Industry Committee on May 5th, 2015

[Judy Sgro, Liberal, York West, ON]

Thank you very much, Mr. Chair, and to our witnesses, thank you very much for coming. As the chair said, unfortunately you sat here by yourselves last week. We're glad you came back.

That was a very interesting deck. It's quite exciting to see all of the opportunities that are in here. When Mr. Lake mentioned disruptive technologies, I think we all looked at him and said, “Disruptive technologies? Okay.” But it's an amazing deck, full of lots of the exciting opportunities that are out there.

In a recent tour that I had in Waterloo of one of the incubator sites, one of the frustrations they voiced was needing more money, of course, as many of these small projects need to try to get to commercialization, and so on. Industry Canada seems to do a very good job. Clearly, just through listening to the three of you, I can sense your excitement in what you're doing, and you probably want to do more.

How can you help them more to get to the commercialization market and on the issue of patenting and how to get through the patent process? There clearly were lots of success stories there, but the need for more assistance from Industry Canada was made quite clear as well.

I would be interested to hear from any of you what else we can be doing to make sure they have the kind of support that they need and that clearly you want to give.

[Gerard Peets]

I think we'll all have something to say about this. I'll start with something very brief, which you mentioned: patenting.

To me, when somebody says “patents” and “Waterloo” I think about Desire2Learn, which is a great company. It has been a great success story. It had a real existential moment when it was attacked by a patent troll in the United States, which is a very important market, obviously.

You're an engineering student who has a great start-up, and you have this fantastic idea. It's software, so you don't need a huge investment to get going. But what do you know about defending yourself against aggressive patent litigation? Probably not a lot. The question arises: what do you know about where to patent, when to patent, what to patent, and how to design your patent?

One thing that the Canadian Intellectual Property Office is doing is making sure that there is a basic level of awareness of the IP system and the way it works. That is a really important role, which it is playing right now in places such as Waterloo.

[Krista Campbell]

I would just add that there's no one single thing government can do that's the silver bullet. There's an ecosystem and an entire chain for an individual; maybe it's that really brilliant student in a university or college who is going to their tech transfer office. Many universities now have their own incubator accelerator program built in. They build links with the start-up community to think about a healthy VC system so that there is money available for good ideas. The government has been investing heavily in that in recent years.

For the ICT sector, we're seeing that venture capital availability is back to about where it was during the peak years, with that availability of money and the market telling you, “We think you have good idea. Go prove it.” Then the companies start to get a little bit bigger. They have those 5, 10, 15 employees, and they now have a product that's more than just a prototype. How do we ensure that government procurement itself is a useful tool for spurring small businesses to get those first clients, especially the ones that are a good proof of concept? With that, they can go to another country or company and say, “I have something that actually works. The Government of Canada bought it. You should buy it as well.” Then, as they get to the size where they're a going concern, how do we ensure that we have organizations like the Business Development Bank of Canada, which offers loans and has services that help ensure businesses know what it is they need to do to get out there, as well as Export Development Canada, or Foreign Affairs?

There's that whole chain on the business side. My colleague Shannon is very familiar with the R and D side, as well. The whole ecosystem needs to work well together and ensure that there's a hand-off and good information sharing. There are lots of programs and services available. Sometimes it's just a question of ensuring that businesses know where to go.

[Shannon Glenn]

Perhaps I can add to that.

As Krista mentioned, there's no one prescription. It is important to take a step back and look at the whole. The government did that in 2010-11 through the launch of the Jenkins panel, which reviewed programs related to business innovation. Out of that review came a number of recommendations. The government actions that were announced in budgets 2012 and 2013 included the transformation of the National Research Council to make it more business-facing; some changes to the SR and ED credit; some direct support for business, in particular some top-up for the industrial research assistance program; and on the topic of funding for start-ups, a suite of actions called the venture capital action plan. It also put in place a new program called the accelerator and incubator program. As well, it provided more support for some of those connective tissues, which I mentioned previously, in terms of the networks of centres of excellence.

If you're interested, I could delve into the accelerator and incubator program a bit more and also just emphasize a lot of the investment in talent. You need money and you need people if you're in the area of disruptive technology. The government has made regular investments, including, in the most recent budget, in Mitacs, which focuses on internships in business innovation out of post-secondary education.

[The Chair, Conservative, David Sweet]

Thank you very much, Madam Glenn and Ms. Sgro.

Mr. Carmichael, you have six minutes.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

Thank you to our witnesses.

Where to start? I'm sure that's part of your dilemma as you come here and face us: how do we educate these folks in a way that we can leverage up to scale and make it something that's comprehensive yet intelligible?

Mr. Peets, your slide 7 talks about the driverless car as a disruptive technology. I just want to clearly understand this. When you talk about redefining the customer experience, clearly it would do that. By the same token, all automotive companies, I would think, are in a race to ensure they're first to market, or at least they're going to arrive at market with the rest of the club.

