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Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
www.policymagazine.ca                                 May—June 2017

               Canadian Politics and Public Policy

                        Innovation
$6.95                                                Volume 5—Issue 3
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
CN takes root
across Canada
In honour of Confederation’s 150th birthday, CN is
planting trees in 50 communities that have played a
seminal role in Canada’s history.                     www.cn.ca
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
WHO’S DRIVING
CANADA’S
NEXT SPIKE IN
EXPORTS?

In support of Canada’s trade agenda, our railways help to deliver more than
                                                                                   R A I LWAY
                                                                                AS S O C I AT I O N
                                                                                O F C A N A D A

$150 billion worth of Canadian goods to markets across North America and
around the globe. With exciting investments in innovation and infrastructure,
we’re driving Canada’s next spike.
                                                                                Y   E    A     R   S

                                                                                        2017

nextspike.ca
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
WHY
                                                                                                                               DON’T YOU
                                                                                                                                   THINK
                                                                                                                                 OUTSIDE
                                                                                                                                THE CAR?
When you                                                      Maximizes                                                          Reduce                                                         Better
choose                                                        your                                                               your carbon                                                    value for
VIA Rail for                                                  productivity                                                       footprint                                                      taxpayers
business travel,                                              With Wi-Fi, power outlets,                                         Making the smart choice                                        It is good for your
you unlock a                                                  use of your cellphone and                                          today helps contribute                                         bottom line and
lot of great                                                  comfy seats—you might
                                                              just like the train more
                                                                                                                                 to a greener tomorrow.                                         Canada’s, too.
benefits:                                                     than the office.

                  Route                                # of daily                       Distance                    Productive                  Non-productive                         Cost of                        Cost of           Taxpayer savings
                                                       departures                                                   train time                    car time*                           travelling                   travelling by          by choosing
                                                                                                                                                                                       by car**                  train (as low as)        train travel***

 Ottawa             Toronto                             Up to 18                        450 km                      4 h 23 min                      4 h 34 min                            $467                             $44               $423

 Ottawa             Montréal                            Up to 12                        198 km                      1 h 55 min                      2 h 27 min                            $227                             $33               $194

 Ottawa             Québec City                          Up to 7                         482 km                     5 h 23 min                      4 h 39 min                            $488                             $44               $444

 Toronto              Montréal                          Up to 13                         541 km                     5 h 25 min                      5 h 30 min                            $562                             $44               $518

Government of Canada employees enjoy a 10% discount on personal travel booked directly with VIA Rail.
Government of Canada employees can take advantage of specially negotiated rates for business travel available through the Shared Travel Services HRG Portal.
The discount does not apply to Prestige class or Escape fares.
  * 30 minutes was added to the total travel time by car in order to account for traffic and bad weather en route.
 ** The total cost to the taxpayer of travelling by car is calculated based on the following formula: $ cost of travel by car (Treasury Board kilometric rate for Ontario of $0.55/km for car travel by a government official X total
    distance travelled) + $ employee-related cost (average hourly rate of $48/h for a government employee, based on a salary of $100,000 per year including employee benefits X travel time) = $ total cost to taxpayer.
*** The value of travelling by train is calculated based on the following formula: $ cost of travelling by car – $ cost of travelling by train = $ taxpayer savings.
Fares and conditions are subject to change without notice. TMTrademark owned by VIA Rail Canada Inc.
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
1

                                          In This Issue

  Canadian Politics and                   2     From the Editor / L. Ian MacDonald
                                                Innovation
     Public Policy
            EDITOR
                                          3 Guest Column/David Johnston
                                          	Innovation: The New Imperative
       L. Ian MacDonald
lianmacdonald@policymagazine.ca           4     Q&A
                                                A Conversation With Navdeep Bains
       ASSOCIATE EDITOR
         Lisa Van Dusen
  lvandusen@policymagazine.ca             9     Dominic Barton
                                                Innovation Nation: Supercharging Canada’s Innovation Ecosystem
    CONTRIBUTING WRITERS
       Thomas S. Axworthy,                12 Kevin Lynch
                                          	Innovation Policy in an Era of Disruption
  Andrew Balfour, Yaroslav Baran,
 Derek H. Burney, Catherine Cano,
  Margaret Clarke, Celine Cooper,         16
                                          	
                                             Linda Hasenfratz
                                             Being Ready for Anything, or How to Innovate
 Susan Delacourt, Daniel Gagnier,
 Martin Goldfarb, Patrick Gossage,              Amid Perpetual Change
    Frank Graves, Brad Lavigne,
  Kevin Lynch, Jeremy Kinsman,
Andrew MacDougall, Velma McColl,
                                          19    Sean Finn
                                                Une culture d’innovation industrielle
David McLaughlin, David Mitchell,
  Don Newman, Geoff Norquay,
Fen Osler Hampson, Robin V. Sears,
                                          22    Nathalie Pilon
                                                Industry: Our Hidden Digital Champion
 Gil Troy, Anthony Wilson-Smith

           WEB DESIGN
                                          25 Geoffrey Holmes and Jean-François Béland
                                          	It Takes a Country: Innovating Canada’s Clean Tech Future
           Nicolas Landry
      policy@nicolaslandry.ca
                                          28
                                          	
                                             Michael Katchen
                                             How do We Build an Innovation Economy? Support the Winners
      SOCIAL MEDIA EDITOR
         Grace MacDonald
     grace@policymagazine.ca              31    Paul Klein and Tim Draimin
                                                The Other Innovation: Unleashing Canada’s Capacity for Good
GRAPHIC DESIGN & PRODUCTION
        Monica Thomas
   monica@foothillsgraphics.ca            34
                                          	
                                             Iain Klugman
                                             There’s no App for That: Creating a Supercluster is a Recipe

              Policy                      37 Sarah Prevette
                                          	Creating Future Designers: It Starts in the Classroom
 Policy is published six times annually
 by LPAC Ltd. The contents are
 copyrighted, but may be reproduced       40 Mary Ackenhusen
                                          	Bringing Healthcare Into the 21st Century
 with permission and attribution in
 print, and viewed free of charge at
 the Policy home page at                  42 Suzanne Fortier
                                          	Résumé : L’université innovante
 www.policymagazine.ca.
 Printed and distributed by St. Joseph
 Communications, 1165 Kenaston
                                          46    Breanne Everett
                                                The Mental Weight of Innovation: Overcoming Doubt
 Street, Ottawa, Ontario, K1A 1A4
 Available in Air Canada Maple Leaf       49    Column / Don Newman
                                                The Innovation Catechism
 Lounges across Canada, as well
 as VIA Rail Lounges in Montreal,
 Ottawa and Toronto.

 Special thanks to our sponsors
        and advertisers.

