mean by productivity. Sectors without protection are just as competitive. So maybe the discussion we should have is what is it costing us in productivity to protect these industries.
  • On innovation and invention issue – it is a real issue. We have something called the valley of death – companies get to $40 or $50 million and then we drop like a rock. There is a huge gap. We as a country better solve that. Real challenge. Last thing on productivity, two-thirds of the gap that exists comes down to our use of computers and networks. Missing the information revolution can be disastrous.

Questions

Bob Ramsey has three follow on questions which we would like to ask the panellists – Tom – what are the 6 sectors? Roger – so if innovation can be taught and learned, what are we doing in order to do that, how does that happen? Anne – what’s so great about Israel?

  • Tom – by acts of federal legislation. Covered in Wilson report. They also are what makes us Canadian. Not saying we should remove them, but should at least include them in the debate. Telecom, broadcasting, transport, uranium, banking. Toyko subways? Shoving … and remarkable infrastructure that they have. Enormous about of population concentrated in one place.
  • Roger – 6 or 7 years ago I came to the conclusion that business schools teach students how to analyze what’s here and now. Must teach them how to create new ideas. Looked at world of design education, and that’s what they do there. Wanted to fuse together best of design education with business education…. Would get innovated business people. Worked with Stanford and Institution of Design in Chicago, and imported what we learned back to Toronto. Rotman is leading in teaching this to students.
  • Anne – Israel. Support system. Skilled people. Venture capital. Welcoming immigration policy. Role of military – pump R&D funding, and people coming out of the army with leadership capability. Bottom line: it’s about the ethos, the mind set, aggressiveness. Mind set and culture.

Bob Ramsay – If you were the finance minister and suddenly found $100 million, where would you put it.

  • Tom – this is complicated. If there were a simple answer, they would have done it by now. There isn’t an answer to that question. Very much like out debt debate 15 years ago. Need to have a debate about it to help stimulate policy. We talk about Israel, but maybe we Canadians would not like the competitive atmosphere there. Answer though – I would do more work on the internet. Get ready for what’s coming.
  • Roger – put it into training. If only $100 million, then put it into high school because would touch everybody. Teaching Canadians broadly about innovation.
  • Anne – if had more money, put half into urban infrastructure, then put money into a few industries, probably health(?). if only $100 million, maybe put it to the high schools.

Question – why do we not have a high speed train?

  • Anne – there is an assumption in Canada that the cost is not worth the result. Will it pay for itself? No, it never will. So if we judge it that way, doesn’t look appealing. But that kind of simple analysis doesn’t look at all the factors.
  • Roger – has to do with the railways doing badly for a number of decades. Out of sight out of mind. While this didn’t happen in Europe and Asia. More government support for them there because consumers were excited about it. Needs a habit change.

Question – got the impression (Anne) that investments that could be made focus on the sciences, corporate investment into research, teaching, universities. Interested to hear where you stand on the role of social sciences for developing the platform for the next company.

  • Anne – to the first part – wouldn’t limit the investments to ICT. Certainly, there is a lot there. Last year did a major study about role of culture in economy, about 7% of GDP. Economic rational to support this. Moreover, not a supporter of universities being aligned with certain industries. On a question of university education, university is about thinking critically. Not about channelling.

Question – What is the limiting belief in Canada around innovation?

  • Roger – “not necessary for survival”. This is an adverse selection problem. Tom knows he needs to innovate. But all the companies not doing this don’t realize that they need to innovate.
  • Anne – CEO top challenges – our CEOs focused on upfront issues. Platform not burning. Big job to start up in China – challenges of going global are huge. Complacency.
  • Tom – debate is about what price we’re willing to pay to achieve that bench mark.

Question – competitive intensity – is there a way to increase our competitiveness without waiting until we’re suffering from not having it? Removing protections? 

  • Tom – talking about the rules of economics here. Human nature flows from the rules of the game. To create competitive intensity we change the game. Need to give these companies time to prepare.
  • Anne – challenge the notion that we have to change our character values. It is true that sectors are protected, but there are many that are not protected. We protect broadcasting for a reason.

Question – looking at carbon pricing, what role that would play in supporting clean energy – what would that look like?

  • Anne – Putting a price on something affects behaviour. Politically, hot issue. Waiting to see what the USA does. All agreed we had to put a price on carbon.

Question – How is Ontario’s green energy policy different from the federal level? Can Ontario have an influence at the federal level?

  • Anne – interesting where the leadership of this should come from. Right now we have a government in Ottawa that doesn’t see itself providing policies on this issues. The provinces are bringing these things up. Really was the premiers who were trying to ease the difficulties on labour mobility, etc. Regionalism makes it difficult in Canada. Change occurs when climate of opinion changes. Inevitable that this won’t be done all top down in Canada.

Question – funding priority. What areas are our strengths? And how do you see innovation in those areas?

  • Tom – already huge funding for these areas. Don’t think we should look to government to fund any more. Perhaps policy is the bigger debate to have.
  • Roger – agree. More interested in cross-sectoral support.
  • Anne – in terms of funding, government is there. But there are a lot of things to do in terms of the commercializing end of the spectrum. Aligning regulatory policy would help to make things happen. Series of decisions, not a single. Looking at it by sector. Do think that we can look at areas where we have a clear leg up. Certain areas where we can make this happen.