Industry Committee on May 14th, 2015

[The Chair, Conservative, David Sweet]

Welcome everyone to the 46th meeting of the Standing Committee on Industry, Science and Technology. I'm going to introduce our witnesses, but I just want to give you a heads-up that we're going to try to squeeze in about 10 minutes of business at the end. Since we're already over time we'll need to clear the room effectively and efficiently afterwards.

Let me introduce our witnesses who are before us today. We have quite a diversity actually. From Google Canada we have Colin McKay, head public policy and government relations; from Canadian Manufacturers and Exporters, Martin Lavoie, the director of innovation and tax policy; and Wendy Cukier, vice-president of research and innovation from Ryerson University. I will go by order of precedence in our agenda here.

We'll begin with opening remarks of six to seven minutes, please, Mr. McKay.

[Colin McKay, Head, Public Policy and Government Relations, Google Canada]

Great, thank you very much, Mr. Chair. It's a pleasure to be appearing before the industry committee again. I'm super excited to discuss Google's approach to experimentation, innovation, and discovery with you today.

Last week, officials from Industry Canada suggested how to identify and define disruptive technology using descriptors such a rapid technological breakthrough with broad global application, significant economic impact, and importantly, significant social impact. That certainly describes disruptive technology but it doesn't begin to capture its potential.

Plentiful computing power can result in improved decision-making. Cheap sensors can produce more frequent and more accurate measurements in a number of fields. Robots can speed manufacturing processes and even improve surgery outcomes. These all have the potential to disrupt how we conduct our business and live our daily lives, which naturally makes us all a little uncomfortable.

Truly transformative change often requires vision and ambition. Transformative change is the difference between making things 10% better and making them 10 times better. As a researcher, a business leader, or a policy-maker you're often tempted to focus on the incremental change. You inevitably build from the existing solution, relying upon existing tools and framing your challenge with insight and assumptions informed by your personal experience. This naturally limits the impact of your work.

It seems like a logical approach, apply a little more effort, find some extra money and dedicate more resources to the problem. With hard work you will find efficiencies perhaps even arrive at insights to inform further work. We can all recognize this is a careful, measured approach to change.

At Google, however, we approach change in a number of ways. As a company founded and run by engineers we understand the impact of data science, massive computing power, and insights into consumer behaviour. These inform how we develop new products and improve existing products. For example, consider Google Maps and how it has changed and affected how we search for addresses, shops, and even property investments in the years since its launch in Canada in 2007.

At Google we naturally have a nuanced understanding of business risk but we also appreciate that sometimes you have to set audacious goals. When you aim for a tenfold impact you energize your workforce. Sheer ambition demands that they examine a challenge with a fresh set of eyes and that they aim for outsized technological, economic, and social change.

Ambition and investment at this scale can light a fire in the hearts of employees. It encourages them to believe that other seemingly impossible goals may also be possible. We refer to some of these projects as “moonshots”. In fact, we have an organization dedicated to ambitious goals: Google X. As Astro Teller, the head of the program, describes it, “Moonshots live in that place between audacious projects and pure science fiction.”

We've always had a focus on investing in the future. Our founders made this clear early on in their 2004 letter to initial investors. Here is just a short quote, “Do not be surprised if we place smaller bets in areas that seem very speculative or even strange when compared to our current businesses.” I think you'll agree that we've kept that habit and that inclination over the past 12 years.

More bluntly, Larry, our CEO, has said that, “If you’re not doing some things that are crazy, then you’re doing the wrong things.”

There was some discussion last week of the Canadian appetite for risk, of what might be slowing investments by Canadian businesses in ICT, or maybe the key to our slow-paced commercializing of both basic and advanced research.

I'd just be speculating on the reasons for this. The officials you heard from last week have a far firmer grasp on the statistics, but I can tell you that western society conditions us from an early age to be cautious, even risk adverse. Think of the advice we've received from parents, coaches, and cut-rate business books: walk before you run, slow and steady wins the race, and horribly, under-promise and over-deliver.