                                                                                                  May/June 2017
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
2

                              From the Editor / L. Ian MacDonald

                             Innovation
    W
                elcome to our special issue    great”—and rapidly, to build Cana-         cial innovators harnessing our capac-
                on innovation in Canada,       dian competitiveness.                      ity for positive change. Ian Klugman,

                                               I
                which we have produced                                                    CEO of Communitech, writes of build-
    in partnership with the Rideau Hall            nnovation isn’t just about high-       ing innovation-based ecosystems.
    Foundation, a non-political char-              tech start-ups, but equally an im-
                                                                                          Sarah Prevette, founder of Future De-
    ity established by Governor General            perative for the survival and pros-
                                                                                          sign School, writes that innovation
    David Johnston in 2012. Now near-          perity of established companies. Lin-
                                               amar CEO Linda Hasenfratz provides         begins in the classroom by introduc-
    ing the end of his tenure at Rideau                                                   ing the qualities of entrepreneurship
    Hall, the Governor General shares his      the example of her company, Cana-
                                               da’s second-largest auto parts manu-       in school. At the degree-granting
    thoughts in a guest column on inno-                                                   end of the education system, McGill
    vation. One of his legacies is the cre-    facturer, whose products seamlessly
                                               cross the Canada-US border several         Principal Suzanne Fortier shares her
    ation of the Governor General’s Inno-                                                 thoughts on the crucial role of uni-
                                               times in North American auto as-
    vation Awards, established in 2016.                                                   versities in innovation.
                                               sembly. Hasenfratz, also Chair of the
    We begin with a Q&A with Innova-           Business Council of Canada, writes         Breanne Everett, a winner of the Gov-
    tion Minister Navdeep Bains, the           that: “Customers come to you if you        ernor General’s Innovation Award in
    Trudeau government’s lead minister         have the products that solve their         2016, writes of a personal journey
    on the innovation file. He was both        problems, problems they want and           from her medical residency to co-
    thoughtful and thought-provoking           innovation is how you achieve.”            founding Orpyx, a business built on
    about the opportunities and impera-        Sean Finn, Executive VP of CN, writes      her invention of a foot sensor that
    tives for Canadian leadership on           of a culture of innovation and safety      provides information to diabetics.
    innovation.                                at one of the most mature industries       She writes of the GG’s Award: “It is
    Dominic Barton, Global Managing            going—railroads. CN is the largest         impossible to overstate the impor-
    Partner of McKinsey & Company, is          railway in North America.                  tance of programs that recognize in-
    serving as Chair of the government’s                                                  novators for their role in growing the
                                               Nathalie Pilon, CEO of ABB Canada,
    Advisory Council on Economic                                                          innovation environment.”
                                               writes about innovation and sustain-
    Growth, which released its first re-       able energy in the electricity space.      Finally, columnist Don Newman re-
    port and recommendations in Febru-         Geoffrey Holmes and Jean-François          flects on the innovation revolution
    ary. Barton writes that Canada needs       Béland write of capturing carbon           in the news media over the last quar-
    to invest heavily in skills training for   directly from the atmosphere and           ter century and more. On a personal
    workers, attract the world’s top talent,   turning it into fuel using technolo-       note, I know of which he speaks.
    and create innovation marketplaces         gy. President and CEO of Vancouver         When I began in the newspaper busi-
    in key sectors and technologies. He        Coastal Health (VCH) Mary Acken-           ness in the early 1970s, I went on the
    also notes: “Half of all billion-dollar    husen provides an excellent window         road with a 35-pound portable type-
    start-ups in the US were founded by        on innovation in healthcare.               writer and a 25-pound Fax machine
    immigrants. Canada’s reputation            Mike Katchen, CEO of Wealthsimple,         that transmitted copy at six minutes
    for openness and diversity give it a       asks how we build an innovative            a page, provided you could find a
    comparative advantage in the global        economy, and says it’s not by picking      phone to connect the jacks. That was
    competition for talent, and one we         winners, but by supporting them.           before laptops, cell phones, the inter-
    should capitalize on.”                                                                net, smart phones and social media
                                               From business to social innovation,
    BMO Vice-Chair Kevin Lynch, a              Paul Klein of HireUp and Tim Drai-         that drive the news media today in a
    former clerk of the Privy Council,         min of Social Innovation Generation        world with no deadlines.
    writes about innovation policy in an       propose a 10-point plan for unleash-       Today, I can write this note on my
    era of global disruption. Lynch says       ing Canada’s capacity for good. De-        laptop and push the send button
    that Canada needs to raise its game        spite Canada’s comparatively secure        from Montreal to our designer, Mon-
    in business R&D and innovation—            social safety net, they write that there   ica Thomas, in Calgary, thinking
    from “reasonably good” to “globally        are gaps that can be addressed by so-      nothing more about it.

    Policy
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
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                           Guest Column/David Johnston

                          Innovation:
                          The New Imperative
O
          ne of the great privileges of    see such creativity as part of who we        the innovators in our midst with an
          serving as Governor General      are and what we do as Canadians.             eye to encouraging others to follow
          comes in having the opportu-     One way we do that is through story-         in their footsteps. With the second
nity to shine a spotlight on important     telling, which is fundamental to any         annual cohort of award-winners set
issues facing our country. Innovation      culture. That’s why I’ve recently co-        to be recognized this year, we look
is one such issue, and this special edi-   authored a new book, titled Ingenious,       forward to continuing to celebrate
tion of Policy Magazine, featuring in-     with leading Canadian innovator Tom          excellence and to foster an innova-
sights from leading innovators work-       Jenkins. Subtitled How Canadian Inno-        tion ecosystem that spans the coun-
ing in a range of disciplines, makes a     vators Made the World Smarter, Smaller,      try. Some of the world’s most creative
timely and useful contribution to the      Kinder, Safer, Healthier, Wealthier, and     people live among us, yet we haven’t
innovation conversation in Canada at       Happier, the book highlights notable         celebrated their stories or brought
a critical moment in time.                 innovations throughout our history.          them together often enough. We aim
                                           The light bulb, the Blackberry, the ca-      to change that with the Governor
We’re at a hinge point in our history.                                                  General’s Innovation Awards.
                                           noe, the Universal Declaration of Hu-
Not only does the 150th anniversary
                                           man Rights, Blue Box recycling, insu-        A third addition to Canada’s inno-
of Confederation offer us a rare oppor-
                                           lin, restorative justice, the synthesizer,   vation ecosystem is the Rideau Hall
tunity to reflect, to celebrate, and to
                                           Me to We, the McIntosh Apple—this            Foundation. Incorporated in 2012 as
reimagine Canada, we find ourselves
                                           is just a sample of Canadian innova-         an independent, non-partisan charity,
in the midst of a global moment of         tions that have improved our lives in        the Foundation is a tool we’ve created
change. And with that change, we are       countless small and large ways. Our          to amplify and broaden the reach of
presented with both challenges and         aim with the book is ambitious: to es-       the office I represent. Its aim is to gath-
opportunities. This is an age in which     tablish a narrative for all Canadians,       er, align and catalyze forces for positive
innovation is critical to our well-be-     telling our inspirational stories and        change. With priorities that include
ing. That means constantly strength-       making them part of a rich “can do”          innovation, education, philanthropy
ening our political, economic, social,     heritage that consistently overcomes         and volunteerism, the Foundation is
technological and environmental            challenges. The book is one compo-           already effecting positive change in
processes. Whether in the realm of         nent of a suite of initiatives intended      Canada. It’s my hope that the Foun-
education, governance, sustainabil-        to promote the culture of innovation.        dation can continue to help foster a
ity, health care, finance, technology      That effort also includes a national         world-class Canadian innovation eco-
or civil society, the spirit of ingenu-    innovation database, an educational          system in the years ahead.
ity and improvement must be part of        curriculum developed by Nipissing
how we operate as a society. Put sim-      University, a web site and a children’s      The good news is that Canadians
ply, if change is the new constant, in-    book. It’s all part of building that cul-    have long been innovators. Indeed,
novation is our new imperative.            ture, providing inspiring, real-life sto-    what is Confederation itself if not
                                           ries and practical advice to the next        an innovation in governance among
How do we meet this imperative? One                                                     diverse peoples? This is a remarkably
                                           generation of Canadians—who are all
of the keys will be to make innovation                                                  vast, diverse and challenging country
                                           potential innovators.
more accessible—to make the concept                                                     to live in, and our pre- and post-Con-

