Thank you very much.
By the way, I'm going to do just the second part of the presentation that my colleague, Barry Gander, and I have prepared on the issues related to e-commerce and commercialization. I will talk about the pan-industry study CATA led over the past year, together with a number of industry associations and national and provincial organizations, to try to understand the critical issues concerning commercialization in Canada. I do this in the context of the fact that for a number of years, there has been a lot of wringing of hands and biting off of heads because of how poorly Canada is doing in terms of innovation and the huge innovation gap we are facing. E-commerce is one significant technology in the process of creating a more effective environment for commercialization in Canada.
I'll just go very quickly through these charts. If at any time you need more information, I would be pleased to come here gain, in whatever format, to discuss the issues.
Research is nothing else but the transformation of money into knowledge. The transformation of knowledge is imbedded in products and services and in an understanding of market requirements. The transformation of that knowledge into money is called commercialization. I want to point to the fact that we have been moving for some years from the industrial era, during which the name of the game in most industrial concerns was product control and direct-cost minimization. For that game companies would try to do as much as possible inside the corporation.
We are moving into what I call an integrated knowledge-services economy in which one company may do design services, another company manufacturing, another company marketing, and another company development. The name of the game is collaborative value creation in intelligent communities. Those intelligent communities may be virtual ones, which are globalized, or they may be geographic ones. In parallel, CATA is driving what we call the i-Canada initiative--meaning the intelligent Canada initiative--to try to raise the competitiveness of Canadian communities, community by community, through the use of collaborative ecosystems, ultra-fast broadband, and intelligent services. Collaboration is the key to the game.
The study we carried out was supported by BDC, EDC, the Ontario Ministry of Research and Innovation, and a number of other institutions. The goal was to understand what industry thinks and does and what it plans to do about commercialization effectiveness. We were also hoping that some of the results would be of interest to key policy-makers in terms of policy and programs that work and policy and programs that do not work.
Basically, the continuum of innovation goes from ideas to technology to product. It then goes through some good market channels to customers and then hopefully to satisfied customers. It's only through that process that you create a viable business that by itself can provide the necessary feedback for the economy to grow.
The conclusion of our study—and I'll show you a number of findings here—is that Canada does not suffer from an innovation gap. The innovation gap has received traditional support in terms of science and technology culture, in terms of discovery skills, in terms of labs, and in terms of big “R” for research and small “d” for development. But there has been no “c” for commercialization. What Canada suffers from is a commercialization gap, which requires focus and adequate support. This involves a business and product-service culture, production operations, financial processes, marketing and sales skills, global connectivity, and customer focus. If at the end of a commercialization process there is no money created and no economic value, we cannot talk about real commercialization.
One of the key findings of our study was that about 17% of the Canadian companies that participated--more than 1,000 companies actually responded to the survey--did not have any new products or services in the past five years. Unless these companies are selling iron ore or metal bars that have not changed for the past 50 years, how can they stay competitive? That's a major issue.
Also, a high number of companies have tried but have failed to commercialize their innovations. Other companies, about 56%, have not yet finished their most significant innovation in terms of its commercialization.
The obstacles to commercialization are first, lack of financing. Second, and the most significant, is insufficient marketing effort, uncertain market demand, lack of market knowledge, inappropriate customer targeting, and lack of sales experience and such. Poor collaboration is another thing that is significant in terms of success in commercialization.
Those are the major issues telling us that Canada suffers from such a commercialization gap.
In principle, Canada is very much a nation of small and medium-sized enterprises. More than 99% of companies in Canada are small and medium-sized enterprises with less than 500 people. Actually, 80% of those have less than 50 people.
A complete company, in order to be successful in its competition--and now the competition is global--requires technology and industry expertise in whatever domain it operates. It requires management and operational skills, including marketing, in whatever domain it operates. It requires market access and connectivity in whatever industry sector it operates.
A small company cannot afford to bring all of that expertise inside; in order to succeed, they need to collaborate. Among the issues is Canada are the lack of commercialization expertise, as we have seen before; a weak culture of collaboration; and insufficient funding. Startups in Canada are only getting about 36% of the funding that equivalent or similar kinds of U.S. companies get.
More significantly, we did a study and found out that the average innovation time in Canada, from the time someone gets the idea to the time a product is ready for market, is about 22 months. Surprise, surprise: the commercialization time, that is, the time from when the product is in the market to the time it breaks even, is one and a half times longer.
Also, usually companies are putting all their efforts into the innovation time, and then they find out that they do not have enough room to survive in the commercialization time; they've...[Inaudible--Editor] and are being acquired largely by U.S. businesses that reap the benefits of Canadian innovation.
Anything that can be done to enhance the commercialization effectiveness would be very significant for Canadian industry, and that includes commerce technologies. So we are making a number of recommendations—and the white paper is going to be issued by the end of this week—given the fact that greatest risk factors involve not the science and technology aspects, but the business leadership and the commercialization effectiveness of companies.
First of all, we are making recommendations to industry itself in terms of each company focusing on competitiveness, and strategizing, planning, and structuring their activities according to their business plan, collaborating to conquer, and targeting marketing and sales in advance of getting the product ready.
In terms of recommendations to governments, both federal and provincial, we are making recommendations to create a flexible framework, with accountability and coherent structures for coordinated programs—and we are very much in line with some of what the Jenkins report recommended—to revitalize the Canadian VC industry; to provide direct innovation investment in industry, as well as purchases from industry; and to support Canadian IP protection. And my surprise, there I found out that none of the government programs support Canadians saving their innovations, or protect them from other businesses. We also recommend promoting anchor company relationships, and support for marketing and e-commerce technologies--