When Google considers moonshots we aim to tackle big problems, big as in dauntingly huge, seemingly ageless in their existence, or of global impact. Our team of engineers, researchers, user experience designers, and other professionals attempt to identify and shape a solution to these big problems, a radical solution. Importantly, the science has to be there or at least the promise that the science will eventually arrive at a solution. There has to be evidence that with enough creativity, passion, and persistence we can arrive at a solution in the next decade or sooner.

In practice, what does this mean? It means smart contact lenses that will help diabetics monitor their glucose more seamlessly and painlessly than ever before; self-driving cars that will reduce injuries on the road, reduce road congestion, and even improve mobility for the elderly and disabled. It will mean novel ways to deliver the Internet to billions in the developing world without developing a 100 years' worth of disputes around poles, land rights, and conflicting technology; and—even I would say that this is audacious—creating a company whose explicit mission is to tackle aging.

There's always a reason for not setting audacious goals. SMEs think that these goals take money and resources that they don't have. Large companies shy away from the risk. Governments feel a pressure to use scarce resources to deliver demonstrable results, usually on short-term problems. Academics love long-term thinking but have largely defined their role as publishing and propagating ideas, not building the solutions themselves.

What's the danger inherent in this behaviour? Well, aside from continuing disappointment in our slow economic growth, we do not question the status quo. What do I mean by status quo? I mean that 110 years ago, cars were the toys of the wealthy. Forty years ago, computers were the size of a house and were purely a business tool. Twenty-five years ago, mobile phones were big, bulky, and expensive. Twenty years ago, Internet access was expensive and glacially slow. Ten years ago, video calls were expensive and difficult, and four years ago, we thought standing on a corner and waving our hand in the rain was the only way to get a taxi.

While we feel pressured by the rapid technological change that's enabled by the growth and power of the Internet, it's important to remember that this is an almost generational pattern, and every time society struggles to adapt to the social and economic impact of technological change. Almost as regularly, we attempt to apply existing regulatory frameworks to mitigate the perceived risk of new habits, new technology, and new solutions to previously intractable problems.

Preparing ourselves for emerging opportunities means embracing that uncertainty, not running away from it. Canadian companies are having an impact. Importantly, these sorts of technologies shouldn't be characterized as disruptive. They're being innovative, and at scale. These products, services, and platforms are attracting users and customers from around the world in markets that didn't exist five years ago, and were the stuff of science fiction 15 years ago.

As you continue this study, please remember this point. Truly transformative change demands an increased tolerance for risk, from researchers, from managers, from regulators. We need to provide innovative companies with room to explore, to develop new ideas, and to experiment with new products, while being protected from regulatory and business moves driven by risk aversion, uncertainty, or even pressure from existing stakeholders.

Thank you again for the invitation to appear today, and I look forward to your questions.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. McKay.

Monsieur Lavoie.

[Martin Lavoie, Director, Innovation and Tax Policy, Canadian Manufacturers and Exporters]

Mr. Chair, ladies and gentlemen, thank you for inviting me to appear before the committee.

My name is Martin Lavoie, and I represent Canadian Manufacturers and Exporters. We are Canada's largest trade and industry association, representing nearly 10,000 companies across the country.

The manufacturing sector is going through tremendous change because of advances in what are known as “disruptive” technologies, but what I will call “advanced manufacturing” in my speech, because that is the term we use in our sector.

In our sector there are five main categories of disruptive technologies: additive technologies, more commonly known as 3D printing; robotics; automation; connected objects, or what we call the “Internet of things”; and new materials, including new nanotechnology applications.

First of all, I'd like to congratulate the Minister of Science and Technology, Minister Holder, for including advanced manufacturing in the science and technology policy back in December. I think it's a great vision. It's a recognition that advanced manufacturing is not only part of disruptive technologies but actually driving the innovation agenda in Canada.