                                           C
less abstract and to ground it in real-            elebration is another key            federation history is full of examples
ity and everyday life for all Canadi-              component in our innova-             of people working creatively and col-
ans. We want to tell stories to make               tion strategy. The Governor          laboratively to improve our lives. As
the importance of innovation vital         General’s Innovation Awards, which           21st century Canadians we must con-
and real and provide practical advice      honour outstanding individuals,              tinue to innovate in countless ways
to help everyone realize they can, in-     teams and organizations who are cre-         so that our institutions and society
deed must, be an innovator. We want        ating value, building better commu-          evolve to ensure continued and en-
to create a culture of innovation in       nities and meaningfully improving            hanced relevance in a complex, rap-
which individuals and organizations        our quality of life, aim to celebrate        idly-changing world.

                                                                                                                   May/June 2017
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
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    Q&A: A Conversation With
    Navdeep Bains

                                                                                                    it’s really about diversity of thought
                                                                                                    and perspectives. When I’m speak-
                                                                                                    ing to presidents of universities and
                                                                                                    colleges, they’re noticing more inter-
                                                                                                    est in individuals wanting to come
                                                                                                    to Canada to study. I’m seeing that
                                                                                                    same level of interest from businesses
                                                                                                    as well. This is something that we
                                                                                                    were very alive to even before the
                                                                                                    US elections. This is an area where
                                                                                                    I wholeheartedly believe we have a
                                                                                                    value proposition that differentiates
                                                                                                    us. And it’s now all about making
                                                                                                    sure that we implement our promises
                                                                                                    around immigration.

                                                                                                    Policy: Dominic Barton in his article
                                                                                                    for this issue of Policy writes, “Half
                                                                                                    of all the billion-dollar start-ups in
    “We want to demonstrate that we’re a willing partner,” says Innovation Minister Navdeep Bains   the US were founded by immigrants.
    in his Q&A with Policy Editor L. Ian MacDonald. Policy photo
                                                                                                    Canada’s reputation for openness and
                                                                                                    diversity give it a comparative advan-
                                                                                                    tage in the global competition for tal-
    Innovation and Economic Development Minister Navdeep                                            ent.” I take it you agree with that.

    Bains met with Policy Editor L. Ian MacDonald for a                                             Navdeep Bains: Absolutely. There’s
                                                                                                    no doubt that diversity and talent are
    wide-ranging interview on the challenges and opportuni-                                         a source of strength for us. I think of
    ties of innovation and Canadian comparative advantage,                                          my own father. When he came here
                                                                                                    from India, literally with a few dollars
    including the advantage of Canadian immigration policies                                        in his pocket, he sacrificed a lot. He
    in recruiting the best and the brightest to study and start-                                    came here with a desire to succeed.
    up new business firms in Canada.                                                                And so when people talk about im-
                                                                                                    migrants succeeding in Canada, or in
                                                                                                    the US or other parts of the world, it’s
                                                                                                    no surprise. They give up a lot. I think
    Policy: I wanted to begin with in-               tion, recognizing that our academic
                                                                                                    that drives them to take risks, to be en-
    novation and the opportunities in                institutions have a unique opportu-
                                                                                                    trepreneurial. You know, they want to
    immigration. I find it quite striking.           nity to attract some of the best and           control their own destiny a bit more.
    First of all, is there an opportunity for        brightest. We don’t have a monopoly            I think that’s why being an entrepre-
    Canada, given President Trump’s “ex-             on good ideas. If you look at our re-          neur makes sense for them.
    treme vetting” immigration policy,               cent global skills strategy, which is
    to gain comparative advantage over               about individuals that are high in             Policy: Let me give you some exam-
    the US as a destination for innovators           demand with specialized skills who             ples. Steve Jobs, the founder of Apple
    and talented foreign students?                   can come to Canada within a mat-               and famously the son of a Syrian im-
                                                                                                    migrant, who wouldn’t be admitted
                                                     ter of two weeks, it really speaks to
    Navdeep Bains: This is a longstand-                                                             to the US under Trump’s immigra-
                                                     that concept of being open—open to
    ing advantage that we’ve had glob-                                                              tion policy. Sergey Brin, co-founder
    ally. We believe in having an open               people, open to ideas.
                                                                                                    of Google, whose CEO is from India
    mindset when it comes to immigra-                When we say diversity is important,            —Sundar Pichai. A Canadian, Garrett

