Industry Committee on May 7th, 2015

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

Thank you, Chair.

Thank you, witnesses, for being here.

It's obviously been quite an interesting discussion.

My thoughts are that everything we've talked about so far are things that have already occurred. Looking forward into the future, what criteria do you think you should be looking at in terms of what the next generation of disruptive technologies would be, and how are they going to impact the research funding that we're putting into all these universities?

That's open to each of you.

[Dr. Ted Hewitt]

I think they'll have slightly different answers than mine, because I want to talk a bit more about process.

The kinds of things that I was talking about—design, the content piece, the things that really make technologies sing, that create the disruptions—quite often are not regarded in this society as research per se. It's quite interesting. If you think about design, I have this iPhone. It's my own iPhone, and it makes a great flashlight until you start to get into it and see what I have in there. I have books, movies, music, and a lot of cultural products and content. That all was added to the element to kind of make it sing.

Some of the research they do, and particularly within companies, for example, in marketing and international markets and design, quite often, is not recognized as research per se. I can bet you it's not counted as an investment in research by our public accounts.

I know for example—and this is without comment—that our industrial tax credit system does not count research that would be done for business planning or marketing or content or design as an eligible expense for a tax credit. I said I would say this without comment, so I would just suggest that we need to start thinking a lot more about these elements in terms of managing and promoting disruptive technologies, or creating disruptive technologies from technologies that one might not consider so, as viable elements of the research process, value them, fund them, support them, and value them in industry. I think that's going to take us down the road.

[Kevin Fitzgibbons]

Mr. Chairman, I know you can't plead the fifth amendment in a place like this, but I am going to say something that may be unpopular with some of the scientific community.

I think you're asking a very interesting question. My strong feeling, and that of others, is that the disruption is going to happen at the interface of disciplines as opposed to hyper-specialization in one specific discipline in itself.

I can give you an example of where it gets interesting. The big enabler for this is not just the computational biology, as you would call it. The application of computing into the biological processes has the potential for change and understanding to be accelerated at a pace that is really quite fantastic, and the importance for us is being able to have the processes in play that allow for that kind of interaction, where the really exciting unthought-of areas can explain themselves.

I think from our point of view, we want to reinforce strong basic science in the fields that they're experts in. I think also what we need to do is challenge that community to branch out, so if you're a physicist or a chemist, to work in other disciplines. The social sciences also apply to that as well. Certainly, there are debates in the community in that regard, but I do think it's something that probably is a bit of a game-changer in its own right.

[Dr. Danial Wayner]

I'll give maybe a different perspective. In the information I handed out there was a deck and there was a quadrant diagram with a bunch of circles on it. I'm not going to go through that, but I will just say that the horizontal axis in this, which really is trying to describe how I view the innovation landscape in Canada and around the world, has two extremes. One is the discovery end, where we would often find university research, and the other is the problem end. I think what we really need is to be able to get our heads around what the key problems are that we need to solve as Canadians, and which are the ones that have potentially technological solutions and for which we actually have no known solution yet.

We have an academic community that needs to stay focused in my view on the discovery side and we can't expect that every science or engineering problem that we tackle has to have a direct line to a problem to be solved, but we need that hopper of creative ideas so that we can actually start to connect the dots.

I am going to ask Dr. Stewart to talk a little about how we see the whole world of quantum information, for example, from the academic side compared to how we're looking at it from the problem side and what we're doing to try to bring those two things together.

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

Very briefly, because I have one more question.

[Dr. Duncan Stewart, General Manager, Security and Disruptive Technologies, National Research Council of Canada]

I'm a kid from Kingston. I spent 15 years in Silicon Valley and I came back to Canada. I also don't see this distinction between basic and applied.

To speak to Kevin's comments, I worked in a group that combined material science, computer science, electrical engineering, and physics to try to invent some new computer pieces at Hewlett-Packard, new components. But the key idea there is that it's only when you join together that scientific frontier work with the intention of delivering something, a new technology at the frontier of technology, that you can make progress.

In the case of quantum information, Canada has invested perhaps more than $300 million in generating scientific leadership and the question is whether we at a tipping point where this will go into a disruptive technology landslide in quantum technology. Waterloo is certainly one of the centres, so my goal is to partner, collaborate, in a hockey team, multiple passes of the puck back and forth. In the group in which I had the pleasure to participate in California, we produced scientific papers and patents at the same time.

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

Okay. I'm going to cut you off because I have one more question.

One of my questions is whether we are missing the boat a little here, because the common denominator seems to be money. All of these disruptive technologies will change and change the value of money to everybody, etc., but there are technologies that exist now that can be applied that could save us billions of dollars. Are we actually missing the boat there?

My example is fairly simple. If you take an insulin pump, it's quite expensive. It's great, but if you supplied everybody in Canada who is insulin dependent with an insulin pump, we could probably save billions in kidney failures and therefore kidney dialysis. I'm just using that as an example, but there have to be other existing technologies. What's your opinion?

