Government Operations Committee on Oct. 18th, 2011

[John McCallum, Liberal, Markham—Unionville, ON]

Okay.

Ms. Preston or Ms. Ing.

[Monica Preston]

In AMITA, we all use BDC funding from time to time, and working capital becomes really important when you're trying to take a new initiative forward in the marketplace. Here we're talking about maybe a reallocation, allocating more directly. The SR&ED, I think, is indirect, in that the company first invests, and then gets a tax credit afterwards. Maybe the fine point here is that the company has to make the investment. With BDC, you're going out and looking for working capital for an idea. It's not as expensive as other types of capital, but it's still quite a bit of money for BDC.

Running a company, we are often self-financing quite a bit of the time. In AMITA, we do have to finance our growth most often. And when we get to the point where working capital for a new idea is required, then we're looking around to see where that can come from and what the options are. I think that may be part of what this report is saying: in those particular cases where you need that, then BDC is a good choice.

[John McCallum, Liberal, Markham—Unionville, ON]

Ms. Ing.

[Lianne Ing]

In our case, our company has benefited immensely from the SR&ED program. When finances are tight, there's often a tendency to perhaps look at reducing investments in longer-term, longer-return programs in order to allocate funds to things that could demonstrate returns more quickly. But I think the important thing to note is that innovation is the activity, which then feeds into the commercialization process. So if you begin to reduce funding or support on the innovation side, you may see an explosion of commercialization in the short term, but eventually the process that feeds the commercialization activity will dry up. From our perspective, it's equally important to both continue funding the longer-term innovation or research activities and increase funding to commercialization activities.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you, Mr. McCallum. Your time is just up.

Next, for the Conservatives, is Bernard Trottier.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you for coming in today.

I have a few questions about the evolution of a product life cycle. There is some basic blue-sky research that companies do; then there's sometimes a patent; then there's a product development effort.

Could you describe the process of how you worked with CICP? It sounds as though you didn't have a final product, necessarily, or there was a high-level set of requirements given to you in each of your examples, with the Department of Foreign Affairs and then also when it came to radiation detection and so on, and that there was further work that CICP did with you to refine the product.

Could you describe how that works? It doesn't sound as though there was a final set of requirements given to you in each of these cases; it was basically a question of responding to a request for proposals.

Could you describe that working relationship? And where within your product and service evolution did CICP intervene, and how did that help you?

[Lianne Ing]

The CICP program is structured somewhat differently from a traditional call for proposals, because in a traditional case there will often be a government department that identifies a specific need and therefore a specific set of requirements for the technology.

In the case of CICP, they were not prescribing what sort of technology they were willing to fund. They basically went out to small and medium enterprises and asked, what technologies do you have that meet a minimum level of technology maturity but that you have not yet brought across the commercialization line?

From our perspective, when the call for proposals came out we basically looked at our technology portfolio and identified which technologies were sufficiently mature to go into testing with a government department but had not yet been sold commercially. That's how we narrowed down the list of technologies for submission, ultimately to one particular technology, which we submitted.

I think there's some merit in that approach, if the intent of the program is to try to jump-start the ability of small and medium enterprises to commercialize the activity, because it allows a very broad cross-section of enterprises to respond with whatever technology they feel is most promising and whatever technology they feel will have the greatest impact and return for their company.

[Monica Preston]

At AMITA we had an early-stage solution for early outbreak management. It is based on the SARS commission report and the ability to manage information during that time, when there was an outbreak and nobody really knew what it was. People were concerned, some people died, and of course it really affected the economy at the time. This was a capability gap that we had a solution for, and that's the one we went forward with.

It is complex, in that it has to be integrated in the health system. Being able to test it with a federal department and then have some way of getting some other involvement from provinces and municipalities potentially becomes really interesting for us—being able to get it tested and really assess the effectiveness of it.

For example, it could be that there is a vessel of interest coming with refugees or something; or we have C. difficile outbreaks that are moving, and this has been recently reported. There are all kinds of things like that.

So that's the one we decided to submit under the program. It is in the early stage because it's not contracted, so the test is still yet to be done. The effectiveness will come after we see how this goes.

If I think back to our consular solution, we had to repackage it to sell it. Countries weren't interested in buying this whole, huge solution. They wanted to buy pieces of it depending on what they needed. So we also, as we're selling, have to change our business models. We have to think about what makes it more attractive to the buyer and that kind of thing. There are a lot of things going out throughout this product management cycle that you're talking about: about the product itself and where to go; what the best way to sell it is; what the best business model is to sell it in.

As time passes in the technology area.... You talked about the fact that this has a huge impact on us because we get new devices coming towards us. We get people using iPads in the hospital now. If we're not fast in getting this out the door, then we are always trying to retrofit the stuff into what we're doing.

I don't know whether that answers your question.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

That's fine.

In a way it sounds as though CICP and its government clients, through testing and feedback and collaborative product development ideas, is making an indirect investment in product development for your companies. Maybe this is one of these things that doesn't get viewed as.... It's not like writing a cheque, but it's a real investment of their time and effort to help you move along in that product evolution.

Would you say that was a fair way to describe it?

[Monica Preston]

Yes. And also you have the government getting a capability that it doesn't have; it's not just a one-way thing.

[The Vice-Chair, Conservative, Mike Wallace]

Thank you very much, Mr. Trottier.

Mr. Blanchette, you have the floor.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you very much. I thank the witnesses for their presence.

I was struck by one thing in your presentations, and that was the importance you attribute to commercialization as well as to the first steps in that process.

