Industry Committee on May 5th, 2015

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen.

Good morning everyone.

Welcome to the forty-third meeting of the Standing Committee on Industry, Science and Technology.

The witnesses before us today have been very stand-up and patient. They were actually here last time and democracy meant that they stayed in our committee meeting room alone and we didn't come here.

We want to thank you very much for your second visit to us.

It looks so far as though you're actually going to be able to speak to us this time, so rather than me delaying it any further and getting into dangerous territory, let me introduce who is in front of us.

We have Gerard Peets, who is the director general of the manufacturing and life sciences branch of Industry. Krista Campbell is the director general of the information and communications technologies branch, and Shannon Glenn, the director general of the policy branch, science and innovation sector.

I didn't get an opportunity to ask you whether all of you will have individual opening remarks. It's just one of you?

Then please begin.

[Gerard Peets, Director General, Manufacturing and Life Sciences Branch, Industry Sector, Department of Industry]

It's actually a pleasure to be able to come here the second time, because the first time we were at the other building, and for us it's always fun to be in one of these rooms, which really is something.

Good morning, Mr. Chair and members of the committee. Thank you for your invitation.

Thank you very much for the introductions.

We have prepared a deck, which I hope you all have. I'll just give you indications as to which slide I'm speaking to.

There are a lot of different ways to approach the subject of disruptive technology. As you begin on your study, I think it's probably useful for us to try to give you context on how we at Industry Canada approach the issue and look at the topic. My presentation will try to cover three main points.

First, new and disruptive technologies obviously create new challenges and opportunities for firms and for industries. Second, the pace of technological change is something that is increasing. It's driven by the pervasive penetration of information and communications technologies. Finally, in the industry portfolio as well as throughout the government, we have a lot of roles that are aimed at spurring technological growth and supporting the competitiveness of Canadian business.

For a staring point, we care about disruptive technologies because they transforms markets. They transform business models and change supply chains and entire industries. But what are disruptive technologies? There is really no single definition. We look sometimes to four key traits. They have speed. We're talking about rapid technological change. They have global reach. They have economic impacts that are significant and unexpected, and they have societal impacts that are often significant and unexpected.

Within these broad parameters, different analysts take very different views as to which technologies should be focused on. They all disagree, but what they don't disagree on is that disruptive technologies have huge economic impact. McKinsey and Company estimates that by 2025, the economic impact of the “Internet of Things” will be between $1.4 trillion and $6.2 trillion. That's a wide range, but both numbers are huge.

On slide three you'll see a selection of technologies as laid out by McKinsey, the World Economic Forum, MIT, and Gartner. The diversity of these things—additive manufacturing, brain mapping, advanced robotics, and agricultural drones—can really be difficult to structure one's thinking around.

Slide four gives you a sense of the lens we use at Industry Canada to try to do that. We find it useful to break disruptive technologies into three groups: platforms, processes, and products. I'll talk about each of these in the next couple of slides.

But first, around the outside of the frame you'll see references to a number of areas of government support and policy that are really important to the development and adoption of technologies. In the centre, we try to emphasize the importance of technological convergence, how technologies are interdependent. They bleed into one another and across traditional scientific disciplines and across different business applications.

Looking at slide five, I'll talk briefly about platform technologies.

Platform technologies, like nanotechnology, for example, are foundations for the development of commercial products and processes. These technologies are often very closely tied to, and supported by, major R and D investments in infrastructure.

Turning to slide 6, we have process technologies.

Process technologies, like additive manufacturing, which is essentially industrial 3-D printing, use technologies in new ways to change how a product is made.

On slide 7 is product technologies. Disruptive product technologies are things like the driverless car, which can redefine the customer experience and create entirely new markets. Disruptive products can quickly create new industry leaders and put others, including well-established incumbents, out of business.

I wanted to make the point that it's really the pervasive impact of information and communications technologies that's at the heart of technological convergence and this rapid pace of technological development that we're seeing today. A great example can be seen in the life sciences area. Bioinformatics is the use of computers to digitally process massive amounts of biological data to better understand biological systems. Bioinformatic modelling can produce insights that can lead to the development of new drugs, vaccines, and diagnostics. All of this in a computer.

