Tuesday, January 25, 2022

Some missing links in the discussion on innovation

Much digital ink has been spilt over the nascent Canadian version of the storied DARPA, including a good overview by Alex Usher today. Usher rightfully points out some dissonance in the focus on disruptive versus incremental innovation; this incidentally confuses the difference between invention (new to the world) and innovation (new to a market). He also questions the focus on product innovation over process innovation, but misses marketing and organizational innovation. But his point is sound: “simply adopting big-country solutions is unlikely to help us overcome them.” 

In thinking this through there are two key points that are missed here and elsewhere (see for example this piece in the Logic). The first is the importance of private+public partnerships for R&D, and the second is a focus on demand-driven innovation. I would add a third here, which is the turn (finally) in Canada to a focus on the entire spectrum of R&D, and here I mean TRLs 1-9. More on this below.

Private+public partnerships for R&D (what I’ve elsewhere called P3RD) are essential for ensuring intellectual property (IP) generated in our world leading public research universities gets to markets. These partnerships are also essential for helping businesses to perform R&D and to innovate more broadly. Not only do research partnerships with higher education institutions helps companies to conduct R&D they might not otherwise do, they also give students valuable work integrated learning opportunities. This results in innovation literacy: “the ability to think creatively, evaluate, and apply problem-solving skills to diverse and intangible issues within industrial problems and multidisciplinary contexts.

Demand-driven innovation is the opposite of what Canada has focused on in terms of Science and Technology policy. That is, we invest more per capita than most every other OECD country in publicly funded research, but we lag on business investment in research and commercialization. Read the CCA Report on Science and Technology – it is a comprehensive overview of the particular values, strengths and weaknesses of the Canadian research to innovation ecosystem. 

According to the Horizontal Review on business innovation and clean technology (2018) – which while 4 years old is still a good barometer of S&T policy – most business facing R&D support is for early stage effort (what the OECD Frascati Manual calls Basic Research). The Horizontal Review further outlines the following:

  • Only 78% of support is focused on traditional product and process innovation and formal R&D
  • Less than half of funding is directed to firms that are in a growth stage, and
  • Only 8% support goes towards productivity enhancing technology adoption.

A focus on technology only (product innovation) disadvantages inclusive innovation, especially in the world of intangibles, a point made very clear by Ontario’s Expert Panel on Intellectual Property

As Alex Usher points out, according to Mazzucato the private sector does not generally invest in early stage research. And the public sector is not historically motivated to carry forward commercialization, preferring to publish results rather than commercializing them (though this is changing).

Most academic research is basic research – very little is applied research and hardly any is experimental development. This continuum matters. A lot:

The continuum from basic and applied research through to experimental development constitutes the types of activities that make up the innovation carrying capacity of national economies: the ability to proactively create value from public investments in basic research by fostering private sector receptivity and engagement to the public S&T systems.

Only 20,000 – 2% - of Canadian companies file SR&ED claims, the most reliable indicator we have for firms that conduct R&D activities, which are essential for innovating products and services for global markets. This is down from 25,000 a half decade ago. This may be only .5% of companies overall, but it represents a 20% drop in SR&ED filers. SR&ED is also down from 4 billion to 3 billion annually. This is not a good indicator for Canadian innovation. We can take from this the stark reality that not enough companies do R&D, and those who may be unsure if they want to conduct R&D have little or no incentive to start.

And this gets me back to the point missed by Usher and others. The discussion around a Canadian DARPA is worthwhile as it gets us into the mindset of developing challenge-based research capabilities. It socializes the idea that private+public partnerships for R&D is a good thing (this is the key DARPA model, along with limited time and funding). It puts us into the mindset that demand-driven research and innovation challenges are the right thing to do – to orient the best and brightest capabilities we have in our higher education institutions to address key challenges, be these health, environmental, social, or economic. 

The good news is that there are many working in this space. Check out OCI and Mitacs, who fund excellent programs that engage colleges and universities in all forms of research. Check out the good work happening at Communitech and their focus on “True North - solving Canadian problems with Canadian Innovation.” And check out how eCampusOntario is helping our 50 member institutions create research partnerships through a unique demand-driven innovation platform piloted with the City of Toronto

Working together we can mobilize the latent R&D capacity in our higher education institutions to increase the numbers of firms doing R&D with explicit reach out to those firms currently not innovating. Together we can aid the economic recovery and growth with Ontario-made innovation. Research partnerships have broad application and net benefits to our social and economic prosperity, supporting:

  • Commercial Innovation via industry-sponsored R&D and commercialization of University research 
  • Career opportunities for post-secondary graduates by providing relevant work experience and building their professional networks
  • IP and Innovation Literacy by integrating student experiential learning and issuing micro-credentials for project work with partners 
  • Employment and economic development by enhancing overall effectiveness of adjacent R&D for programs by providing a common entry point for Ontario businesses.

CARPA or no, the discussion around demand-driven innovation and research partnerships is right-headed. Not only that, but these are essential for competing in the global innovation economy. 

Post-Script: The Continuum of Research

I’ve written many times about this and why it matters. Developing the capacity and contribution for the span of R&D – from basic to applied research through to experimental development – is key to enacting intentional innovation. 

An excellent graphic from the CCA Report Competing in a Global Innovation Economy that describes the links between R&D, Innovation and Wealth Creation. 

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