Industry Committee on June 4th, 2015

[The Chair, Conservative, David Sweet]

Good morning ladies and gentlemen. Bonjour à tous. Welcome to the 50th meeting of the Standing Committee on Industry, Science, and Technology. We continue our study of disruptive technologies.

We have some great witnesses today. First off, from CEFRIO, we have Jacqueline Dubé, president and chief executive officer. From IBM Canada, we have Patrick Horgan, vice-president of manufacturing, development and operations. From the University of Waterloo, we have Pearl Sullivan, dean of the faculty of engineering. Finally, as individuals, we have Claude Gagné, and we have Bettina Vollmerhausen, co-founder of the Ottawa Tool Library.

Colleagues, I normally follow the agenda that you have in front of you, but because we have two presentations that will be on the computer, we need to synchronize them after the first presenter. I'm going to change it up so that you're not confused. Maybe I'll just tell the witnesses as well.

We'll begin with CEFRIO. Then we'll go to IBM, then to Ms. Gagné and Ms. Vollmerhausen, and then to the the University of Waterloo with Ms. Sullivan last.

I apologize. It's Dr. Sullivan. Is that correct?

[Dr. Pearl Sullivan, Dean, Faculty of Engineering, University of Waterloo]

That's fine.

[The Chair, Conservative, David Sweet]

Well, we should give honour where honour is due, I think.

We will begin then. I believe the clerk has told you that you have six to seven minutes. Please stay within that, if you could. Then we'll have a round of rotating questioning after that.

Please, Ms. Dubé, begin.

[Jacqueline Dubé, President and Chief Executive Officer, CEFRIO]

Good morning, ladies and gentlemen. Thank you for receiving me today.

I will try to stay within the six or seven minutes that I have, but since I am a little passionate about the subject, I might go over time. Please signal me if that is the case.

CEFRIO is a centre that supports research in social and organizational innovation. Simply put, we research and assess how technologies are used and implemented. We work with 80 associate researchers on how to change the ways of doing things using digital technology. We work in all industry sectors, whether in health, education, or with SMEs, in the transfer of digital competencies, for example.

For over 25 years, we have developed a research model that makes it possible to work systematically on the ground, that is, directly in companies, hospitals and schools. The transfer is continuous. Every time new knowledge is created, it is systematically integrated into the work process and professional practices. As a result, no change management is needed subsequently.

The researchers are experts in the area of the project we are working on. They need to stick to the expected “deliverables”, not to do broad research. We like to say that we have researchers who find, not just researchers who research. We have a network of experts and everyone works systematically together.

Today, let me give you our definition of the word “digital”. For us, digital technology is the Internet, the Internet of things, 3D printing, big data, the advanced manufacturer. When we talk about digital technology, we refer to all those aspects, not just the information and communication technologies.

I really like the two photos on slide 4 of the presentation. In the top right image, from the election of the pope in 2005, we can see only one smartphone. Eight years later, at the election of the new pope, what we see is not candles, but smartphones. Those photos show us the speed of the changes coming our way in the next few years.

The concept of disruptive technologies is captivating, because all these technologies are disruptive to the extent that they require a complete overhaul of the business models that companies have. They are very demanding for a simple reason: they require organizations to have a capacity for innovation.

The fascinating part is that citizens, users and consumers adapt very quickly. However, there is a problem. The digital competencies of individuals are not being used in businesses or institutions, which has a significant impact on Canada's productivity and development. The main reasons that explain this difference between citizens—

[The Chair, Conservative, David Sweet]

I'm sorry to interrupt. Excuse me.

There are two things I should have mentioned beforehand.

When we're in process there are no photographs allowed, and your illustration with election of the popes reminded me that I should say that.

The second thing is, do all of you know you have an earpiece for French and English beside you? If you want the interpretation, it's there. Maybe you're all bilingual, because I didn't notice anybody who had their earpiece in. You can use that. On your microphone, you have the ability to go from floor to English to French.

I'm sorry for the interruption. You can continue.

[Jacqueline Dubé]

No problem. Thank you.