From a disruptive perspective, I guess, to my understanding we're looking at a different way of buying, owning, and operating your vehicle in the future, as opposed to something that's going to necessarily put an industry out of work, per se. Am I correct in that?

[Gerard Peets]

I don't know if you want to finish that. I could jump in, but then I'd probably be blabbing on forever.

[John Carmichael, Conservative, Don Valley West, ON]

Okay, I'll keep going for a second.

As we do our study, I want to make sure I focus on where we want to go to truly understand how we can contribute to the development of these types of technologies, particularly, as on slide 8, when you get down to talking about non-silicon-based computer chips. Those are game changers. With quantum computing and what's going to happen there as machines get smaller and the output gets bigger and with all the technologies that are applicable, the output from these types of machines is going to be unbelievable. I look at that kind of comparative as being different from the driverless car. Maybe I'm off base, so I hope you'll straighten me out.

Finally, to follow up on Mr. Lake's questioning, because I'm not sure I heard an answer, where is Canada today relative to the globe? Are there global leaders we can look to who would truly give us some inspiration to understand what the challenges are?

[Gerard Peets]

Okay, there's a lot in there.

We talk about the driverless car, the connecting car, and the autonomous vehicle. You'll hear people talk about how the next big auto companies could potentially be some combination of Apple, Google, and Microsoft and how the service of transportation provided by a car is essentially going to be increasingly defined by automated software.

And you see investments. You see the recent investment by GM. There was a bad disinvestment as well, but the recent investment by GM in its innovation centre in Oshawa for the connected car kind of shows how it values some of the expertise in Ontario for really developing some of that technology. We have QNX, and we have the whole Waterloo cluster, etc.

Clearly if a connected car talks to infrastructure, somebody's going to have to change that infrastructure so that it can talk to the car. A connected car talks to other cars. Well, what's the model going to be? Are they going to speak the same language? A connected car talks to the environment. Is it okay to trust the car's sensors to keep you away from a tree that fell on the road or to tell the difference between a dog and a baby? All these kinds of questions come up with a truly disruptive product like the driverless car.

In terms of the global leaders question, let's be clear. There are leading manufacturing nations. Germany has always been among them, as has the United States certainly. There are places that in a lot of ways define the standards and define the cutting edge almost across the board. In Canada we have the opportunity to figure out the areas in which we have interesting things to build on. It's unlikely that a country Canada's size is going to be a world beater everywhere, but we can absolutely be a world beater in certain niches.

[Shannon Glenn]

I would supplement that a little bit just to emphasize the science and the R and D side and what our strengths are.

Certainly we've been leading the G-7 on R and D performance in terms of spending in the higher education sector. It's also important to then look at some of the outcomes in terms of how we compare.

People are important. We have the highest share of tertiary graduates in the working-age population amongst the OECD. Over the last decade or so, we've been experiencing a net positive migration of world-class researchers within Canada, again on both the basic and the applied sides. We have a very strong scientific output. We have 0.5% of the world's population, yet we publish 4% of the world's peer-reviewed articles and 5% of the most cited ones, so we punch above our weight in terms of influence.

While we have recognized challenges in the area of business innovation, it is important to emphasize that we have pockets of strengths that will overlap in some respects with the map that Gerard was speaking about earlier. The areas of strengths are aerospace, the ICT sector, oil and gas research, and pharmaceuticals. All of those have inroads into disruptive technologies.

[The Chair, Conservative, David Sweet]

Thank you very much, Madam Glenn and Mr. Carmichael.

Now we move to Madam Papillon, for six minutes.

[Annick Papillon, NDP, Québec, QC]

I'm a bit surprised, Mr. Chair. I had no idea it was my turn.

Do you want to go ahead?

[Brian Masse, NDP, Windsor West, ON]

Yes, no worries.

Thank you for your presentation and for being here today.

One of the things I'm kind of curious about is on your slide 4 there. How much money right now has been allocated and how much has been spent with regard to your four programs of incubators, direct support programs, demonstration centres, and access to capital? Can you provide maybe a specific example of one project that you've been involved in and where it has either led to or is leading to at this point in time?

[Gerard Peets]

Shannon, I wonder if you're best placed to sort of.... We may have to look this up, and it may take a second.

[Brian Masse, NDP, Windsor West, ON]

Okay. You can maybe get back to the committee later about the overall funding.

[Gerard Peets]

Maybe perhaps in terms of all the numbers, because I don't know if I have that on one page. I certainly don't have it upstairs.

[Brian Masse, NDP, Windsor West, ON]

Yes, and I'm curious as well as to how we rank against other countries in that process. That's why I would be interested to know specifically how much we're providing access to capital, what program it's coming through, and what's available.

One of the things that's interesting about the subject is that some would argue that, for example, if you're already in the private sector and you've invested money in research and development and you bring a product out there, then somebody else comes along with an innovation, but that innovation gets government support for those programs, and it affects your bottom line.... Have you had to deal with those situations at all? Has it come out that participating in a new innovation has led to a company complaining or raising concerns that they see it as unfair competition?

