International Trade Committee on March 23rd, 2015

[Neil Lang]

Much of the funding and work, certainly within the universities, is focused more on pure and very early stage research. From a commercialization perspective, it is probably pre-commercialization by five years.

There are many challenges to getting your product. Once you develop your first-generation product and then put it into the field, you get a lot of field data. Then, taking that to the second and third generations ultimately is the platform to grow your company in the future.

There is not much focus on that industrialization process and not that much support for industrialization process. You are looking at how to optimize your manufacturing systems, how to optimize a design for reliability of the product. The technology is there; it's now a question of optimization for a commercial product that will operate in the real-world environment. There is not significant funding to support those activities.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

In your experience, which country, or maybe which cluster of universities, really gets this right? Is there a best practice that we should be following?

[Neil Lang]

In Europe, Fraunhofer is probably the best practice. They've done some pretty amazing work in the solar industry and in green technology. ITRI in Taiwan has done some pretty impressive work as well. Even some of those do some blue-sky research, but then they make it available to multiple companies, whereas with SR and ED, the funding is focused on one company, which does some research, and then the intellectual property is locked within that company.

If you can do the research at the level of a foundation, such as ITRI or Fraunhofer, and then push it out into the market, three or four or five or multiple companies can pick up the base technology and apply it to their own industry or market and develop it to build maybe four or five world-class products out of the same base technology, rather than just getting one, as when the IP is locked in.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

Thank you very much, Mr. Lang.

I'd like to ask Mr. Reynolds a couple of questions.

What share of your business is done with the United States?

[Jim Reynolds]

I would say 80%.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

How effective is NAFTA for you? Do you feel that for your U.S. customers, doing business with you is essentially the same as it would be with a U.S. company, or are there still some barriers? Is it a little bit harder for you than it would be if you were across the border?

[Jim Reynolds]

No, it's not; there is no real difference, or if there have been differences we worked them out years ago, so that it doesn't feel as though there are differences right now.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

Is the weaker dollar helpful?

[Jim Reynolds]

Sure.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

Do you think we're going to be seeing any impact from companies like yours? We talk a lot about the impact of the weaker dollar.

[Jim Reynolds]

When we do business in the U.S., we basically have price sheets, etc., set in U.S. dollars. On the days when the Canadian dollar is worth more than the U.S. dollar, what we net back is a little lower in Canada. When it's the way it is today, the net back is a little higher. We have to make our business model profitable on selling in U.S. dollars.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

So you can take more days off now?

[Jim Reynolds]

Well, I wish we could, yes.

[Voices]

Oh, oh!

[Chrystia Freeland, Liberal, Toronto Centre, ON]

You spoke very specifically, Mr. Reynolds, about how to hit some of the goals we have on getting small and medium-sized enterprises more involved in exporting and in trade. There's going to have to be an expansion of the resources available to them. It's clear that you've thought a lot about this. Do you have a specific sense of how many additional resources and what kind we need?

[Jim Reynolds]

Those are very, very good observations.

[The Chair, Conservative, Randy Hoback]

You have about five seconds to answer.

[Chrystia Freeland, Liberal, Toronto Centre, ON]

You can just say a number.

[Jim Reynolds]

On additional resources, I think of net additional as “redeployment of existing” resources. I come from a corporate background, where we did a lot of restructuring and bringing companies out of CCAA and things like that. Oftentimes, you don't have the luxury of saying you need more resources; you have to redeploy what you have.

I think it's about redeployment of existing resources and reconfiguring them based on the new dynamics of the extra trade agreements and that target of 10,000. The 10,000 target is pretty cool. It's like Canada in the Olympics and Own the Podium. It's going to push people.

[The Chair, Conservative, Randy Hoback]

Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thanks to the witnesses as well.

Mr. Lang, we heard from some witnesses that Canadian SMEs are risk averse and shy away from exporting due to fear of overseas processes. Your company, Corvus, has obviously overcome such hesitation. The question is, what pushed your company over that hurdle into exporting your products? Which government services did you use? What do you think the Government of Canada can do to improve its services to motivate more SMEs to cross over into exporting?

[Neil Lang]

There are a few different questions in there.

Firstly, for Corvus, I think the thing that pushed us across was the reality of our business. We're very focused on a particular market, and that market is 95% driven by overseas customers. We didn't have a choice, really.

In terms of the facilities that are available to Canadian companies, in order of importance for us I would say it was the financial support by EDC in providing the backing we needed to deliver letters of credit and so on and so forth to our customers, and foreign exchange opportunities. De-risking the transaction financially for our customers was probably number one.

Also, STDC has been enabling us to create reference customers overseas. That's key. Again, if you're not present in the market and people can't see you, they just don't know you exist. Physically having a site in your key market and enabling customers in that market to go see it is hugely powerful.

The third part—and whether you're exporting or not, this really is a challenge for all SMEs—is around the commercialization perspective and how you help people through that “valley of death”, if you like, that $5-million to $10-million size, with your first prototypes and your first customers, and seeing it through that first two, three, or four years of commercialization to get to a stable platform where you can build profitability.

Those are the three core things.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Do you have any suggestions for the government? What should we do to motivate more SMEs?

[Neil Lang]

For getting more people involved, I think it's about making it easier for companies to access the facilities that are available. For the people I work with and the people I talk with in different companies in B.C., most of them aren't aware of what is out there to support them to export. I think that if there were a single point of contact, as I mentioned, where they could access the different programs, that would drive significantly more interest from them.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Mr. Reynolds, you mentioned a couple of issues. You said that there are 40,000 plus SMEs, and that only 10,000 of them export. You then talked about the TCS, whose resources are deployed at about 80% internationally and 20% domestically. At the same time, you also mentioned the Prime Minister's latest announcement promising to help SMEs by providing additional funding on an ongoing basis to the TCS service.

On the other hand, you talked about an awareness campaign. You also mentioned Go Global and agreed that it is a good initiative which helps SMEs and builds awareness among them.

What other initiatives should the government take to move forward, to ensure that more and more SMEs are aware of the government's programs and that they are also encouraged to move forward towards export markets?