Why do we call those technologies “disruptive”? First of all, they represent nothing less than a fundamental shift in the paradigm of fabrication. Take, for example, additive technologies. You're basically going from a subtractive method of fabrication to an additive method of fabrication. Right there is a major shift in the way you think about product development. More importantly, it not only changes the way you make things but also the way you design things, because 3-D printing allows you to design parts, components, or products that you would not be able to fabricate under traditional methods, such as cutting, drilling, or CNC machining.

They're also disruptive because they are reviving industries in Canada and elsewhere that we thought were pretty much gone forever. The best example I can talk about is probably printable electronics and their applications and what we call the “smart” textile industry. How many millions of people in Canada worked in the textile and apparel industry in the past? Ten years ago, who would have invested in an apparel facility in Canada? Now we're seeing, with those integrated sensors and smart textiles, a lot of entrepreneurs going around with new business ideas that have a lot of potential here because of this technology. In one way, it's disruptive not only because of the method of fabrication but also because it's reviving industries that we thought were gone.

I would like to congratulate the National Research Council for making the printable electronics flagship program a reality in Canada. I think it's a great vision. This is certainly an area where Canada can be leading globally.

There's a third reason why they're disruptive, and it has much more impact than what I just talked about. They've really changed the way we look at economic development and entrepreneurship. ln recent years we've seen the emergence of what we call the “maker movement”. It's pretty much a cultural transformation where people now have access to affordable means of production. The maker movement is a cultural movement, but concretely, they get implemented through what we call “makerspaces”. Makerspaces are physical locations where you put a lot of advanced manufacturing equipment such as 3-D printing, laser cutters, electronic boards, water jets, or whatever. People buy a membership, and they can use the facility to access the machines and maybe prototype new products.

More importantly, it also allows those makers to get together with other makers and do co-development of products. A lot of the people you see on Dragon's Den, for example, are members of makerspaces from across Canada. I looked at how many makerspaces we have, and I found about 50 in Canada. The most well known is AssentWorks located in Winnipeg.

I don't know if anyone here is from Winnipeg. If you ever have a chance to visit them, I strongly recommend that you do so.

Concretely, the maker movement here in Ottawa offers a very good example of how disruptive technology such as 3-D printing can actually fuel entrepreneurship. In 2012, grade 9 students from Ashbury College in Ottawa started their own 3-D printing business in a science class from an idea that they had to build customized iPhone cases for their friends. After developing a business plan, the students got seed funding from their school's entrepreneurial competition, which allowed them to purchase a small 3-D printer. They set up their business making customized iPhone cases for their friends, and they were selling them through the Internet. They were 16 years old. That makes me think about how disruptive it could be if every 16-year-old kid in this country had access to a makerspace in their high school. It would be totally disruptive.

ln conclusion, I would like to point out a couple of policies that we may want to talk about during this meeting that are actually affecting the adoption of those disruptive technologies, especially within SMEs. As I said earlier, the recognition of advanced manufacturing in the science and technology strategy was a good thing. However, something that has hurt the capacity to adapt those technologies is the elimination of capital expenditures under the scientific research and experimental tax credit. This elimination took place earlier this year, in January. When I talk to the people who actually sell the 3-D printers or sell advanced pieces of equipment, they tell me it's eliminating an argument for them to actually accelerate the adoption of those technologies, especially within SMEs.

We'd like to congratulate the leader of the NDP for making the commitment to look at how we could reintroduce a tax credit for the capital expenditure in advanced manufacturing. I invite all parties to look at ways in which we could develop a tax structure that would actually accelerate the adoption of those technologies. It doesn't have to be through the SR and ED program. It could be through another tax structure.

Thank you very much. I look forward to your questions.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lavoie.

Now on to Ms. Cukier.

[Professor Wendy Cukier, Vice-President, Research and Innovation, Ryerson University]

Thanks very much.

