Canada’s Innovation Gap (part 3)


Innovation GapNOTE: This is a bit of a long post, but it is also long overdue. In it, I present some needed steps to address the innovation issue in Canada. So, bear with me on the length and I really would like to hear your thoughts on the topic.

Back in the fall, I wrote part 1 and part 2 of this series.

Part 1 talked about the overall problem that was described in an article in the Globe and Mail on the same topic.

In part 2, I wrote about the Conference Board of Canada’s annual study entitled How Canada Performs,  A Report Card on Canada, and in particular Canada’s consistently miserable ranking on Innovation.

The final numbers for the 2009 Report Card are finally(!) out, and yet again, Canada scores a D on Innovation.

(click to enlarge)

Here’s a video from 2008 describing the issues identified in the report. Nothing has changed from 2008 to 2009 so the comments are still valid.

According the video above, The biggest problem Canada faces regarding innovation is:

our failure to turn good ideas into products and services that can be sold on the world markets.

Did Edison actually invent the lightbulb?

Here’s a story to illustrate this point. I’m sure you’ve heard of Thomas Edison. Who hasn’t?

But have you heard of James Woodward or Thomas Evans? Probably not.

Woodward and Evans, two Canadians living in Toronto in the 1870s created the first electric lamp with a shaped rod of carbon held between electrodes in a glass bulb. The gas in the bulb was nitrogen. They patented this invention in Canada in 1874.

They tried to raise capital to form a company to further research and develop the product, but were met with ridicule. Who could possibly use such a thing?

In 1876 Woodward received a US patent for the invention. In 1879 Edison bought out the patent completely and used it in his own pursuit of electric light.

It’s important to note that Edison was working simultaneously on his own electric light as was British inventor Sir Joseph Swan. In 1880, Swan and Edison teamed up to create the first commercially viable bulb.

So did Edison “invent” the lightbulb? Clearly no. But he was the first to bring a viable bulb to market and make it available to the masses. And that’s why he’s remembered for the lightbulb, and Woodward and Evans are not.

Groundhog Day all over again?

This story, unfortunately, has been repeated many times over since the 1880s. There are many similar examples of Canadian innovations and technology that only gained broad success AFTER being bought by foreign companies or AFTER the inventors went to the US or overseas to more receptive markets. Whether in software, hardware, biotech, or other areas, the story repeats itself into the present.

Finding solutions

So what can be done to start changing this truly sad state of affairs? Here are few suggestions. They are not comprehensive, nor fully fleshed out, but to me these are important steps that must be taken.

  1. Fully utilize the skills and abilities of the Canadian workforce
  2. Fix the financing issues for entrepreneurs
  3. Match technologists with experienced Product Management and Marketing  resources early on
  4. Create a national culture that celebrates innovation
  5. Resource industries can no longer be the primary focus of Canada’s international trade strategy

I’d certainly love to hear what you have to say. Whether you live in Canada or not, it doesn’t matter. No country is immune to this problem, though certainly some countries have far more focus on it than others.

1. Fully utilize the skills and abilities of the Canadian workforce

This is a message for employers. Canada has an educated, driven and skilled workforce capable of making great contributions in the workplace — if given the opportunity.

A recent article in the Globe and Mail entitled, Returning Canadians Chilled by Workforce, looks at the experiences of people with overseas experience coming back to Canada. The following quote from the article talks about Roy Pereira’s experience after returning to Canada from Silicon Valley.

Instead of his experience translating into a valuable asset for Canadian companies, he discovered it was much more difficult than he expected to find a job that allowed him to use his skills and knowledge.

I totally agree and experienced the same thing. When I was looking to move back to Canada from California,  most interviewers focused on the Canada/US exchange rate and salary differences in the two locations. They didn’t care about my skill set, my contacts, my experience etc.

This narrow minded thinking impacts everyone, new immigrants as well as returning expatriates. There needs to be a cultural change made by employers. We are competing in a global economy and international experience and contacts are invaluable in that regard.

People are truly the most important assets knowledge-based companies have, and employers and managers MUST learn how to use those skills to their advantage instead of trying to force fit people into narrow definitions that do little, if anything, to truly benefit from the skills people have available.

2. Fix the financing issues for entrepreneurs

This topic could fill several blog posts alone, so I’m going to focus on one very specific point.

Canada’s venture capital community is a mess. Don’t believe me, then read the articles in this series entitled The Future of Venture Capital in Canada.

When I say, fix the financing issues, the reality is that there needs to be a better, more symbiotic model that can help both the entrepreneurs and the financiers become successful.

Most tech companies in Canada don’t need millions of dollars in series A and B financing. What they need most is targeted assistance very early on. As Rick Segal says:

… we have to learn how to fail faster.When it comes to software, you can build, test, rework, and test again for under $100,000. We need a structure in place that allows that kind of money to be thrown at something to see if it works, and if it doesn’t, kill it and try something different.

He’s basically talking about dollar amounts that are traditionally supplied by Angel funds. A healthy and efficient Angel funding network would do wonders to help small entrepreneurs get over that initial hump and get some market validation.