Here is what mainly explains such a big difference between individual users and companies. We are seeing a real lack of financial capacity in SMEs; it is a reality. However, the main obstacle is organizational, in the sense that there is a resistance to change and to transforming the work process.

When we talk about digital skills, we are not talking about how to use a computer or tools but about how to transform what we do so that the technologies are effective. A major problem, whether in the private or the public sector, is that senior management has generally become more accustomed to outsourcing this responsibility. So little leadership comes from senior management in terms of adopting digital technology.

It must be said that developments in this field are moving very fast. Revolutions used to take place every 100 years. Now they happen every three years. Because of technology, things change very quickly.

The reality is that growth is exponential, which has a direct impact. This partly explains the delay in productivity in Canada. In terms of the GDP, there is a difference of $13 less per hour per employee in Canada compared to the United States. This is a very significant difference. This challenge with productivity will become more pronounced for a very simple reason. It has been shown that productivity is enhanced by the use of digital technology. The U.S. spends $100 per worker whereas Canada invests $53. As a result, the gap between the level of productivity in Canada and the U.S. will widen further if no prompt action is taken to adopt digital technology.

We often wonder what the government’s role could be in this situation. Actually, the government must act more as leader or a mobilizing force. It has been shown that subsidies will not move things forward, but rather targeted initiatives supported by the government that are very well documented and demonstrate the benefits. These initiatives are supported by what is called a generalized approach. We can sort of compare generalization to commercialization.

I have only one minute left. There are several pages you can read for yourselves.

On the next slide, you’ll see some examples I will not discuss. I will simply say that these are areas we are working on in terms of adopting digital technology. In the health sector, for example, we are working with doctors and pharmacists. Patients have their own personal health records. It takes a year or a year and a half for a clinic to accept the transformation of the work process and to take advantage of all the benefits that digital technology has to offer. In transportation, it’s fascinating. Montreal loses $3 billion a year just because people are stuck in traffic rather than working. This gives you an indication of how digital technology can transform those aspects. You can check that on the slides.

Later on, I compare the data on usage in Quebec and Canada. We can say that Canadians are Internet and technology users. It's the same for Americans. From the perspective of its citizens, Canada is the second best in the world in terms of the use of digital technology, but for companies, it ranks 22nd. That too is quite a significant paradox.

[The Chair, Conservative, David Sweet]

Madam Dubé, merci beaucoup.

[Jacqueline Dubé]

I’m sorry I was not able to give you more information, but I will be able to answer any questions you may have.

[The Chair, Conservative, David Sweet]

To the witnesses, by the way, if you don't get through all of your opening remarks because the time runs out, as we go through the questions, you can sometimes add those facts in response to the members' questions.

Mr. Horgan, please.

[Patrick Horgan, Vice-President, Manufacturing, Development and Operations, IBM Canada]

Mr. Chair, it looks as if the IBM person here is going to be the lowest tech person on the panel, but there you go. I'll try to make this succinct so I can get within the timeframe.

Thank you very much, Mr. Chairman, and members of the committee, for this opportunity.

As you know, IBM is one of the country's largest private enterprises in R and D, and Madam Dubé was pointing out how others maybe should do as much. We try to do a lot. We've spent $4 billion in R and D in the last 10 years and $500 million in collaborative investments. I want to tell you a little bit about that this morning. I'm going to talk about two different dimensions of disruptive innovation.

The first is it's happening to the IT industry itself, and I'll talk about that. The second is how this R and D in commercialization is a bit of the issue that we were just talking about and how we are trying to make strides to make that better in Canada.

Let's talk about the IT industry itself. Analysts are pointing out quite often that Uber is the largest taxi company in the world but owns no vehicles. Facebook is the world's largest content provider, but it has no content. Alibaba is the largest retailer, but it has no inventory. Airbnb is the largest accommodation provider and has no rooms, no real estate. Each of these examples is an example of disruptive innovation. They are rapidly transforming traditional industries, and there are more examples coming.

It's important to understand that these disruptive business models, whether you're discussing Airbnb or Uber, are enabled by a specific set of technologies and increasingly, technology services that are now broadly available to both large and small businesses alike. Let me explain five.

