Budget 2016

March 24, 2016
Tom Brzustowski
RBC Professor at the Tefler School of Management (University of Ottawa), Board Member at the Institute for Quantum Computing (University of Waterloo), Former President (Natural Sciences and Engineering Research Council of Canada)

Budget 2016 had been touted as the herald of change, and there was much in the Finance Minister’s speech to signal that change was coming. The word “innovation” appeared frequently. That’s a good thing. The intention to develop an Innovation Agenda in the next two years was announced. That’s good too. A major section of the Budget document on the Finance Canada web site is entitled “Building a More Innovative Country”. The full-page table in it is a nice summary of the government’s areas of interest in S&T, and the instruments that support them. 

It will be reassuring to university researchers that there is explicit reference to the importance of “discovery research”, and a new allocation of $95 M through the granting councils for it. Another $10 M per year for five years will go to the Perimeter Institute for Theoretical Physics. Such measures are an important indication that the Government understands why basic research matters. 

But I wonder about innovation. Much is made in the Budget of the need for more innovation in Canada, but with no explicit statement of the reason why. The assumption seems to be that more research by better-educated people working in newer labs will make us more innovative, and that will somehow improve the economy. But what if it turns out that it doesn’t? Do we then go back to that tired old question “Why can’t our researchers just commercialize their research better?” But that question is no answer, and never has been.

It seems to me that Budget 2016 was a communications opportunity lost. The Government’s own rhetoric in the last few months has talked about transforming Canada’s economy through science and technology. OK, but what’s the place of innovation in that? In the economic realm, an innovation is an invention that is commercialized by an entrepreneur. In the hands of a skilled entrepreneur, an invention can lead to a new way of adding value in existing activity or of creating entirely new value. Transforming Canada’s economy through science and technology would be the use of technological innovation from all sources – industry, government, and universities – to make more valuable stuff and do more valuable things. Success would be an increase in the value added in all sectors of the Canadian economy – that’s all sectors, including natural resources. No sector would be abandoned. Some sectors might be able to produce big increases in value added, some others only small ones, but moving the whole economy up the value scale would increase the GDP and provide the growth Canada needs. So an Innovation Strategy for government might simply be the single-minded exhortation: “In every sector, find and support those innovations that increase the value added in Canada.” Achieving growth this way has great benefits: an increase in tax revenues at current, or lower, tax rates; a lowered dependence on commodity markets, and a rise in Canadian productivity without the loss of jobs. But it needs a single-minded and enduring commitment from government.

The Innovation Strategy must be discerning in detail because innovation happens in different ways in different circumstances, and innovators have various needs. In the simplest terms, inventions can be research-based (i.e.: new things requiring new knowledge) or design-based (i.e.: new ways of using prior knowledge). And each can become an innovation when commercialized by an established firm or by a new venture. A common factor among the four sources of innovation is the pressure of time. Speed matters – there is urgency in getting to market, in decisions, in government support. The size of a firm seems to matter less than what its people know. The research- based new ventures seem to attract the most media and political attention, because they can be sexy and exciting and hold out great potential, but they have the biggest challenge in learning how to do business. The Innovation Strategy must take such things into account.

It may need to take all of two years to develop the Innovation Strategy, maybe – but no longer, please.