It almost goes without saying that technologies have implications for competitiveness, but I said it anyway. Canada is considered an advanced economy in part on the basis of its capabilities in research and development and its successful track record of commercialization in many industries.

At the firm level, companies that thrive get ahead of trends and move away from incumbent technologies before they're overtaken. Kodak is probably the most commonly cited example of a company that didn't do this. It didn't see the advent of digital imaging and the decline of chemical- based photography. Its market cap in 1997 was $30 billion U.S., and it was completely wiped out by 2012.

On the other hand, IBM is probably the most frequently cited example of a company that's the model of reinvention. It sold off its PC and server hardware divisions to put its sole focus on cloud computing and big data analytics.

Reinvention happens at the firm level, but it also happens beyond the individual company. One thing about disruptive technology is that it has serious implications for the nature of work. Increasingly the pace of new technologies coming onto the market really does put the premium on flexibility as a core workforce competency, and it creates an advantage for workers who have a solid footing in the kinds of emerging skill sets that are required.

Finally at the broad social level, changing technology can also give rise to questions of social acceptance. These in turn can give governments reason to re-examine frameworks including norms, standards, and regulations.

What I find interesting is that when we think about the reach of disruptive technologies in the Canadian economy we're really talking about something that has the potential to touch communities and businesses across the country in very tangible ways. Disruptive technologies aren't just about the high-tech sectors like aerospace, ICT, or life sciences. They have the ability to transform business in any sector.

I'll use nanotechnology to illustrate the point.

Nanotechnology in Vancouver is helping reduce the amount of costly platinum that goes into making fuel cell stacks. Getting the cost down is one of the key measures along with infrastructure to deploying this kind of technology on a large scale. In Quebec, nanotechnology is helping develop new lightweight, stronger materials, going into things like spacesuits and making them flexible, more resistant to damage, and embedding them with sensors. Food processing, which people sometimes don't think about as advanced manufacturing, has a footprint across the country and nanotechnology is active there in areas like developing food packaging to kill bacteria and extend product life.

Industry Canada and our federal partners help disruptive technologies move to market through a variety of mechanisms, including scientific research; research labs and infrastructure; direct and indirect support to industry for R and D, commercialization and innovation; and specific partnerships targeting cutting-edge areas such as communication technologies and genomics. We engage with industry and other stakeholders on an ongoing basis across regions and sectors.

Finally, I thought it might be useful to give you a sense of the questions I think would be interesting to pose to witnesses and to consider in your study.

First, how do Canadian companies see disruptive technologies coming down the pike and impacting their business? Second, how have industry, governments, and academia been successfully partnering to advance innovation in disruptive technology? Third, where are Canada's technology development hotbeds? Fourth, what impacts will disruptive technologies have on jobs and work? Last, how do Canada's disruptive technology strengths line up against global trends and future commercialization opportunities?

With that, I'll end my remarks. Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Peets.

It's not often that we have a witness who provides not only testimony but also the questions. I'm certain my colleagues will be very motivated in that regard.

Colleagues, I think we'll settle on six minutes a piece across the board. We are going to talk about some business afterwards. We also have the motion we're going to deal with just before we go in camera.

With that in mind, Mr. Lake, you have six minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair. Thank you, Gerard, and other witnesses for being here today.

It's interesting; I took some notes and then your questions at the end summarized a bit where I was going to go with my questioning.

The first question you asked that jumps out at me is: where are Canada's technology development hotbeds? But I'll add something to that. It seems we have them all across the country. In my conversations, it often seems that folks are doing amazing things but are not necessarily aware of what's going on in other parts of the country.

“Where are they?” would be a good question, but how are they connected? What's being done to connect them and to maximize the promising practices in each area of the country so that others can take advantage of them without reinventing the wheel?

[Gerard Peets]

Perhaps I'll start and then maybe I'll turn to my colleagues to supplement.

It's a tough one because I can name a few things that are really impressive to me across the country, and I'll be forgetting people, but I'll still give you a sense of some of the areas I think are really neat.