First is cloud computing. It enables anybody with a credit card to sign on to get a full range of computing resources from infrastructure to business processes to software to applications, all consumed as a service. It means no large capital investments are required and even a very small business or someone in a garage can access world-class computing.

The second is mobile platforms. Cloud-based services now allow everything to be delivered to your handsets, to your iPads, or to your PCs anywhere you are. We've noticed that even though we're out of the PC business, it's very important to us to see the iPad has IBM on it, because we're very linked now with Apple in terms of our ability to use their very nice devices and our ability to understand the enterprise and put the two together.

The third is social networks. There are nearly two billion users of social networks creating oceans of data across a vast range of issues. Harnessing that evolving ocean of data would not only facilitate real-time feedback loops, but also anchor predictive capabilities. You'll hear us talk a little bit more about that.

Fourth, especially with the government, is security. Cybersecurity is as important in today's economy as vaults were to protecting gold and currency in years past. Whether it's protecting commercial secrets or sensitive personal information, managing and measuring access to the consumption of data and digital products is paramount to ensure value in today's data-driven economy.

The fifth is analytics. Make no mistake, we're living in a data-driven economy. A full 90% of data in the history of humans has been created in the last two years. That is continuing to grow. However, these large datasets really require understanding and deriving knowledge from them. That is really the secret. What we're talking about now is how to get those tools in front of everyone so we can get on top of this new data and knowledge economy.

I'm sure this committee will hear numerous disruptive business models and technologies, but I'll venture to say that many will be included or be enabled by secure cloud, mobile and social platforms with a strong component of big data and analytics. That's why we're investing so heavily in these areas.

It's a good segue to the second part of my discussion, world-class research, development and commercialization of disruptive technologies that's taking place in Canada.

Canada has a tremendous competitive strength, including the five technology areas I just described, and I hope to illustrate a bit of that with one of the projects we're working on.

Specifically, I'm going to focus my comments on the southern Ontario smart computing innovation platform, known as SOSCIP. It's an excellent example of how government, business and academia can collaborate to stimulate made-in-Canada disruptive technologies and the new companies and jobs that these technologies can support.

SOSCIP is a consortium between IBM Canada and seven research-intensive universities in southern Ontario—Pearl is from one—with financial contributions from the federal and provincial governments. The foundational idea behind the creation of SOSCIP was that Canada could lead the world in development of disruptive technologies as we establish a dedicated world-class technology platform to focus our efforts in areas of national and regional priority.

In turn, SOSCIP put Canada's fastest supercomputer in place, as well as the largest analytics cloud in the world. With that platform you now have the ability to tackle the toughest and most complex challenges in the areas of health care, energy, water, and cities. This initiative represents an investment of over $200 million, of which 85% came from IBM. Access to this platform is governed by the consortium members with specific focus on producing commercial outcomes. In turn, we proactively bring together some of Canada's most renowned researchers, relevant entrepreneurs, and small businesses. In fact, priority is placed on projects that are led by small business. In these cases, we can connect them directly with principal researchers. Very important in this is that the IP is open. Researchers bring in their projects and they become richer by doing so.

Since we launched in 2012, we've launched 50 game-changing projects. We've materially enhanced the skills of over 300 post-doctoral fellows that were hired for this purpose, with 88 research jobs and over 1,000 jobs that are in the network of the small businesses and researchers that are involved. We've established a pipeline of close to $2 billion in revenues for these growing SMEs just from three years ago.

One example—and I won't be able to go through the detail at length—with Synchronicity in Motion is Dr. Carolyn McGregor, who's working with SickKids in the neonatal unit and looking at all the medical devices attached to a patient. She is now able, because of real-time streaming analytics from those machines, to predict sepsis and many other ailments for those patients 48 hours in advance of anything happening to that patient; in other words, saving babies, but also saving all of the downstream effects of affected babies that take place in a very high-cost unit, but also a very high-value unit. She's taking this not only to the rest of the Canada in the cloud, but also to leading hospitals in the U.S., China, and Australia, where she's from. That's one example. It's a compelling one, but I have 49 others we could talk about and the disruptive technologies that are coming from here.