Or perhaps something more like YCombinator is needed in Canada.  Either way, small amounts of well targeted early stage funding will have a huge impact on moving small companies forward to the next stage in their evolution. There is a lot of room for improvement in this area.

3. Match technologists with experienced Product Management and Marketing  resources early on

OK, this may sound completely self-serving but it isn’t. It’s absolutely true and absolutely critical.  And it goes to the heart of what the Conference Board of Canada identified as the biggest weakness we face in innovation. i.e. taking good ideas and turning them into successful products.

The early stage funding model as described above is about being lean.  Given that, there is little margin for unnecessary mistakes. So, while it may be good to fail fast, failing fast for the wrong reasons is stupid. And even worse is working on something that is bound to fail and not knowing it for far too long.

This is where focused Product Management will add significant value for early stage companies, because success is not simply about the technology or the product that is built. It’s about being lean and efficient, ruthlessly efficient in all the steps needed to bring the product to market and make it successful.

Everything from identifying the right market problems to solve, finding valuable market segments, positioning products against competition, defining pricing models and launching products are critical to success. In short Product Management will help the technologists focus on the right problems and the optimal outcomes. These are not skills that are widely available in Canada, let alone in the high tech industry in general. But they do exist and need to be utilized.

Look back to my post on Bill Campbell of Intuit and you can see that Silicon Valley has the same issues.

Only with the combination of technical skills, necessary funding AND market knowledge can success rates for entrepreneurs improve.

4. Create a national culture that celebrates innovation

Canada has many examples of innovators in it’s history. The telephone, electron microscope, the zipper(!), insulin and newsprint were all invented by Canadians. But, with the exception of Bell’s telephone, very little of this history is taught to Canadians in school. We have a society that is frightfully ignorant of it’s own history and accomplishments.

Not only do we need to teach our children and students about Canada’s history of innovation, but we also need to change the culture to celebrate and focus on innovation today.

How can we do this? Use the Participation model, but apply it to Innovation!

Participaction, started in the early 1970s, was (and still is) a national initiative to get Canadians to be more physically active. It included TV, Radio and print advertising. It included corporate sponsored runs and other activities. There were Participation challenges in various cities across Canada.  It got the country moving again and is credited with creating a bit of a fitness craze in the 1980s in Canada.

We need an analogous program to get Canadians aware of our history of innovation, and both the value and potential that it can bring to this country. Like Participaction, the program must be multi-faceted and continuous over a period of many years. Education, events and initiatives to bring people with ideas, money and market savvy together would help accelerate the efforts of entrepreneurs across the country.

A coordinated Participaction-like program could help reshape the innovation landscape in Canada over the next 10 years.

5. Resource industries can no longer be the primary focus of Canada’s international trade strategy

I’ve left this one to last because it may be the most contentious and least likely to happen in the short term.

Canada is a resource rich country. There’s no denying that. But for far too long resources like oil, gas, lumber, coal, potash, nickel, gold have dominated both the economy and the political mind. But we need to change that. Resources will play a prominent role in the Canadian economy for decades to come, but software, green-tech, biotech, life sciences and other knowledge based industries must grow in size and economic influence in Canada.

Our political leaders are far too focused on short term economic incentives and promoting low value jobs in the resource sector. They do this because it is easy to do and has short term political benefits. It also supports the current power structures in this country, as they have significant interests in resource industries.

The resource sector can’t be ignored, but focusing on it cannot be done to the detriment of high-tech, biotech and other industries where Canada can make significant gains.

Alberta was “king of the world” 2 years ago, sitting atop hundreds of BILLIONS, if not TRILLIONS of dollars of oil in the tar sands. Today, with the world economy depressed and both the demand for and price of crude oil well below peak levels, things don’t look so bright there. Yes, demand for oil will pick up, but other factors including alternative fuels and ecological awareness of the impact of excavating the tar sands are working against Alberta.

Why not learn a lesson from this and invest in a more diversified economy while there is still time? We need policies that look to the next decade and the next generation, not simply to the next budget or the next election campaign.

Canada needs a diversified, technologically efficient economy that can utilize the intelligence, knowledge and drive of it’s population.  There is little debate on that point.

The key questions are how best and how soon it can be done.  I’ve outlined a few suggestions here. I’d love to hear from the rest of you on this topic, whether you live in Canada or elsewhere, because I’m sure Canada is not unique in this regard.

Saeed

P.S. Here’s a great Canada focused blog that covers this topic as well as many others related to the future prosperity of Canada. It is both thoughtful and insightful. I highly recommend it.

http://dontleavecanadabehind.wordpress.com/

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2 responses to “Canada’s Innovation Gap (part 3)

  1. Pingback: Crowdsourcing ideas for Canada’s future « On Product Management

  2. Saeed,

    Great post. I agree with much of your project. I would add an increased focus on a single location and include universities in the plan. I think that innovation is a function of local ecosystem – Silicon Valley, Boston and now NYC are examples in the states. In those ecosystems you have universities doing research, people with successful experience to pass along to startups, venture capital firms that can do early and late stage financing, services (marketing, SEO, design, hosting, legal).

    Any project to close the innovation gap should have a single city focus – Toronto or Waterloo seem viable.