One of them is out west. In Alberta, there are some incredible things going on with oil sands research, and groups like COSIA are leading that with the oil sands players. Vancouver is pretty much the world centre for fuel cell technology development, as evidenced by companies like Daimler, Ford, and others who are located there.

Everyone always mentions Waterloo because Waterloo is an incredible place—and Krista may want to jump in on that—in terms of an ICT hub that overlaps with some really interesting things going on in the life sciences, for example, in the Mississauga and related area. It's just a very dynamic and compelling place.

Montreal and Toronto have substantial world-class aerospace sectors. Aerospace is an area where disruptive technology tends to get adopted at a stately pace because of the need to make sure everything has flight heritage and is safe. But it's also a leading innovative sector.

Life sciences is an area where we have incredible capacity in Vancouver, in Montreal, in Quebec City, and in Toronto. There are also pockets of excellent capabilities elsewhere, such as Prince Edward Island, which has a fantastic bio cluster.

I left out a bunch of people, but those are some really interesting areas.

[Krista Campbell, Director General, Information and Communications Technologies Branch, Department of Industry]

If I could just add to that, maybe a very literal answer to how some of these things are connected. If you think about something like big data, which is a really new and innovative disruptive way that businesses can be evaluating massive amounts of information, they're using it in ways, for example, to customize the services that you get. So when you go to Amazon or Google and do your search, there's a computer system behind that to help customize it, based on what your past preferences have been. Big data analytics is really becoming one of the fields in Canada where we have strength.

There are very physical ways that some of that information is connected in terms of our digital research infrastructure and the actual pipes that we have in Canada to help move information from, say, a research institution to a business, or to enable a business to get access to the cloud so they're able to use some of these technologies. If you look at something like an organization called CANARIE, which is Canada's research infrastructure backbone, it's the actual physical pipes. That's really important to understand: where the strengths are from a networking infrastructure perspective.

If you think about the ecosystem broadly, and again I'll stay with big data, something that IBM is doing a considerable amount with, CANARIE itself is creating a test bed that allows small businesses—one or two people creating their software in their basement, which could be absolutely anywhere across the country—to go online and get access to the cloud at free or very reasonable resources. It creates a community of individuals who can be located anywhere across the country, who then have access to other researchers in similar areas such as big data.

The ecosystem to support also includes things like incubators and accelerators. Toronto has a very interesting accelerator that focuses specifically on big data, called OneEleven. As you think about what the supports are for these types of networks, those kinds of connections and specialization areas are really important to understand. They underpin some of the work that goes on in universities and colleges, which also helps to create some of these communities and networks so that individuals who are, say, working on something like software can understand and build off the work that others are doing.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I have one more minute, okay. Good luck with that. I could just sit here and ask you guys questions all day long, I think.

When you look at other countries, it seems as if one of the probable disadvantages we have, when you think about incubators and the strength of an incubator system, is the sheer size of our country. Other smaller countries can have a greater concentration of organizations in the same area, and even different incubators in different parts of a smaller country are closer together and probably have more opportunity to physically connect with each other, which obviously isn't maybe as important in this day and age as it used to be, but I think being able to have those face-to-face discussions is still fairly important.

What countries are doing it best? Where does the world look when they're looking for countries that are really successful at this?

[Gerard Peets]

Maybe just to address the first point.... Whether it's sometimes beneficial to have that geographical concentration is what I'm reading into the point that you raised. We think it is useful in many respects to have that economic clustering. I think when you look at it, the performance of firms, of innovation systems, people who are located in a cluster really do benefit from things like lateral movement of people, the development of expertise for the financial system to serve their needs, the development of partnership opportunities, even proximity to competitors. All these things tend to increase the performance of innovative firms. That's not to say that you can't do it without being located in a cluster, because we have all kinds of examples of where that's worked.

[The Chair, Conservative, David Sweet]

Sorry, we're way over time.

Ms. Nash for six minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

First of all, thank you so much for your presentation. It was very interesting. I think this could be a really fruitful area for us to take a look at as the industry committee, because it's always about trying to be ahead of the curve, as you rightly pointed out in your presentation. What was the Gretzky thing, skate to where the puck's going to be? Hopefully that's what we're encouraging our private sector to do.