    Policy
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
5
Camp, is the co-founder of Uber. Satya             When we say diversity is important, it’s really about
Nadella is the CEO of Microsoft. Jerry
Yang, the co-founder of Yahoo. Bob
                                                   diversity of thought and perspectives. When I’m
Miner, an Iranian, is the co-founder       speaking to presidents of universities and colleges, they’re
of Oracle. Pierre Omidyar of eBay. In      noticing more interest in individuals wanting to come to
Canada, Shopify founder Toby Lutke         Canada to study. I’m seeing that same level of interest from
is a German immigrant.
                                           businesses as well.
Navdeep Bains: That’s right. I was
recently talking to Toby during a din-
ner and we talked about his personal
success. What’s really interesting to
note is not only their individual suc-     opportunities for everybody to up- what their needs are, where the gaps
cess, the enormous amount of wealth        grade their skills.                     are, and we want to deal with it in a
they created for themselves and for                                                much more timely manner.
                                           Our focus is on lifelong learning.
the jurisdiction that they operate in,     Teaching kids computer coding. Work We made a commitment to launch the
the numerous employment oppor-             integrated learning. More internships. global skills strategy on June 12th—so
tunities. It`s also the fact that they     More co-ops. This is an area that not next year or the following year,
genuinely want to give back. They          would provide meaningful opportuni- but in a matter of weeks. And the pro-
also want to make the world a better       ties to upgrade skill sets and to pro- cessing time for visas will be a matter
place. Often they become very global       vide employment opportunities, not of ten working days or two weeks. If
in their perspective, and they do a lot
                                           only for our youth, but also for adults you’re a company and you need to
when it comes to philanthropy and
                                           who have been in the workplace for bring somebody and they need to get
mentoring.
                                           10 to 15 years and want to go back to their visa processed—currently it can
Toby’s a great example of that. He         school to upgrade their skills.         take potentially months. For compa-
pushed very aggressively for initiatives                                           nies that quickly need someone to be
around computer coding for lifelong                                                able to make that next investment or
learning. And it’s not simply about                  People are worried            find the next solution or to deal with
what it means for his business. He sees              about their jobs, their an issue, they have that nimbleness
where society is going. He sees the role                                           and flexibility.
of technology. He’s looking at issues of   own personal opportunities
                                                                                      This program will make Canada an
diversity, gender equality, focusing on    and the hopes and                          even more attractive place for top
encouraging girls to take science, tech-   aspirations they have for                  talent. It demonstrates that we have
nology, engineering and math.
                                           their children or                          a process that will be very sensitive
These entrepreneurs` contributions go                                                 to the needs of small businesses that
                                           grandchildren. One of the
beyond their own personal success.                                                    want to grow and scale up in Canada.
They give back a lot to society.           areas where we could help
                                           Canadians deal with those                  Policy: And number three, create in-
Policy: Your thoughts on the three                                                    novation marketplaces.
main recommendations of the Advi-
                                           anxieties is to provide
                                           opportunities for everybody                Navdeep Bains: We deal with this
sory Council on Economic Growth.
                                                                                      in the budget through the lens of the
Number one: invest heavily in skills       to upgrade their skills.                   superclusters. We’re looking at how
training.
                                                                                      we can accelerate commercialization—
Navdeep Bains: That was a key com-                                                    bring ideas to the market more rapidly.
ponent of our budget. We focused on                                                   Canada is doing really well when it
innovation and skills. When we were        Policy: And then, number two, at-          comes to investing in research. Rela-
consulting innovation leaders, busi-       tract the world’s top talent. That’s       tive to our G7 peers, we’re really strong.
nesses and academic institutions, we       pretty obvious.                            Where we’re challenged is when we
asked them: What is the number one                                                    translate those ideas into solutions that
issue? And it always came down to          Navdeep Bains: It is. But at the           can be commercialized, that can create
people, skills and talent. In this rap-    same time, we need to do it in a very      jobs, generate revenue for companies.
idly changing economy, there’s ob-         thoughtful way. We want to be led by       That’s an area that we want to focus
viously a lot of anxiety. People are       the needs of the marketplace. This goes    on. We want to accelerate commer-
worried about their jobs, their own        beyond attracting more engineers or        cialization. The superclusters bring all
personal opportunities and the hopes       technicians or individuals with certain    the key elements together: academia,
and aspirations they have for their        skill sets. It could be recruiting a CEO   where the ideas are generated; anchor
children or grandchildren. One of the      or a Chief Technology Officer who can      firms that have an understanding of
areas where we could help Canadians        help a company scale up and grow. We       how to grow and scale up; connecting
deal with those anxieties is to provide    want Canadian companies to identify        them with smaller firms; connecting

                                                                                                               May/June 2017
Innovation - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
6
    them with civil society, different lev-   But those are all great reasons to in-    and ideas. When these companies
    els of government; and finding com-       novate in Canada.                         go abroad and these companies are
    mon platforms that can allow them to      So the question is where do we need       asked, “Do you do business with the
    compete globally.                         to raise our game. For example, while     Government of Canada?” They can
    We’re really excited now to go out        the government and universities are       say: “Yes.” And that allows them to
    there and engage industry, academia       leaders in R&D, private sector ranks      develop additional business opportu-
    in a very competitive process that        24th in R&D and as a percentage of        nities internationally.
    will let the best ideas come to us. Our   GDP, and 22nd overall in innovation.      Even though we have a very well-
    objective is not to prescribe these so-                                             educated workforce, even though
                                              Navdeep Bains: Correct.
    lutions. We don’t want to prescribe                                                 we’re ranked as a strong place to do
    a path forward. We want to demon-         Policy: So what do we need to do          business, we can still do better in de-
    strate that we’re a willing partner.      about that?                               veloping and attracting talent. We
    We’re willing to put money in so we                                                 can do better in making sure there’s
    can leverage more money, primarily        Navdeep Bains: There are a few            more capital available. And we need
    from the private sector.                  key problems that we tried to address     to do a better job of creating more
                                              in the innovation and skills budget.      market access.
                                              There are certain gaps that were iden-
             We’re really excited             tified when we went out there and         Policy: Do we need to do a better
             now to go out there              engaged industry, academia, civil         job of tracking results of government
                                              society. Access to people and talent      investments? For example, the Insti-
    and engage industry,
                                              were key issues. And access to capital,   tute for Fiscal Studies and Democ-
    academia in a very                        particularly in clean tech.               racy at University of Ottawa put out
    competitive process that will             We brought forward measures to deal       a report in March, as you know, that
    let the best ideas come to us.            with that: the Venture Capital Cata-      the government has funded $22.6
                                                                                        billion for 147 skills and innovation
    Our objective is not to                   lyst Initiative, which will be managed
                                                                                        programs with little understanding
    prescribe these solutions. We             by the Business Development Bank
                                              of Canada. The idea behind this is:       or analysis of the performance or
    don’t want to prescribe a                 How can we continue to strengthen         value for money. Do you have some
    path forward. We want to                  our venture capital ecosystem, which      thoughts on that?
    demonstrate that we’re a                  has done remarkably well over the         Navdeep Bains: Return on invest-
                                              past few years? Last year, $3.2 billion
    willing partner.                          in VC funding was raised in Canada.
                                                                                        ment is really important for taxpay-
                                                                                        ers—making sure that when we design
                                              That’s an all-time high. So how do        programs, they achieve the desired
                                              we continue to build momentum?            outcomes. Economic growth, more
                                              How do we improve the access that         jobs, more R&D—those are all very
    And quite frankly, I think they under-    Canadian companies have to working        important targets. We have proposed
    stand the proposition. They under-        capital and growth capital and patient    a path forward called Innovation Can-
    stand how this would benefit them.        capital?                                  ada. And the idea is two-fold. One is
    And we think this model has a lot of      The other challenge we’re trying to       to coordinate and streamline our pro-
    potential. It’s really about focusing     solve here is how do we create oppor-     grams. And the other is to evaluate
    on three to five areas. That also would   tunities for our companies to be ex-      the effectiveness of these programs.
    increase the level of competition. We     port oriented? One of the things that     And both initiatives will be housed
    want the best ideas to come forward.      I’m very proud of is the Canadian Free    centrally through Innovation Canada,
    Policy: The budget says that innova-      Trade Agreement. The whole objective      which will allow better outcomes for
    tion begins with smart, creative, and     there is to allow companies to have ac-   Canadians and Canadian companies.
    skilled people, and cites Canada being    cess to more customers, deal with less
                                              red tape and position themselves well     Policy: What about the role of univer-
    positioned for leadership. For example,                                             sities in all of this? Apparently about
    some bullet points: number one edu-       if they choose to go global. We want
                                              to have not only strong Canadian          half of our students and millennials
    cated workforce in the OECD; number                                                 want to have their own start up—their
    one in the G7 for business cost com-      brands, but also global brands.
                                                                                        own start-ups and businesses. Are the
    petitiveness; number two in the G7        How do we use government pro-             universities going to be able to give
    for openness to trade and investment;     curement to support the growth of         them the tools and the knowledge
    number three on the global entrepre-      Canadian companies? We want to            base that they need to do that?
    neurship index; and, second-best place    identify companies that have good
    in the world and best country in the      ideas. And we’re going to have a spe-     Navdeep Bains: If you look at aca-
    world to do business, and the best        cial carve-out in the federal govern-     demic institutions, they are promot-
    banking system in the world in the        ment’s procurement budget for those       ing a lot of multi-collaborative efforts.
    WEF rankings nine years in a row.         companies to validate their solutions     They’re bringing in law students to