Based on these outcomes, FedDev Ontario recently announced another $20 million investment for SOSCIP 2.0 of which it unleashed another $65 million of investment from IBM. It's very exciting.

In conclusion, Canada has the capacity to produce disruptive technologies, as well as the entrepreneurs required to build companies around these new technologies. In SOSCIP, I submit, we have a proven model that can bring the critical ingredients together to facilitate such activity. In this model, we do believe there's an important role for government to set national and regional priorities, and to provide some financial incentives, including direct funding to support collaborative initiatives such as SOSCIP right across the country.

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

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Horgan.

Now we go to Ms. Gagné and Ms. Vollmerhausen, please.

[Claude Gagné, As an Individual]

Thank you, Mr. Chair. We're very honoured to be here as ordinary citizens. I'm Claude Gagné from Ottawa. I'm an entrepreneur in social innovation.

[Bettina Vollmerhausen, Co-Founder, Ottawa Tool Library, As an Individual]

Mr. Chair, and members of the committee, I am Bettina Vollmerhausen, co-founder and tool goddess at the Ottawa Tool Library.

[Claude Gagné]

Last November, Mr. Chair, you met Abigail Capannelli, a young lady from your riding who was very pleased to show you her new hand. She had a new prosthetic hand. Abigail sent me this clip to express her appreciation. This is a hand that was done with 3-D printers by volunteers here in Ottawa. You should look at the images. You'll see Abigail wearing her prosthetic hand.

[Video presentation]

Thank you, Abigail.

As you can see, Abigail uses her new hand to prepare meals, work in the garden, and play sports.

This happened as a result of the e-NABLE network. Last summer a news report about a boy in Hawaii who was equipped with a similar hand prompted Abigail's mother to send pictures of Abigail's arms and a request to the e-NABLE network.

The e-NABLE network is an ecosystem of researchers in prosthetics and 3-D printing, passionate volunteers, makers, and end-users and their care providers. In a matter of days, the e-NABLE matchmaker contacted a volunteer, also based in Ontario. It happened to be me.

I had signed up with the e-NABLE network because I thought I would have easy access to a 3-D printer here in Ottawa. That was in August 2014. I knew that there were two 3-D printers at the Ottawa Public Library in Nepean. Unfortunately, they didn't use the right kind of filament. But then the engineering department of the University of Ottawa opened a makerspace and they made it open to the public on Sundays, so I was able to access their printers. Throughout September 2014 there was a lot of trial and error with materials, sizing, printing quality, and the assembly of the prosthetic.

I was able to send by courier a prosthetic to Abigail, who was in Waterdown, Ontario. I had never met Abigail. She received the prosthetic and she was quite pleased with it. One month later, she came to Ottawa. She met with you, Mr. Chair. She was here for the official launch of the makerspace at the University of Ottawa.

So 3-D printed prosthetics can provide desired functionality at a fraction of the cost of similar prosthetics supplied by industry. It cost less than $100 to produce this. In industry, it would be over $20,000. It's not exactly the same, but it provides the functionality. Ordinary people like me with no particular training can access 3-D printers and make functional assistive devices, whether in Ottawa, in Timbuktu, or in a refugee camp.

Open source designs, creative commons licensing, and enhanced public access to the results of publicly funded research are key for sustaining local resilience, for more innovation, and also for more equitable wealth distribution in the digital age.

I think there's a role for governments to help accelerate the spread and growth of makerspaces, fab labs, and tool libraries that are managed by and for the community. This is an astute way of promoting local resilience, innovation, and entrepreneurship.

Bettina.

[Bettina Vollmerhausen]

That's where I come in.

The Ottawa Tool Library is actually part of a sharing economy and a movement that started in the United States in the 1970s and has moved up to Canada, with Vancouver opening the first tool library in this country four years ago. We will be location number 12 and we are aiming to provide access to tools in four categories: hand tools, power tools, kitchen tools, and garden tools.

As Claude Gagné has pointed out, we are also planning and offering access to workspace, maker labs, where people can be using 3-D printers, CNC routers, and laser cutters.