[Gerard Peets]

The program that I have experience with is the advanced manufacturing fund. This is a program in Ontario that's administered by FedDev Ontario, and Industry Canada participates with a review of projects.

One of the things that we try to look for is an assessment of the market, just to kind of understand who the competitors are and what the opportunities are. I certainly haven't seen the situation that you're describing.

I think what we really try to do is support the companies that come to us, first of all, and where they really do meet that threshold of innovation. They can demonstrate that they're world leading, that they're world class, that they really do have that commitment to generating economic spillovers in the community and working with suppliers and with universities, etc., and that they do have, in this particular program, that relevance to the market where there's somebody ready to buy their stuff.

[Brian Masse, NDP, Windsor West, ON]

All right. Yes.

It would be interesting if you had two competitors coming to you at the same time for innovation. What would happen then in terms of support, whether you're picking winners or losers at that point in time?

I want to move to the health care sector in terms of our process, because there are wonderful health care initiatives. They are everything from monitoring how much you walk or sleep, to improvements, and there are all kinds of different things out there.

When projects come through that would obviously assist even some of our health care, do you have comparable people to work with in different departments to find out the real benefits? Say, for example, something comes in health care improvements, do you have somebody over in Health Canada to help with the evaluation and rollout of potential supports and programs?

[Gerard Peets]

One of the things that we do have, which is extremely valuable.... We're policy people, or I don't know actually. I think we're all kind of like the economics, political science types of folks, but we do have in the portfolio the NRC, for example, people absolutely full of expertise. We certainly draw on them regularly to really help us understand some of that technology.

We certainly have other departments: Health Canada, Natural Resources Canada for matters relating to energy and energy efficiency, and a number of other people around town. We do keep communities of practice. We try to make sure that there is that collaborative interplay between federal officials.

[Shannon Glenn]

Small businesses, and businesses in general, will want to have access to that advice themselves as well, so using your health focus. They regularly go to the NRC's industrial research assistance program, not only for funding but for advice. There they can get plugged into advice in the health sector. In particular, the NRC has an important research program in the area of biologics, which is disruptive technology focused on large molecule medicines. Beyond that I wouldn't be able to describe it more.

What I could do is briefly circle back to your original question in terms of the amount of support for business. There was a breakdown in the recent budget in terms of how the $13 billion has been broken down.

It's broken down in the areas of research, infrastructure, and talent, which I won't list. In the category of business innovation there was $3.7 billion with respect to support for commercialization in sectors, such as manufacturing and natural resources, $912 million related to the NRC directly, $805 million to support the applications by industry of research supported by the granting councils—through a number of the partnership programs that I referenced earlier—and $422 million to increase access to expertise in capital through the venture capital action plan that I had mentioned previously.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Glenn and Mr. Masse.

Now on to Mr. Daniel, for six minutes.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you, Chair, and thank you, folks, for being here.

Just listening to all the conversation that's going on, this sort of disruptive technology seems to me to fall into three categories: the base one like the nanotechnology that can be applicable in lots of places, specific products that are developing that will disrupt, and processes. That seems to be a summary of what's going on.

How do we connect these with the amount of research that's going on, and how do we place the research funding so that some of these technologies can be significantly developed?

[Gerard Peets]

I'll offer a brief remark and then ask my colleagues if they want to jump in.

One of the things about disruptive technology is that there is research that's going on. In some cases a company may have an explicit intention to conduct incremental research to marginally improve a product, or to not disrupt things. In some cases they may, but I think in many cases a lot of the policy tools that are available to help research and innovation in technology are going to help both kinds of companies.

We've provided a sense of some of the tools we do have in place, like the networks of centres of excellence, accelerators and incubators, and industrial support programs such as the advanced manufacturing fund. I think these things all have the potential to help a company with the ambition to drive something forward.

[Krista Campbell]

We've talked a little about some of the enabling technology that needs to be in place, like an advanced research network. It's important to have the pipes in, too. Government has a role and in all OECD countries governments fund a similar type of network that facilitates the research getting done.

There are important partnerships that happen between government and business on specific types of projects that might not be commercial, but definitely have commercial applications at a certain point.

For example, within Industry Canada one of the things we're responsible for is spectrum. Spectrum is foundational to virtually everything we're talking about here because people are addicted to their mobiles and all data is moving across your mobile. Spectrum is one of the ways you can transmit data. How do we use it efficiently and effectively because it's a finite resource?

We have within the portfolio, CRC, the Communications Research Centre, which works to do research itself. It then works to align with companies to say, “This is the type of research we're doing, it's pre-commercial or it will have application at some point, and we would like to work with businesses to better understand how you might see mobile, for example, in your business plan five years from now.” We're thinking about the spectrum, and if we come together, and we have the science, and we have the business application then we can bring that together. Those kinds of relationships are very important.