[The Chair, Conservative, David Sweet]

You have 20 seconds.

[Dr. Danial Wayner]

Okay.

From my perspective there's no question that we have to draw on the existing capabilities. In my view, you're asking not so much a technology question as a policy question, and I'm not really qualified to respond to that.

But from the perspective that there are technologies that currently exist and combinations of existing technologies that require a high level of ingenuity in order to be able to extract even more value from them, absolutely, we do that and we continue to do that. The R and D that we do is quite often to push the boundaries of the limitations of the technology that we know.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Wayner.

The floor now goes to Ms. Papillon, for eight minutes.

[Annick Papillon, NDP, Québec, QC]

Thank you, Mr. Chair.

Mr. Hewitt, I was listening to you earlier and I fully understood your comments about the gap between invention and innovation. There is certainly something to be said about the importance of training and of resources, as well as the importance of having a strategy on how our resources must be used.

I am not sure if Canada really has the best leaders to do that. Certainly, we are missing something. Let me read to you from an article in the Globe and Mail. It reads:

Canada is falling behind global leaders in R&D....

Let me quote the Globe and Mail again.

Canada is the only developed country with an intellectual property deficit—meaning we spend more to acquire other peoples’ technology than the world buys from us—

That's maybe a point.

And most disappointingly, the private sector continues to underinvest, in spite of repeated warnings about the consequences. Business spending on R&D stands at 0.88 per cent of GDP, near the bottom among OECD countries.

I would like to hear more from you about this, because it seems there’s no obvious sense of urgency. Maybe that's the problem here. That's probably something we should do.

I'll give you an example from the article:

Taiwan, which spent half of what Canada did in 2002, now tops this country by nearly $3-billion a year.

There's probably something that should be done about this.

[Dr. Ted Hewitt]

I agree with you. That said, our organization funds research, so I am not sure we have the solution.

We encourage partnerships with industry. There are also internships and training under our Mitacs partnerships. But we do not control the activities of industries and companies.

However, in terms of training, I feel that we could do a little more to encourage that kind of entrepreneurship and that kind of commitment from students and researchers. What really counts, actually, is collaboration between sectors.

[Kevin Fitzgibbons]

We do recognize that there is a innovation gap. In Canada, the gap is a major one, to such an extent that the government established the Jenkins panel to address the issue. Your committee rightly refers to its report in your work on the issue.

In its report, the panel indicated that work must be done in various areas. First, the tax system and the way it is administered. Second, access must be much more closely linked to the market, an idea which will, in a way, be reflected by transforming the NRC. For NSERC, this means, without losing the richness of purely scientific inquiry, creating links to the programs we are conducting with industry.

For example, in 2009, the number of industrial partners with projects funded by NSERC was 1,500 companies per year. Five years later, that number climbed to 3,000 companies per year. We have put a lot of effort into adjusting our programming to create those funds.

In a way, I feel that you have touched upon the subject that is critical in this area, the labour force and the human resources. Those changes are made in people's minds. We are trying to do it more and more. With the emergence of Mitacs as—

[Annick Papillon, NDP, Québec, QC]

Mr. Fitzgibbons, let's stay very specific and talk about investments in training. Do you really have anything there? This is not just about encouraging people to become entrepreneurs, and so forth. We need really concrete solutions.

[Kevin Fitzgibbons]

We organize project-based internships with companies. They are often short-term, but some are for a longer term. More and more, we are seeing the emergence of new organizations like Mitacs. That, specifically, is the main way that university internships with companies are funded.

[Annick Papillon, NDP, Québec, QC]

An important point needs to be emphasized here.

Since 2011, the government has wanted to encourage companies to invest in research and development. We were just talking about how Canadian companies are underperforming in R and D. We have to admit that the results are not yet up to snuff. According to Statistics Canada, R and D investments by companies went from $16.5 billion in 2006 to $15.5 billion in 2014. When a government invests in applied research because its private sector is not doing so enough, it seems that two options arise. It either stimulates R and D or the private sector decides to spend as little as possible on it and to take advantage of government subsidies so that its own innovation costs are as low as possible.

In the light of those figures, therefore, would this not be the time to question the strategy once more? Would it let Canada be competitive enough internationally and also with the United States, our closest neighbour?

[Kevin Fitzgibbons]

I am not sure whether I want to monopolize this discussion or hand things over to my colleague Danial.

I will let Danial make a comment and I will come back to the topic later.

[Dr. Danial Wayner]

Thank you, Kevin.

I fully agree with what my colleagues have said previously.

The challenge of BERD is an interesting one because it's something that's been on our radar for many years. What will it take? It is partly a business culture challenge and partly a capacity challenge. From that perspective the transformation of NRC has been critical to be able to focus our expertise, resources, and capabilities on the needs of industry.