I want to echo the other panellists' comments about how pleased we are that the committee is looking at these issues and also that we have the opportunity to speak to you today. I will try to restrict my comments to some high-level issues that I would like you to keep in mind. I didn't have time to submit a brief, but I will provide a follow-up report that gives more detail. I think other witnesses have talked a lot about specific technologies and specific examples. There are some broader policy-related issues that I would also like to discuss.

There are a couple of important concepts that I think we have to reinforce because they really would go a long way to shaping policies that would address the innovation gap. It's very important in my mind to differentiate between entrepreneurship, which challenges the status quo and creates something new, and innovation, which requires the adoption and use of those new things in some way to transform systems, businesses, or consumer behaviour. You can have entrepreneurship and you can have lots of wonderful technologies, but if you don't pay attention to end-user needs, to organizational issues, and they're never used, you do not reap the benefits.

I would argue, in terms of the policy frameworks, in terms of where we invest research dollars, that there is quite appropriately a great deal of focus on developing technology, and there should be, but we need to put more focus on how to actually roll those technologies out effectively, whether it's a combination of tax credits, training, or some other things I'll discuss. I think that's critically important.

There's a second thing that I think is very important, and this comes from not just doing research but working very closely with business leaders, community organizations, and so forth. We have to think about impacts, even though it's very hard to predict what the impacts will be. Early in my career I worked with the Institute for the Future in Menlo Park, California, and I worked with Don Tapscott, who wrote all sorts of books, and I would say that they were good at anticipating change but probably no better than Star Trek. If you actually think about how the world has changed, some of the technologies you've been hearing about, whether it's mobile computing, additive manufacturing, or virtual and augmented reality, much of that was prefigured by science fiction. So I'm not saying that it's easy to anticipate what is going to happen, but we have to try.

McKinsey has done a really good study, I think, of disruptive technologies and tried to identify some of the potential impacts.

Again, disruptive technologies are not the same as advanced technologies. Not all advanced technologies are disruptive, and not all disruptive technologies are particularly complex. To be disruptive, the technology has to be applied to change fundamental business models. That's basically the definition. For example, I would argue that robotics, in and of itself, is not disruptive. Robotics has transformed the automotive industry for many years. Taking robotics and introducing it into the hospitality industry then becomes very disruptive because that's an industry that, up to now, has not used robotics. I think it's important to really keep a focus, not just on developing these technologies but thinking about how they will transform how we live, play, and work.

I also don't want to be alarmist, but I think we have to think, not just about the potential advantages but the potential disadvantages. The good news is, the recent study by Frey and Osborne, which looked at the impact of computing on jobs, did not suggest that politicians were an endangered species. However, they did say, through a detailed analysis, that 47% of the current jobs in the North American economy are potentially at risk. That's fundamental.

Of course, there are opportunities for new kinds of jobs as well, but we have to look at both sides of the equation and that has implication for policies, that has implications for how we invest, and that has implications for how we train and educate our students.

I want to read from a couple of things, and this is the first.

We have historically felt that low-skilled jobs might be vulnerable, they might be outsourced, that low-skilled auto workers, for example, were sort of the inevitable casualties of automation in the manufacturing sector. I think we will hear more about how that is, perhaps, a real misconception. But many have thought that highly educated knowledge workers weren't at risk. The Associated Press has announced that the majority of U.S. corporate earnings stories for their business news report will eventually be produced using automation technology. This is a major publisher.

To free journalists to spend more time on things like beat reporting and source development, they discovered that automation technology from a company called Automated Insights would allow them to automate short stories of 300 words to 500 words about the earnings of companies, and instead of providing 300 stories manually, they could provide up to 4,400 stories automatically for companies.

Diane Francis, the journalist, sent this article to me. It says people who think journalism is not in trouble need to give their heads a shake.

The second point that I think is critical is that research is the foundation of innovation, without question. We may not be getting the outcomes we would like from all of our research investments, and there are reasons for talking about that further, perhaps in the questions.