    Policy
7
collaborate with business students,
with science students. These efforts
equip these individuals with multiple
skill sets. Academic institutions are
also beginning to recognize the merits
of business accelerators and incuba-
tors. The Digital Media Zone at Ryer-
son University, where I taught, is an
example of that. It has created an envi-
ronment for businesses and individu-
als with ideas. Like you said, young
millennials want to start up their own
company, make the world a better
place. It’s not always about making
money. It’s also about innovative so-
lutions that have a positive impact on
people’s lives.
More and more, academic institutions
                                           “Our focus is on lifelong learning,” says Navdeep Bains on the role of education in innovation.
provide mentoring services. They pro-      Policy photo
vide legal advice. They even provide
opportunities for companies to get fi-     inces and territories then can use that           Clark to look at what British Columbia
nancing. So I think academic institu-      supply base. This way, we respect edu-            should propose as an idea for a super-
tions are beginning to appreciate the      cational responsibilities. And at the             cluster. In order to do that, he brought
role that they play. That’s really what    same time, we help support the grow-              in small businesses, large businesses,
we’re trying to accomplish through         ing demand in the area of coding.                 all the sectors­—traditional sectors, new
the supercluster initiative. It’s to ac-                                                     sectors, emerging players, established
celerate that commercial opportunity     Policy: How do you feel about corri-                players, academic institutions. When
and to make sure that our industries     dors of excellence, like the Toronto-               you have all these people in the room
and our academic institutions work       Waterloo corridor? Years ago, Michael               talking about how they can work to-
really closely together to help facili-  Porter, as you know, famously wrote                 gether and find common areas of inter-
tate that process.                       in the Competitive Advantage of Na-                 est, it makes the magic happen.
                                         tions about the diamond cluster of
Policy: And in terms of education,                                                 In BC , they have a neat initiative: the
                                         excellence. What do you—you know,
how does Ottawa partner with the—                                                  Cascadia corridor between themselves
                                         when you travel all over the country,
the provinces on what is, as we all                                                and Washington state. They recog-
                                         what are you seeing about that?
know, under Section 92 of the Con-                                                 nize that we’re in a global innovation
stitution, an exclusive provincial ju- Navdeep Bains: Geography, popula- race. It’s very competitive out there.
risdiction? The Canada Chairs were a tion and a sense of history are key fac- We’re too small of a country to com-
good example of brain gains for Can- tors. Even for the Toronto-Waterloo pete against each other. So how do
ada. What are your thoughts on that, corridor, a discussion is taking place. we work together? And what relation-
working with the provinces?              And it’s really around leveraging all the ships can we leverage going forward?
                                         technology and life science companies There’s east-west. There’s also north-
Navdeep Bains: We’ve demonstrated
                                         that exist. And it’s the second-largest south. And it’s also cross-sector. It’s
that we can work with the provinces.
                                         such cluster or corridor in North Amer- no longer just about aerospace or auto
We did so with the pan-Canadian                                                    or ships. Of course, those are impor-
                                         ica outside of Silicon Valley.
framework on environment. We did                                                   tant areas of growth that have existed
so with the Canada Pension Plan. We Policy: That’s quite something in it- and will continue to demonstrate a lot
demonstrated that with the Canadi- self, isn’t it?                                 of growth. But artificial intelligence,
an Free Trade Agreement, which was                                                 for example, or quantum computing
signed by all the provinces and territo- Navdeep Bains: That is a point of have the ability to really help com-
ries. Our government has a track record pride. When it comes to these cor- panies in multiple sectors. Take CAE.
of demonstrating that we can work ridors, there’s a recognition that it’s That’s an aerospace company that’s in
with the provinces and territories.      all about making sure that you create
                                                                                   training and simulation. They’re us-
                                         common spaces and collaboration to
When it comes to education, the com-                                               ing that technology now for health-
                                         help generate new possibilities.
puting coding initiative for school-                                               care solutions. I think that just speaks
aged kids that was in Budget 2017 is a That notion of collaboration is key. For to the nimbleness and the flexibility
great example of how we can use not- example, when I was in British Colum- that exists. And the openness that we
for-profit and other organizations for bia, I met with UBC’s President (San- need to have as policy makers in how
this initiative. And the different prov- ta) Ono, who was tasked by Premier we define clusters and sectors.