This is a very important community resource that we're trying to establish. We're currently looking for space in Ottawa and are very much looking forward to support in the community, which we have received already during our recent crowdfunding campaign where we have surpassed our set-up goal. With the support of everyone around, we're looking to open, hopefully very soon, to provide this community resource to Ottawa as well.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much for your testimony.

We'll now go to Pearl Sullivan.

[Dr. Pearl Sullivan]

Thank you very much, Mr. Chairman.

We have an eight-page presentation. There are some copies here. Because of the time, I will just go through some parts of it.

First, Mr. Chairman and members of the committee, thank you for your invitation to speak with you today. I'm here on behalf of hundreds of researchers and students developing new and emerging technologies at the University of Waterloo in collaboration with colleagues across Canada and around the world. As dean of our country's largest engineering school, I'm also fortunate to work alongside some of Canada's brightest young entrepreneurs and to consult with many of our country's industry leaders.

Harvard Business School professor Clayton Christensen coined the term “disruptive innovation” in 1995. Twenty years later, we fully appreciate how new technologies can shake up industries and create completely new markets. We see the consequences of two major 20th century innovations, aviation and telecommunications, in the full force of globalization and the information revolution. The difference today is speed of adoption. It is moving faster than ever before. You can no longer speak in terms of speed but acceleration.

So how does Canada stay on the fast track? With half a per cent of the world's population, we can't do everything, but where we excel, we can lead.

The federal government's recently published science, technology and innovation strategy identifies several disruptive technology areas as priorities, including information and communications technologies, energy and advanced manufacturing. This demonstrates a strong will to prepare our country for the future. I think 21st century disruptions will be led by organizations with the agility to react quickly to new opportunities. We'll develop entirely new technologies, but equally important, we'll adapt technologies in powerful new ways. Those who can stay ahead will be those who can build off and integrate multiple innovations to engineer practical solutions to some of the world's most pressing challenges.

Two research areas that promise enormous economic impact are ICT and energy storage. As you have heard from Industry Canada, the disruptive impacts of ICT spread far beyond IT and the communications sector. Inexpensive new sensors wirelessly transmitting data for analysis will revolutionize environmental monitoring and personalized health care. Aside from the potential health care savings, this technology will be particularly critical for rural and remote Canada. Another ICT impact will be in the connected car.

The overarching impact of ICT is encapsulated in the emerging Internet of things, or IoT, whose potential is highlighted in the government's STI strategy. Expect a future of cyber-physical systems. Technology titans such as Google, GE, Cisco, Intel, Microsoft, IBM, Qualcomm, BlackBerry, Telus, and Samsung are investing billions of dollars to own the Internet of things podium.

The most significant advance in addressing global energy challenges may come in energy storage, a real game-changer for the utility and transportation sectors. Research into energy storage demonstrates the interconnectedness of innovation, linking to other disruptive areas such as smart materials, nanofabrication, and 3-D circuit printing. Over the coming decade, countless IoT sensors, microprocessors, and wireless nodes will need new low-cost, longer-life batteries and energy harvesting technologies.

Already we're seeing commercial energy storage systems with the potential to dramatically change our traditional approach to electricity. Tesla Energy recently announced that Powerwall and SolarCity systems, for example, are rapidly building towards reliable 24-hour solar power for homes and businesses, and they're available off the shelf. ln the longer term, new battery materials like lithium-sulphur will power electric cars three times further than current batteries and at a much lower cost. Both these technology movements will impact horizontal markets creating new services and sectors. They will transform our manufacturing base.

I'll turn now to the heart of innovation.

As a teacher, researcher, and administrator for the past 25 years, l've observed that innovation ecosystems matter, but original ideas provide the essential fuel. Disruptors of the future will be those who can tackle truly difficult technical problems and produce solutions with significant scale-up potential.

If people worldwide can access the new technology quickly, global markets will be transformed. Over time, new technology will itself be disrupted. Of course, we need to maintain a continuous flow of new ideas.

Curiosity-driven research is essential; it is the ultimate source of all new technologies. Strategic initiatives targeting areas with high potential are equally important as they offer competitive differentiation. The roots of truly disruptive innovations, in my view, lie in exceptional technical talent, with men and women who have great ideas and who can execute them. If we can incent them to take ownership and translate their ideas into prototypes with real market potential, we can create a deep culture of innovation.