Ryerson, certainly, has invested heavily and has many of the technologies you've heard about—cloud and context-aware computing, advanced manufacturing, virtual reality, and so on, but again, those technologies are not in and of themselves disruptive. We have to look at their applications.

One of the ways Ryerson has done that is by challenging the traditional paradigm of lab to market. We completely support the importance of foundational research, but lab-to-market models, where you assume that scientists and researchers will develop things that will be commercialized, is a high-risk proposition if your objective is commercialization. We, instead, have focused on much more iterative market-driven models for research, which produce significant results that are tied to user and organization needs.

On a panel I was on, someone said recently that if you want to drive research, invest in research; if you want to drive commercialization, invest in commercialization. Right now the current models of funding university-based research reinforce the behaviours that we've heard don't necessarily drive innovation. They reward publishing articles. They do not reward patents, and they most certainly don't reward setting up small businesses. We have to think about the structures and how they align with what we say we want to achieve.

I would note that a lot of effort has gone into trying to turn professors into entrepreneurs. You've met some who have made that transition—Hossein Rahnama, who is from Ryerson, is an excellent example of a Ph.D. entrepreneur. However, lots of people become professors because they want to stay in their labs and they want to write papers. I say we should let them do that, but build the structures that will help identify the research that has commercialization potential and bring in the people who know how to do that and how to start companies and grow them. Right now the current structures don't necessarily support that.

Obviously, Ryerson is very committed to supporting the creation of start-ups. We have one of the leading incubators in Canada and, indeed, in the world. We have partnered with the Bombay Stock Exchange to set up an incubator in India to provide soft landings for Canadian entrepreneurs going out and Indian entrepreneurs coming in.

We've been very successful with a number of federal government funding programs that we're grateful for, from FedDev to CAIP, and so on, and we're partnering with groups like the Ontario Chamber of Commerce to help scale up existing businesses.

I think that one of the things we really have to come back to is an example from health care. It's another quote saying:

The future of medical computing is bright. Obstacles to the practical use of the computerized medical record exist.... We have a golden opportunity to avoid a new round of escalating medical costs.

Does anyone want to guess when that was written? It was written in 1990. We've had the technology we need to transform health care for the 25 years I've been in this industry, but it is the organizational and human factors that are a huge issue.

I just wanted to close—

[The Chair, Conservative, David Sweet]

You are about three and a half minutes over. Please be quick.

[Prof. Wendy Cukier]

My apologies.

I think that one of the things, and we can talk about this more in questions, is that universities are basically medieval institutions. There are many changes that could be wrought to actually transform education for the 21st century. Bringing together government, educational institutions, and industry is a very important part of moving that forward.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

Colleagues, we missed the business last week. We are very short on time now because of votes. I seek some guidance. I can give you six minutes each, and that will get us out of here on time. If we want to have some business, I'll have to cut it down to about four and a half minutes each.

Do you want to save the business for Tuesday, or do you want to deal with it today?

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

We are not back here on Tuesday.

[The Chair, Conservative, David Sweet]

I'm sorry. You are right. It will be a week from Tuesday.

[Judy Sgro, Liberal, York West, ON]

Yes, I think it would make more sense.

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

Sure. Let it go until then.

[The Chair, Conservative, David Sweet]

All right. Then let's proceed with six minutes each.

Mr. Lake, go ahead.

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

Thank you.

Thank you to the witnesses for coming today.

I want to focus a little bit on some examples. We've heard some broad-based things. We haven't heard many examples of these disruptive technologies based in your areas.

Colin, I am going to start with you. You and I have talked in the past, and one of the things that we talked about.... I remember you sharing a little bit about how Google Maps works with the traffic flow. I thought that was an interesting example of something that changes the way we navigate our world in terms of driving, taking buses, or whatever the case may be.

Can you give an example for the rest of us of how that works?

[Colin McKay]

Sure. Thanks very much for the question.