                                                                                                                          May/June 2017
8
    Policy: I want to ask you about dis-       I often cite the example of Germany,       they become more export-oriented.
    ruptive technologies.                      South Korea, Japan, where automa-          We sent a very clear signal to the mar-
                                               tion and technology exist in abun-         ket that clean technology is important
    A study by the WEF in January, as you
                                               dance, and yet they still have low lev-    to us because of the commitments
    know, revealed that 86 per cent of US
                                               els of unemployment. What that tells       we have made on the environment
    job losses between 1997 and 2007
                                               me is that, if we play a leadership role   and reaching our climate-change
    were the result of technology-driven
                                               in innovation and technology, if we        goals. Putting a price on carbon is im-
    productivity gains, and only 14 per-
                                               play a leadership role in technology       portant, but one of the key ways of
    cent because of international trade.
                                               adoption, we’ll actually create more       achieving it is through innovation—
    And in this issue of our magazine,
                                               opportunities. And if we’re a laggard,     through clean technology.
    Kevin Lynch writes: “Widespread de-
                                               it’ll be to our own detriment because
    ployment of autonomous trucks in                                                      There are 8,000 companies right now
                                               other jurisdictions will out-compete
    the US could put the jobs of upwards                                                  in Canada that are identified as clean-
                                               us in the global innovation race.
    of three million truckers at risk of                                                  tech companies. And their growth
    technological displacement.” I won-                                                   potential is enormous.
    der, do you see this kind of anxiety               The message is not
    about disruptive technologies with                 about humans versus                Policy: Finally, on the CFTA, you’ve
    people you meet—just in your riding                                                   said this is really about “strengthen-
                                               technology, humans versus                  ing our home field advantage.”
    of Mississauga-Malton?
                                               machines. It’s about how we
    Navdeep Bains: You’re absolutely                                                      Navdeep Bains: As a market of 35
                                               can make Canada a more                     million people, we don’t have the lux-
    right. I have Pearson International,
    the largest airport in the country,
                                               innovative economy, where                  ury of competing against each other.
    in my riding of Mississauga-Malton.        companies come here to                     We need to work together. I recognize
    There is a strong logistical hub around    build innovative solutions.                there are regional differences. But fun-
    it. There are warehouses and a large                                                  damentally, we believe being open to
    transportation sector. I know many                                                    trade and being open to investment,
    people in the trucking industry. They                                                 being open to people is how we’re go-
    share these anxieties and concerns.                                                   ing to succeed in a world that’s pro-
                                               Policy: Two more quick ones. First
    We understand the anxieties that                                                      moting protectionism, that’s turning
                                               on clean energy, renewables, and then
    middle-class Canadians are facing                                                     inward. With the Canadian Free Trade
                                               on the CFTA. Coal is not coming back.
                                                                                          Agreement, we are strengthening our
    about their own prospects, about the       You probably saw the story the other
                                                                                          home field advantage. And we are
    prospects of their kids. The role of our   day about the Kentucky coal mining
                                                                                          saying loud and clear that Canada
    government is to say: “How can we          museum that switched from coal to
                                                                                          is open. This is how we are going to
    help deal with those anxieties in a        solar power? And in the US there are
                                                                                          deal with those anxieties around the
    meaningful way?”                           more jobs in solar—210,000—than
                                                                                          middle class, how we’re going to see
    In our first budget, we brought in tax     there are in coal—190,000, and—or
                                                                                          more growth in the economy. Because
    policies to deal with that—a tax cut       oil and gas extraction—180,000. And
                                                                                          we’ve had modest growth and we
    for middle-class Canadians. Then we        solar is forecast to employ 420,000
                                                                                          need to change that equation.
    focused on the Canada Child Ben-           people in the US, and wind 380,000
                                               by 2020, where—and coal costs $140         How do we create good quality jobs?
    efit. We used tax policy to deal with
                                               per megawatt-hour to operate, solar        The only way we do that is by saying
    some of those anxieties. Then, we
                                               costs $80, and wind $60. It’s pretty       that yes, diversity is important and
    focused on immediate job opportu-
                                               obvious where the future lies in en-       yes, it is our strength, but how do we
    nities through significant infrastruc-
                                               ergy in growth and jobs. So what are       leverage that diversity for economic
    ture investments. In this budget,
                                               the opportunities in clean energy and      benefits? If you have an idea and you
    we’re focusing on skills and innova-
                                               renewables?                                want to take risk and you want your
    tion so that Canadians are ready and
    able to do the jobs of the future. The     Navdeep Bains: There’s a lot of po-        company to grow, this is the place to
    message is not about humans ver-           tential in clean tech. This is an area     come. We must let the world know
    sus technology, humans versus ma-          that impacts all sectors of the econ-      that we have the best regulatory en-
    chines. It’s about how we can make         omy. And that is why we’ve commit-         vironment. The best talent. The best
    Canada a more innovative economy,          ted $1.4 billion in our budget to look     access to financing. The best oppor-
    where companies come here to build         at early-stage commercialization op-       tunities for companies to succeed
    innovative solutions. It’s not by be-      portunities for clean-tech companies.      globally because of both our inter-
    ing the lowest-cost jurisdiction, but      We’re looking at how we can con-           national trade and domestic trade
    a jurisdiction that people come to         tinue to finance and provide that pa-      agreements.
    because the best people are here, the      tient capital for companies that want      Innovation and Economic Development
    best ideas emerge from here, the best      to make additional investments and         Minister Navdeep Bains sat for this Q&A
    technologies emerge from here.             want to grow here. And then how can        in his Ottawa office on April 13, 2017.

    Policy
9

Innovation Nation:
Supercharging Canada’s
Innovation Ecosystem
Dominic Barton

When the Trudeau government created its Advisory Coun-                            needed now is bold ambition, and a
                                                                                  willingness to challenge our current
cil on Economic Growth, it turned to Dominic Barton,                              thinking.
global managing partner of McKinsey, to chair the group.
                                                                                  1.	
                                                                                    Invest heavily in skills training
After decades spent advising major corporations and gov-                            for workers. The automation of
ernments on how to address obstacles to success, Barton                             work—driven by technology—is
                                                                                    the single most disruptive force fac-
brought that experience to bear on Canada’s economic                                ing labour markets today. Nearly
strategy, particularly on innovation.                                               half of Canadian jobs are at a high
                                                                                    risk of being affected by automa-
                                                                                    tion over the next two decades, ac-
                                                                                    cording to a study by the Brookfield

A
        decade ago, CBC Television        vation have failed to deliver. Three      Institute. Furthermore, the para-
        aired its mini-series The                                                   digm of work continues to evolve—
                                          specific issues have proved difficult
        Greatest Canadian Invention,                                                the number of people engaged in
                                          to address. First, as a nation, we do
counting down 50 inventions that                                                    temporary or contract work has
                                          not consistently translate our good
were developed in Canada, including                                                 increased substantially in recent
                                          ideas into revenue-generating com-
insulin, the telephone, the artificial                                              years, and those employed full-time
                                          mercial products and services. Sec-
pacemaker, and the zipper. Clearly,                                                 are switching jobs more frequently.
                                          ond, we struggle to turn successful
inventions are a core part of our heri-                                             In this changing environment, life-
                                          start-ups into mid-size companies,
tage as a nation.                                                                   long learning and re-skilling are es-
                                          and to scale up mid-sized firms into
                                                                                    sential to maintaining a workforce
                                          globally competitive players. And
Today, creating the conditions to su-                                               that has the skills needed to thrive
                                          third, many sectors lack a ‘burning
percharge Canadian innovation—or                                                    in an innovation-led, increasingly
                                          platform’ for corporate adoption of
taking our ideas and inventions to                                                  knowledge-based economy. Budget
                                          innovation, as they are comfortably
scale commercially—will be critical                                                 2017 provides considerable new in-
                                          profitable and do not face the in-
for our future prosperity. We face a                                                vestment in skills development and
                                          tense competition that has spurred
demographic challenge (rapidly ag-                                                  training. Continuing to build on a
                                          innovation in other markets.
ing population) which, if left un-                                                  strong foundation here will become

                                          W
checked, could cut GDP per capita                                                   more and more important in the
                                                     e believe that there are       coming decade.
growth from the 1.9 per cent we ex-
                                                     eight broad actions that
perienced over the past 50 years to
0.8 per cent over the next 50 years.                 could help address these     2.	
                                                                                    Attract the world’s top talent.
And, as the pace of technological         challenges and transform Canada’s         Three-quarters of high-growth firms
change accelerates and competition        innovation economy. The Canadian          in Canada say that the greatest bar-
from other countries intensifies, sup-    government’s Innovation and Skills        rier to growth is a lack of manage-
porting innovation will be key to         Plan, detailed in Budget 2017, and        rial talent. An important first step in
creating high-value, resilient middle     other recent initiatives lay a strong     remedying this will be to pursue the
class jobs.                               foundation for Canada to reach its        federal government’s 2016 Global
                                          innovation potential. That said,          Skills Strategy, and to double down
Upping our game on innovation will        more opportunity still exists across      on other recent initiatives such as
not be easy, and several previous at-     the board—to increase productivity        the fast-track visa program. In the
tempts to accelerate Canadian inno-       and drive inclusive growth. What is       long run, attracting international

                                                                                                          May/June 2017
10
                     students to our globally recognized                               Half of all billion-dollar start-ups in the US were
                     universities and increasing immi-
                     gration of skilled workers will be                                founded by immigrants. Canada’s reputation for
                     essential. Half of all billion-dollar                     openness and diversity give it a comparative advantage in
                     start-ups in the US were founded by                       the global competition for talent, and one we should
                     immigrants. Canada’s reputation                           capitalize on.
                     for openness and diversity give it a
                     comparative advantage in the glob-
                     al competition for talent, and one
                     we should capitalize on.