Global competition for highly skilled talent is very real, dividing the future's technology leaders from the followers. Technology hubs are rapidly emerging in major cities around the world, but the Silicon Valley remains at the frontier, particularly in the area of ICT. However, there is an interesting Canadian story behind it. Last year more software engineers and developers in the Silicon Valley were hired from Waterloo than from any other school in the world save U of C Berkeley—more than MIT, more than Stanford. For these young minds, the world is their oyster. We must build a thriving home for this generation so they can reach their aspirations here in Canada. They are the future of the country.

Deploying new technology can be risky for industry, and it's particularly challenging given the risk and the current pace of change. The infrastructure investments and resources needed are very large. Canada's geography poses unique challenges, but we can create critical ecosystems that cannot be readily reconstructed by competitors.

The co-operative education program at the University of Waterloo provides such a model. Imagine a parallel system whereby the university acts as an anchor for experiential technology innovation. By bringing in companies of all sizes to innovate with our students, we capitalize on infrastructure, talent training, expertise, equipment, tools, information networks, and business support. This approach will enable and accelerate the first critical iteration of product innovation. With over 1,600 co-op partners and over 1,000 research partners, Waterloo engineering's experiences may offer some insights on its feasibility.

I will use the manufacturing sector as an example to end this presentation.

ln the automotive industry, the production life cycle is increasingly shorter. ln the aerospace and medical sectors, the payback periods can be significant.

As regards corporations, in today's environment, even large companies need to collaborate in open innovation ecosystems. Toyota, for example, our major research partner, has forged a recent partnership with Mazda on technology development. This is the future of shared risks.

SMEs employ over 90% of Canadians in the private sector but have scarce resources. They generally don't operate within an innovation ecosystem, but have the greatest need for support for new technologies. One disruptive technology, as you heard earlier, is 3-D printing, or additive manufacturing. lt will enable quick prototyping, proof of concept testing, and small production runs particularly suited for SMEs. This is a technology domain where Canada needs to succeed or else we risk being left behind. Waterloo is partnering with five other Canadian universities and scores of SMEs to create the Canadian additive manufacturing network. It is the future of innovation in product development.

[The Chair, Conservative, David Sweet]

Dr. Sullivan, that will have to be the last word in your opening remarks. It won't be the last word today, though, because we have rounds of questions now.

Colleagues, you have eight minutes each.

We'll begin with Mr. Daniel for eight minutes.

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

Thank you, witnesses, for being here.

Mine is probably a little bit of a weird question. Madame Dubé, you talked about the social need, and as a government we need to look forward and see what's happening, and we have all these disruptive technologies. Where do you think our society should be going, or is it going to be determined by these disruptive technologies? How will we as a society move forward in terms of training and making sure we have the skills to support these disruptive technologies in the future?

I hope you can all have a go at answering that.

Let's start with Mr. Horgan.

[Patrick Horgan]

Okay, I'd be happy to.

We were talking earlier about some history about our company. When I started, even in my time in the company we were the best typewriter manufacturer in the country. Some people would remember the Selectric, but our new employees wonder what that thing is with a label on it.

[Voices]

Oh, oh!

[Patrick Horgan]

We've disrupted ourselves so many times forward and yet our employment rate is the highest it's ever been. I'd say that one of the things we need to say, and it was expressed by many of the speakers here, is we have to move to the future and skills are necessary to do that. It's partly why the ecosystem comes into play in making sure that we don't just think about ourselves and our own domain, whatever organization we're in. We have to think about the adjacent spaces, and especially from that people and skill development point of view.

If I was in a way being selfish as a business...analytic skill is at a huge deficit. Canada is in the middle of that deficit, frankly, although we have some of the best higher education. So we're dragging some of our students to Silicon Valley. Shame on us. We have to think about ways to bring them here, really incent our students to want to thrive here. The way to do that is to do some of the things we're talking about in a collaborative way.

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

IBM is unique in the sense that they actually invest so much back into research and development in their own company.

[Patrick Horgan]

That's correct.

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

That's not the case in many other companies, frankly.