The example of traffic data and how it is applied to mapping services, whether it is Google Maps or others, is a perfect example of how you can have a functional consumer product that actually has a consequence for important things such as infrastructure investment and quality of life for commuters.

When you have a phone and you have opted into location services, you are in a sense providing anonymous tracking information about your movements to your phone provider and to whatever mapping service they use, which allows them to know when you are on a highway or any other road and what speed you are going at. When you aggregate this sort of data from thousands of people, all in the same traffic jam or in the same city, you get very detailed information about that traffic behaviour that could be used to provide guidance to users about choosing their routes and choosing when to leave.

It also sends important signals to cities and to people in charge of making investments in infrastructure around congestion points or highways that may need more investment. It gives them the sort of detailed data that was previously available only by hiring university students over the summer to sit on the corner and use their little clicker to count the traffic. It's a consumer product that in its application actually provides data and insight that can inform tremendous investment.

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

It's very much in real time. When I am driving down the highway and I see that red line, I know that it represents a whole bunch of people who are sitting in traffic in that moment, not moving.

[Colin McKay]

Yes.

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

That's interesting because it builds on what Wendy was saying regarding the way technology is used. That's not what the location services were originally meant for, but someone has found a way to use it in this unique fashion.

[Colin McKay]

Yes.

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

Martin, maybe I'll go to you. In your industry, you obviously represent many organizations across the country. Could you give us some examples? You talked about some broad areas where you would refer to advanced manufacturing as opposed to disruptive technology. What concrete examples could you give us of the way our lives might be impacted today by this type of advanced manufacturing?

[Martin Lavoie]

I think one of the best examples, if you get into the area of robotics, is probably civil applications of drones. I think this one is going to disrupt a lot of sectors. It's also disrupting regulations, because now Transport Canada has to look at how it will regulate this.

It's interesting, because drones incorporate a lot of other disruptive technologies such as 3-D printing. All of the drones have parts and components printed and the reason is that 3-D printing allows for a reduction in the number of components in a product. Traditionally you would make one part and make another part and then glue them together or weld them together or screw them together. 3-D printing allows you to reduce the number of parts by printing two, three, or four components in one shot, so you have more complex shapes.

If I knew where it was going to disrupt, I'd be investing there right away. I think you're going to see a lot of applications in places where it's very expensive or dangerous to send a human being. You're going to see a lot of them in the Arctic, with pipeline inspections, for geomapping for the oil sands, inspection of hydro, and all kinds of applications like that. I think that is more disruptive than what you see in the media about delivering a pizza. I'm not sure about that, but I think there are a lot of industry applications that would be disruptive. That would be one of them.

The other thing is that in any makerspace you visit you'll see people building drones, because if you have the right skills and the right equipment, it's easy to invent new applications with the advanced cameras and the advanced vision systems. That's pretty much one example you should keep your eyes on.

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

I'm going to just jump in and ask you a question. I was actually going to go in a different direction, but you talked about makerspaces, and I don't really understand exactly what you're talking about. For anyone who might be reading the transcript of this who doesn't have the background that you have, maybe you could explain it in easy-to-understand terms.

[Martin Lavoie]

A makerspace is pretty much a business incubator that is led and used by people, by anybody.

You see a lot of them starting to be implemented in universities, for example. People put together a pool of money to buy 3-D printers and advanced manufacturing equipment that they couldn't afford on their own, and then people buy a membership so that they can access those means of production. Then they can hang out with other people and develop products with them.

It's really an entrepreneurial thing that is starting to be some kind of a business incubator thing, but it's not really supported by government. It's really kind of a grassroots movement. People go there and they can also get trained. Some of them offer classes on how to do 3-D design using 3-D software, how to use the printer, how to use the laser cutter, or how to use the CNC machine. Some people see it as a business incubator, but what is interesting is that the movement behind it was a grassroots movement. It was not initiated by a university or a government. It was really a grassroots movement that just came up.

[The Chair, Conservative, David Sweet]

Ms. Nash, you have six minutes.