     3.	
       Create innovation marketplaces                                            scale innovation ‘marketplaces’           4.	Pivot focus to high-growth mar-
       in key sectors and technologies.                                          or ‘clusters’ to match the demand            kets in Asia. Canada’s domestic
       Canada’s innovation ecosystem is                                          for innovation from companies                market represents two per cent of
       strong on many dimensions—from                                            and governments, with the sup-               global GDP and less than 0.5 per
       its remarkable base of talent, to its                                     ply from researchers and entrepre-           cent of the global population. To
       mix of large firms and high-growth                                        neurs. These marketplaces can be             scale and become global cham-
       SMEs, to its leading researchers and                                      flywheels of innovation and eco-             pions, Canadian companies will
       universities (e.g., in technologies                                       nomic growth, especially when fo-            increasingly need to look beyond
       as diverse as artificial intelligence,                                    cused on sectors where Canada has            our borders for growth opportuni-
       clean tech and quantum com-                                               already developed a competitive              ties, and adopt the global mindset
       puting). What can be improved                                             edge, such as ag-food, energy and            common in Switzerland and Scan-
       however, is the coordination and                                          renewables, mining and metals,               dinavia. The US will continue to
       collaboration among these vari-                                           health and life sciences, and ad-            be our most essential international
       ous stakeholders. To address this                                         vanced manufacturing—as well as              market, but as global growth dy-
       need, Canada should create and                                            around our leading technologies.             namics shift, other countries—es-

     Figure 1: Capital injection needs by stage in a company lifecycle

                CAD MILLIONS

                                            30
                                                 Seed             Early              Expansion           Growth
                                                 Both number of   Between            For every C$1       21 percent of
                                            25   deals and deal   2013–2015          available to        Canada’s
                                                 sizes rose       average deal       early-stage firm,   high-growth
                                                 between 2013     size fell by 33%   only C$0.82 is      SMEs
      CAPITAL INJECTION NEEDS PER COMPANY

                                                 and 2015         in Canada          directed
                                            20                                       towards the
                                                                                     expansion stage
                                                                                                         say that they
                                                                                                         face financing
                                            15                                                           issues,
                                                                                                         compared with
                                                                                                         just 3% of SMEs
                                            10

                                                  Little to no                                            C$200–350
                                                                         C$400–500 million
                                            5          gap                                                million total
                                                                          total annual gap
                                                   at present                                             annual gap

                                            0
                                                    Seed              Early            Expansion            Growth            Mature             Exit

                                                                                     STAGE IN COMPANY LIFECYCLE

     Policy
11
  pecially in Asia—will become more         ment Digital Service is collaborat-      8.	Prioritize existing business inno-
  and more important as markets for         ing with individual departments;            vation programs. Canada spends
  our innovations. Companies that           using design principles to lead a           more than $5 billion annually on
  have an explicit strategy for broad-      fundamental “digital transforma-            a multitude of programs to ac-
  ening their international footprint       tion of government,” and on a               celerate innovation, enable com-
  will not only have greater opportu-       very aggressive time frame. Cana-           mercialization, and strengthen ex-
  nities for growth, but will also tap      da can and should make a similar            ports. We can still do a much better
  into the vibrant innovation eco-          large-scale, bold effort to digitize        job of scaling up programs with
  systems that exist in these high-         federal, provincial and municipal           proven impact, and cutting those
  growth markets.                           governments as well.                        without. To do this successfully
                                                                                        will require regular assessment and
5.	Create new pools of growth capi-
                                                                                        systematic data collection on effec-
   tal to scale businesses. Starting               A survey of start-up                 tiveness, as well as a major mindset
   a business in Canada is relatively
   easy: according to the World Eco-
                                                   ‘exits’ in Canada and                shift towards resource re-allocation
                                          the US since 2000 found that                  and optimization. Also needed is a
   nomic Forum, Canada ranks sec-
                                                                                        regular review of regulatory barri-
   ond worldwide in ease of establish-    only one per cent of                          ers—removing or re-tooling those
   ing a new firm. The problem is that    Canadian companies exited                     that create unnecessary barriers to
   disproportionately few small com-
   panies in Canada ever become mid-
                                          with a valuation of more                      innovation.
   market or larger firms. A survey of    than $500 million, compared
                                                                                     Canada has the potential—and the
   start-up ‘exits’ in Canada and the     with 10 per cent of exits in               need—to be an innovation power-
   US since 2000 found that only one      the US This is why the                     house in the coming decade. From
   per cent of Canadian companies
                                          government’s recent                        our world-class education system,
   exited with a valuation of more
   than $500 million, compared with       announcement of a private                  to our diversity and reputation for
                                                                                     openness, to our strong existing sec-
   10 per cent of exits in the US This    sector-led Canadian
                                                                                     tors, we have all the right ingredients
   is why the government’s recent an-     Business Growth Fund is                    to attract and equip the next gen-
   nouncement of a private sector-led
                                          so important.                              eration of great Canadian inventors
   Canadian Business Growth Fund
                                                                                     and business builders. Capturing this
   is so important. It will help close
                                                                                     opportunity will be one of the most
   Canada’s $200-350 million annual
                                                                                     important drivers of Canada’s future
   funding gap faced by firms with
                                                                                     prosperity for all.
   more than $10 million in revenue,      7.	
                                             Target government procurement
   and provide the growth capital,           to boost innovation. The Canadi-        Dominic Barton is Global Managing
   venture capital, and access to in-        an government should use strategic      Partner of McKinsey and Company
   vestor advice and support needed          government procurement to help          and Chair of the Trudeau government’s
   for those companies to expand.            small, innovative Canadian compa-       Advisory Council on Economic Growth.
   (see figure 1)                            nies scale-up and gain credibility in
                                             global markets. The principle here
6.	Digitize government. Nearly a
                                             must be a shift from requirements-
    quarter of Canada’s employees
                                             focused to value-based procurement,
    work for government or quasi-
                                             enabling the public sector to be an
    government entities such as
                                             important first customer for Cana-
    schools, hospitals, and crown
    corporations. At this scale, any         dian innovations. The opportunity
    meaningful national innovation           here is significant: Canadian gov-
    and productivity effort must in-         ernments at all levels spend approx-
    clude the public sector. Opportu-        imately $100 billion each year to
    nities abound here, particularly in      purchase equipment, supplies, and
    digitizing government processes          services. Innovative Solutions Can-
    and services. The US Digital Ser-        ada, modeled after similar, success-
    vice, a new federal agency, has          ful programs in the US and U.K.,
    a mandate to make government             will provide $50 million annually
    services “awesome” (i.e., better,        starting with Budget 2017 towards
    faster, more mobile, more social)        earlier-stage products and services,
    and cheaper. Another example is          and if successful, should be expand-
    in the U.K., where the Govern-           ed even further.