It seems to me that while connecting innovative technology with the private sector is obviously key to developing this and improving our economy, that basic investment in pure science precedes all of that, so you are looking into those big questions. The private sector was not going to send a man to the moon until after government had done it.

Can you talk a bit about the link between government investment in pure science and translating innovation to the private sector?

[Gerard Peets]

I'll make a brief comment and then pass it to my colleague, Shannon Glenn.

The comment I would start with is that a lot of these things we think of as platform technology—areas of technology where we're not exactly sure where the product or process is going to emerge, or when, or in what vertical part of business—are the things that are most tightly linked with some of the investments that are made in science and technology infrastructure.

[Shannon Glenn, Director General, Policy Branch, Science and Innovation Sector, Department of Industry]

If I can add to that, the linkage that you highlighted is a key one in terms of translating investments in basic and applied research into the commercial world. Since 2006 the government provided more than $13 billion in new resources for basic and applied research across the spectrum, and for other key elements that are important in that translation, specifically talent development and research infrastructure questions such as the digital research infrastructure Krista highlighted.

On an annual basis, the spending is $10.9 billion, including research performed in-house and also $3.4 billion on foregone revenues in terms of the SR and ED tax credits.

To focus a little more on the roles of the granting agencies, for instance, in the area of disruptive technology, it is important to focus not only on basic research but also on applied research to increase the economic impact of the research they support, including for disruptive technologies. They've been increasingly putting an emphasis on partnerships and how they structure their granting programs between the post-secondary researchers and the companies. It is very important and they do continue the emphasis on basic research because that's an important source of future disruptive technologies. It is also an important area for training the next generation.

If I can do a parentheses in the recent announcement of the Thirty Meter Telescope, that's an area where one can classify it as basic research, but it's an important training ground for big data, which has an application way beyond astronomy to a number of disruptive technologies. That's an example of talent.

Touching a little on the question of connectedness, which has been raised now in a few areas, the granting councils also have a number of programs that focus on multidisciplinary and multisectoral partnerships. There's the business-led networks of centres of excellence program and the centres of excellence for commercialization and research program.

The other area I would touch upon is the National Research Council, which has a number of disruptive technology research programs and a strong emphasis on partnering with business. I can delve into that further if you'd like.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

In the short time that remains, I'm not a scientist, so forgive me if this question doesn't fit in this area, but people have written me about the whole area of artificial intelligence. It's clearly a disruptive technology because it's transforming how products are produced and how services even are delivered.

I'm wondering if one of you could touch on that and where it fits in the framework that you have described for disruptive technology.

[Gerard Peets]

I'll let Krista talk about it, but to answer your first question, to me it's a platform.

It's like a series of competencies that can be used to develop new products, like products that can think, and to support the future of production. The future of production in terms of manufacturing is going to be about real-time decisions made by systems that react to feedback from the supply chain and react to where elements, supplies, and inputs are that are being communicated in real time by a system.

AI is a platform that creates new products and influences the way process is developed.

[Krista Campbell]

Let me add briefly that Canada has a number of companies that work in artificial intelligence. We've referenced the idea of big data. Maybe I'll come back to that very quickly for one moment.

With the amount of information we are now able to collect from a variety of sensors, we can transmit large volumes of data, put them in databases that are now much more powerful, apply software to them to do data mining, and then create machines that can recognize the patterns they see in the types of information being provided; and, to go one step further, we can create an algorithm that will give you a set of decision functions that you as a machine will go through and come up with an answer that shows thinking or judgment, and be able to manipulate that data—which the machine itself is able to do to demonstrate that it is learning and is applying judgment.

We have companies in Canada that, for example, can help with learning for, say, pilot training to better instruct the pilot on how to respond to changes in weather and the patterns as they're learning to fly a plane. The machine is able to help them anticipate better some of the influences that could happen, based on the data they are evaluating.

[The Chair, Conservative, David Sweet]

Thanks, Ms. Campbell. We had to go way over on that to try to give you some kind of modicum of an answer.