One of the opportunities there and one of the outcomes that we would see is that by helping industry in different ways.... When we're working with them on very short-term problems, they pay the entire cost of research. We're not doing it for nothing. By working with them and helping them solve problems it helps to build into their organizations a stronger culture of why R and D is important to advance the innovation agenda in their firms. We see at least a few examples of increased internal spending on R and D. We know, for example, generally speaking, for every dollar that a company would invest to contract R and D, they would spend $1 to $4 within their organizations on R and D.

[The Chair, Conservative, David Sweet]

Thank you very much, Dr. Wayner.

I'm sorry. Time is always our enemy here.

We'll move on to Mr. Warawa for eight minutes.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Mr. Chair.

Thank you to the witnesses for being here.

I think of the old adage “necessity is the mother of invention”. We may need to come up with a new adage because it's not often necessity. It's dreaming and research and being surprised at what we find and how these new technologies are then applied.

I'm not sure who touched on the lag. I think it was Dr. Wayner. The lag, in the examples you used, was a 20-year pause from when the technology was found to when we had an application. Mr. Carmichael talked about how we used to make clay models of cars and now it's all done digitally. Are we seeing generally a reduced lag time from discovery to commercial application?

[Dr. Danial Wayner]

My experience is, yes, we're seeing the cycle shortening.

The shortening of the cycle may well be driven by the technologies, for example, moving from clay models to being able to do digital CAD, sometimes in just hours. Also, from our deeper understanding of global markets and global market opportunities, we're very much more a global enterprise from the industry perspective than we were 50 years ago. That knowledge also drives the competitive cycle. The lag is shrinking. It's really important to understand that the lag between discovering a scientific principle and then understanding how to embody it into a technology is still longer than our ability to take a nascent technology and drive it into the marketplace. That part is getting faster. I think the time between discovery and understanding the technological implications is still longer.

[Mark Warawa, Conservative, Langley, BC]

In the field of science the collaboration that you referred to occurs within our own country but there's also international collaboration within the scientific field. How does Canada become leaders in the commercialization of those new technologies instead of being followers in using that technology?

[Kevin Fitzgibbons]

This is one of my pet pieces.

First and foremost, Canada by necessity does collaborate quite extensively internationally, at least at the academic level. It's partly because of the size of our country. It's natural recognizing that for most of that knowledge—and I think Dan made reference to it earlier on—we have 0.5% of the population in the world. We have 4% of the knowledge that is produced. In 2013, for the first time, more than 50% of published journals in natural sciences and engineering had a co-author from someone outside Canada. What's also interesting, however, is that the percentage with the United States, which has been our traditional collaborator, has dropped. That's saying that all of a sudden there's an explosion of new knowledge that's coming from places we never thought of before. It's primarily but not only from Asia. We're seeing a rapid rise, particularly with China and South Korea, of investments in cutting-edge research and development. We definitely need to be connected in a very serious way if we want to stay on that track.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

What stands in the way of a safer way of using these new technologies, these disruptive or paradigm-changing technologies? Is it politics or ideologies? What is standing in the way of our remaining a leader? If you have a lag time, somebody else will move on more quickly. I'm going to use an example so you can understand the point I'm trying to discuss here.

It was highlighted that Canada is a natural resource rich country, and part of our economy is based on exports of our natural resources. We, I believe, are constantly looking at new, safer, and more sustainable ways of using those natural resources. Are there situations where there are safer and more sustainable ways to do things, yet they're not permitted to move ahead and be used because of politics or whatever? Can you elaborate on that?

[Dr. Ted Hewitt]

I'd be happy to. I'm glad you looped back to something I wanted to touch on.

On the safety issue per se, I could come back to the example that I gave with the Forest Products Association of Canada and their 40-storey wooden buildings. A lot of that is, again, simply research that will help us to better understand these issues and help to lead the public to accept, in fact, what that shows.

But one of the things I wanted to touch on was the way in which we still maintain a fairly linear sense of discovery to invention, innovation, and application. I just want to give you an example of how the world really doesn't look like that, and it touches on your question of what the gap is.

In my former life, I was the vice-president of research at a major Canadian university. I can assure you that in Canada there are likely hundreds and hundreds of patents for amazing technologies sitting on the shelves of Canadian university technology transfer offices and being maintained at some considerable cost.

These are a couple of examples. An inventor had a 360-degree digital camera—amazing. The other one was a hand-held 3-D digital scanner, so he just basically moved the scanner. This goes back to a comment that was made by Madam Papillon. Have those technologies been adopted? No. Why? They're clearly disruptive somehow in the imagination, but the problem is that these things exist as scientific advances without a business planning culture, innovative thinking, or market savvy that would take them where they need to go. Sometimes we talk about receptivity, risk-taking on behalf of companies, who just haven't taken them up.

That's not a perfect answer to your question, but in part my feeling is that the gap exists, not with the development of the technology and our capacity to do that, because I think we're eminently capable given the things that we've done; it exists with the individuals who have the savvy, the ability, and the risk-taking attitudes that can take these technologies and imagine how they can be used in order to succeed in the marketplace. That is a gap in this country.