                                                                                                            May/June 2017
12

     Innovation Policy in an
     Era of Disruption
     Kevin Lynch

     As so many authoritative economic sources, surveys and                                         production economy—how we com-
                                                                                                    municate, interact, date, learn, get
     corporate titans have told us recently, the nature of work                                     news, and govern.
     is about to change drastically. Automation will replace
                                                                                                    People are totally transfixed by tech-
     many existing jobs and governments are scrambling to                                           nologies that have created self-driving
     adjust their innovation policies accordingly. Kevin Lynch,                                     cars and trucks but blissfully ignorant
                                                                                                    of the job-displacement potential of
     one of our regular contributors who is uniquely positioned                                     such automated vehicles.
     to assess the evolution of thinking on adaptation to the
                                                                                                    Uber sent a shipment of beer 200
     Fourth Industrial Revolution, outlines the opportunities                                       miles along an interstate in a self-
     and pitfalls of policy making in an age of disruption.                                         driving truck. Elon Musk likes to be
                                                                                                    photographed arriving at meetings
                                                                                                    in San Francisco in a self-driving
                                                                                                    Tesla. Amazon is experimenting

     W
                                                                                                    with drone delivery of packages in
                 e are in the midst of an         intertwining in unimaginable ways—                selected neighbourhoods. Cool tech-
                 era of disruption, driven        a virtual revolution (Figure 1).                  nology, disruptive innovations and
                 by the extraordinary scale,                                                        new business models. A productivity
     scope and speed of technological             But few revolutions transpire without
                                                                                                    and growth gain from technological
     change, and spawning transformative          upheaval, uncertainty, and swaths of
                                                                                                    change, to be sure, but also a looming
     innovations throughout economies             winners and losers, and technological
                                                                                                    social pressure and policy quandary.
     and societies. These new technologies,       revolutions are no different. This one
     from big data to machine learning            not only has the potential to funda-              Widespread deployment of autono-
     to artificial intelligence to quantum        mentally transform what we produce                mous trucks in the United States
     computing to the internet of things,         and how we produce it, but its im-                would put the jobs of upwards of 3
     to much more, are intersecting and           pacts are being felt well beyond the              million truckers at risk of technologi-

          Figure 1(a): Technology is disrupting                         Figure 1(b): The “PACE” of disruption
          things, again                                                 (time to reach 50 million users)

          • Artificial intelligence (AI) and advanced robots
          •	New computing technologies
             (quantum, neural, …)                                     Telephone                                                  75 years
          • Blockchain, distributed ledgers                                 Radio                             38 years
          • Internet of things (linked sensors)
          • Big data, cloud computing                                           TV            13 years
          • Virtual and augmented realities                              Internet         4 years
          • 3D printing
          • Neurotechnologies, geo-engineering                         Facebook           3.5 years
          • Nano materials                                           Angry Birds         38 days
          • Energy storage
                                                                                     0              25            50        75

     Source: McKinsey                                              Source: Citi GPS: Global Perspectives & Solutions

     Policy
13
cal displacement. In Tom Friedman’s                There is no silver bullet for Canada’s innovation
words, this is the hollowing out of
middle-income paying jobs requiring
                                                   underperformance: no elusive tax incentive, no
middling education. More generally,        reclusive venture capitalist, no exclusive intellectual
McKinsey & Company estimates that,         property policy that can suddenly turn on the innovation
through a combination of machine           spigot. But there is much we can and must do, starting with
learning, big data, massive comput-
                                           a national innovation strategy.
ing power and artificial intelligence,
some 40 per cent or more of current
jobs in North America could be auto-
mated in the foreseeable future.

This highlights the duality of the         venture capitalist, no exclusive intel-       at least one innovation ecosystem in
policy challenge facing governments,       lectual property policy that can sud-         the global top 10 by 2020; half-mea-
business and society. On the one           denly turn on the innovation spigot.          sures will not succeed.
hand, we have a significant long-term      But there is much we can and must
                                           do, starting with a national innova-          Second, we have to become a glob-
growth problem, caused by slow-
ing productivity performance and           tion strategy.                                al talent hub, and align policies to
                                                                                         achieve this. Extraordinary talent

                                           H
shrinking labour forces due to aging.
                                                     ere, the 2017 federal budget        drives brilliant research, solves in-
The main driver for rebuilding poten-
                                                     provided encouraging sig-           tractable problems and creates new
tial growth is innovation, which in-
                                                     nals. First, we have to set         ways of looking at old things. What
creases productivity, improves com-
                                           ambitious targets and assign account-         sets successful innovation ecosys-
petitiveness, expands product choice
                                           abilities. Building world-class innova-       tems apart is that they are magnets
for customers and moves firms up the
                                           tion superclusters has driven innova-         for such talent. Recognizing that tal-
value-added curve. And Canada has
a considerable way to go in rebuild-       tion and growth in other countries,           ent pools are global, not national or
ing growth through improvements in         ranging from the United States to Is-         local, the government’s new Global
our innovation performance as even         rael, Singapore and the Netherlands,          Talent Visa and other measures to
a cursory examination of global rank-      and the government has signalled its          attract researchers and innovators
ings makes strikingly clear (Figure 2).    intention to work with business, uni-         should build on one of our greatest
                                           versities, technology centres, risk cap-      strengths—our diversity.
There is no silver bullet for Canada’s     ital and the entrepreneurial start-up
innovation underperformance: no            community to do so here on a com-             Third, we have to modernize our
elusive tax incentive, no reclusive        petitive basis. We should aim to have         policy toolkit to support innova-

    Figure 2: A global scorecard on innovation
    Despite pockets of excellence, strength in start-ups and some best-in-class university research strengths, Canada is
    pretty mediocre in business R&D and innovation, particularly in established firms. We have to go from “reasonably
    good” to “globally great”, and rapidly, to rebuild Canadian competitiveness.

                                                     Innovation Reality

                          (C$ blns, except where noted)
                                                         Estimate                    —Forecast—
                                                          16/17          17/18          18/19          19/20
            22nd              24th
                          Revenues                26th    292.1
                                                                        70 %
                                                                         304.7          315.6
                                                                                             4         327.7
                                                                                                             $11,500
       Canada’s ranking    Canada’s ranking  Canada’s ranking       Canada’s business- Canadian research Per person gap
       on innovation
                          Expenditures                  315.1
                                             on productivity
                                                                           330.2 level
                                                                    productivity       340.0             348.1
                                                                                       universities in the in incomes relative
                           on business
                              Program
                           spending on Spending
                                             growth over290.9              305.4
                                                                    relative to US     313.7
                                                                                       global top 100 319.8 to U.S. due to
                           R&D/GDP           1995-2012 period                                               productivity/
                              Public Debt Charges          24.3             24.7        26.3              28.3
                                                                                                            innovation deficit
                          Adjustment for Risk              —              (3.0)          (3.0)          (3.0)
                          Budget Balance                 (23.0)          (28.5)         (27.4)         (23.4)
                          Federal Debt                    637.1          665.5          692.9          716.3
                          As a percent of GDP:
                                                                                                                  May/June 2017
                              Budget Balance              (1.1)           (1.4)          (1.2)          (1.0)
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