Ms. Preston, you said that it was important to you to be able to use the government's name right from the beginning of the commercialization of an innovation in order to present it to various clients. You gave me the impression that the rapid commercialization of an innovation is what is important to you in the process of research, development, innovation or commercialization. Is my perception accurate?

[Monica Preston]

I think that when you have an innovation, a solution, you would like to see it in use as quickly as possible to derive and demonstrate the benefit.

With regard to the commercialization itself, if I think about my example with DFAIT, we have seven countries today, and we probably will have another dozen in the next five years. That's not quick; that's over a ten-year period. The innovation itself was developed over ten years ago, and of course it evolves as we get more customers; the product evolves, and it offers new features and functions.

That's where I was coming from on that.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Very well.

Ms. Ing, you stated that the program was on the right track and you shared certain ideas with us to make it go forward. Since you represent a company which is based on innovation, I would like you to share with us certain ideas that might allow you not to go from innovation to commercialization, but rather to go from a good idea to innovation. What could be done to help businesses like yours to be more competitive?

[Lianne Ing]

That is a difficult question. In our company we are somewhat unique, as I mentioned, because we happen to have 50 people who are trained and skilled in various disciplines of science and engineering. When you put all of those people in one place, you are often able to generate, through a lot of brainstorming, a number of good ideas. As a small company we then have to decide from that list of good ideas which ones we either invest in ourselves or seek additional support to nurture into an innovation that can be useful to people.

In terms of assisting other companies to do it, that's something you improve upon with experience. You have to find a way within your organization to efficiently translate good ideas into a tangible technology or prototype, which you can then show people has merit. Often when you reach that stage you can garner additional interest or funding or support that will help you build a business case to go that last leg of the journey into commercialization.

I think every company, depending on its particular industry sector, has to basically decide how to prioritize which ideas actually get funded, because it is typically not possible for a company to try to invest in all of its ideas and bring them to an innovation stage.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you very much.

Mr. Gupta, in the information technology field, good ideas can become obsolete very quickly . You put considerable emphasis on the commercialization of new ideas. I would like you to explain somewhat more in depth the particular support businesses in the information technology area would need, as compared to other high tech companies that can work with longer development horizons. Can you tell us what means should be taken to make the information technology sector in Canada more competitive?

[Karna Gupta]

It truly varies by sector, so I'll give you an example.

If you're in a mobilities phase--and I'll be talking to our membership--developing applications, the rapid prototyping is the quickest way to get to market. As you commercialize, you need to quickly do a prototype test with a customer. If it sticks, then you move forward. Otherwise, you get to the next one.

If we talk of some our other client bases, which are developing more products and solutions that are more permanent in nature and elaborate, with bigger ERP solutions, then you need a longer cycle. Prototyping would take longer. The commercialization process would take longer.

So it very much varies by the type of products you are talking about, and also by the sectors. Then you have the software and hardware differences. In the software case, the prototyping could move a lot faster than hardware. Hardware requires the manufacturing process, including prototyping and testing.

All of these processes need some help for early adoption. The quickest way, at least in my personal experience in this field, has been that if you can't get to try it on a smart customer, the idea stays at the idea stage for a very long time. Funding aside, somebody needs to use the product. It truly needs to solve a business problem. Then you can move it forward.

So the early prototype leads to very quick commercialization. It truly varies by sector. It is not a universal answer for various sectors.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Merci.

[The Vice-Chair, Conservative, Mike Wallace]

Our next questioner is Mr. Trottier again.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you very much.

To Mr. Gupta, ITAC is a very diverse organization, as you've described. It includes some very large organizations—CGI, Rogers, RIM, and OpenText, for example—and also a number of smaller entities.

I am wondering, from a public policy perspective, whether 50 jobs get created in a large company in Canada or 50 jobs get created in a small company, is there a fundamental reason why CICP should steer business towards some of the smaller members of your organization versus steering it towards larger ones? What is the benefit to Canada to having those jobs within small and medium enterprises?

[Karna Gupta]

It's a very good question. I think small and medium businesses truly become the underlying economic engine. For most of the large companies, at the end of the day their new innovation is often through acquisition and building into the new talents as they go to the market, either as a joint bid or something else.

Unless we sow the garden with seeds, which are the small businesses, the economy overall will suffer. We truly believe it's extremely important, from a policy point of view, to have sufficient incentives in place, through CICP and others, where young businesses can grow in all sectors. Once you create a billion-dollar company, in its shadow the other companies will grow and an ecosystem will be formed. If you don't start at the early stage, it's going to be very difficult.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Is there a lack of fairness and transparency, though, where sometimes small and medium businesses, and the smaller IT companies, just aren't able to commercialize their products in the same way? Is it less fair and transparent for them to get a leg-up vis-à-vis their perhaps larger competitors?

[Karna Gupta]

I wouldn't say it's less fair or transparent. I think it's more an issue of comfort zone. Nobody ever gets fired for buying IBM; that was the old saying, right? You always go to your comfort zone, and most buyers tend to go to the comfort zone.

But as you look at the ecosystem today, more and more larger companies for new products and innovative products and new solutions are reaching out to the community and to the ecosystem to bring in the innovations. It is their lifeblood. They need to stay alive in a competitive world. They reach out to the innovative companies.

So the more we see the younger companies and provide that support, I think the better off we will be, as a broader economic engine, as a country.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Okay.

Maybe you could you describe this from a prospective customer's point of view. Let's say they procure a product from a Canadian-based small or medium-sized enterprise, and they see that the Government of Canada has endorsed that product and made that investment.

What are the things they are looking at, and how does that make them more eager to buy that product?