We go now to Ms. Gallant, for six minutes, please.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

What I'd like to do is go to page 10, to the map of Canada on which you have itemized select Canadian industrial activities for different parts of the country. In the time we have remaining, just mention the types of technologies—not a company or anything, or the specifics, but the types of disruptive technology—that are impacting those various industries.

Thank you.

[Gerard Peets]

Let me highlight a couple of examples. One is in the area of genomics. Modern medical research, now that we've mapped the genome, is based on looking at those genes, looking at the mechanisms they trigger in terms of the proteins they create and how those proteins interact with the body. But one interesting thing is that research tends to clump around a very small number of genes, because it tends to be incremental.

What's going on in Toronto with the Structural Genomics Consortium is an attempt to bring companies together in an open innovation framework to go into uncharted territory to pioneer those others areas of the genome. This is the kind of thing that, when it identifies promising areas, can open up entirely new avenues of medicine.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

With respect to genome innovation, give an example of the way this research is changing the way medicine is practised in Canada.

[Gerard Peets]

The way medicine is practised in Canada is a little bit down the road from where I tend to focus when I'm thinking about disruptive technology. That would be more in the area of health technology. I'm not sure I have an example ready to hand, but the area of drug development is really designed to impact health care 10 or 15 years from now.

Another example is regenerative medicine, in which, if you can use stem cell therapy to recreate tissue, you can eliminate disease. For example, in type 1 diabetes, if you can recreate the tissue that's not working in the pancreas, you don't have to treat it anymore. So the entire market for the tools and the drugs that have gone into treating that disease has now become replaced with a new therapy that will have its own supply chain, that will have its own expertise base.

If that kind of technology is developed, say, in Toronto or in Vancouver, then you can expect that to be an economic opportunity, but far down the road.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Is your department keeping track of a timeline of when these disruptive technologies are anticipated to start impacting the way things are done in their various sectors, so that we have an idea of how we should be preparing policies in order to provide, most importantly, an environment towards which future job seekers—and current career people as well, who will have to transition or upgrade their knowledge—can be directed?

Is the industry department in your sector signalling to other departments that this is coming down the pike and that we had better do something to make sure we have the people with those skills in place 5, 10, or 15 years from now, so that we can benefit from this new technology and ensure that we keep our population employed as much as possible?

[Gerard Peets]

That's absolutely the goal. The goal is to watch the signs, to try to take signals from business, because business is much closer to both the technology and the market than we are. It's a continual process. It's not something wherein we figure it out and then go down the path according to a pre-established map, because we really don't know the specifics of what's going to happen.

Some things, though—flexibility.... I talked about it in the context of the workforce. Because things change, flexibility is a great core competency for the workforce. It's also a great core competency for us as analysts and for decision-makers, to have the ability to read, react, and align resources behind wherever it needs to go.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

You provide the analysis of where you see it going forward, and then are you involved in some way, or does somebody take it from you to consult with, as you said, the business community to let them know what is coming down the pipe of which they may not yet have been aware in their particular sector, so that the consultation process, perhaps with their local community college or their university, can commence?

[Gerard Peets]

Let me give you one example of how we do that as a government in partnership with the Canadian Manufacturers and Exporters. They have a program, called the SMART program, that helps SMEs in Ontario—this is with FedDev Ontario—invest in technologies. Part of the bigger partnership is to figure out what technology small firms should be investing in. It has been advanced by Deloitte recently, in a study that was published last week, that many companies in Canada—they surveyed 700, and a third of them—don't really know, aren't really prepared.

We can do things such as partner with people putting on a conference called RAPID, which exposes companies to additive manufacturing—3D printing and what promise that technology holds. We can partner with a CME. But once it gets to us, we're really reflecting what we've seen. It's probably after the thing has already started happening, if you know what I mean. It's pretty unlikely that somebody in my position is going to be able to say, nobody knows this yet, but this is where we need to go in terms of a specific technology.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Peets. Thank you, Madam Gallant.

Now we'll go on to Ms. Sgro for six minutes, please.