Canadian innovation needs to fail differently

Despite significant government efforts to promote innovation, Canada lags in innovation, productivity, and competitiveness, seriously threatening the Canadian economy.

Numerous reports have documented Canada’s weak innovation performance, but little agreement exists on why (1). Many point to a lack of private sector spending on research and development, while others blame the lack of translation from promising academic research into robust domestic innovation and commercial outcomes. Others still point to challenges in achieving scale. Numerous reports have outlined outstanding ideas, principles, and policy levers for the Canadian government to better support innovation, yet these practices have either not been implemented or have simply failed.

Perhaps herein lies the problem. Canada’s history has fixated on top-down, (big) industry-led initiatives to spark change. This “directive leadership” is clearly not working. Like a true innovator, Canada should dare to fail differently and try a different tack – pursuing a “facilitative leadership” role focused on cultivating a strong innovation ecosystem by empowering innovators and cultivating connection.

A good innovation ecosystem should be like a good party: diverse, welcoming, fun, and engaging. It should include a mix of stakeholders, from individuals to organizations of all sizes and interests, fostering engaging connections that make participants want to stay, participate and connect. Everyone should be there because they don’t want to be anywhere else. So, how do we create this robust innovation ecosystem in Canada?

Empowering innovators

How do Canadian companies fall into one of two buckets – those who never receive government support and those who spend all their time chasing it? Navigating the endless thicket of government funding opportunities plus nursing the bureaucracy of government funding programs can be time-consuming, distracting innovators from their core activities to become successful. It is overly bureaucratic, administrative work which easily drags down once-agile startups. The administrative burden of current funding mechanisms only favors companies that can afford administrative burdens: large, well-established organizations, often multinational, foreign-based corporations, for whom this funding is neither make nor break. This does very little to foster a local ecosystem or empower new and upcoming SMEs – the very ones who we hope to grow into large Canadian success stories.

Ideal government support should empower upcoming businesses to do what they are supposed to do – there are far too many stories of funding requirements “wagging the dog,” limiting the flexibility and freedom that startups need to successfully grow. Furthermore, the “matching funds” regime that is so prevalent in Canada’s innovation funding for SMEs only deepens the administrative load on innovators. This funding mechanism requires both the private sector and the government to put in partial funding to execute a project. While this theoretically de-risks taxpayer spending on innovation, it ends up subsidizing large multinational corporations who can easily put up their percentage, while forcing up-and-coming innovators into a pyramid scheme of funding opportunities, where funding from one program becomes matching funding for another.

For these smaller, newer, risk-taking enterprises, the best way for government funding to empower local innovators is to closely mimic private investment in terms of process, speed, risk-profile and relationship-building. As a result, innovators would gain useful experience fundraising with funding agencies that could transfer to fundraising “in the real world” and become better equipped to raise funds elsewhere.

There is a growing conversation in “metascience” – the science of doing science – among funders globally who dare to ask the question of how to best support entrepreneurial science. For example, the US government’s Defense Advanced Research Projects Agency (DARPA) has been lauded as being a model program (2) for effectively funding innovation, and this model has been adopted in other countries, such as the UK launching the Advanced Research & Invention Agency in 2023 (3). It would make perfect sense for Canada to take direct inspiration and best practices from leading government funding agencies like DARPA, philanthropic organizations and venture capital funds to support innovation across the discovery to commercialization pathway; why re-invent the wheel? For the most effective agencies the equation is pretty simple: fund fast, fund often, and hand over the decision making to highly engaged, science-minded program managers who are hired on 3-5 year contracts and who see innovation funding as an act of public service.

Facilitating connection

This focus on creating a robust innovation ecosystem is not just about having the right pieces of the puzzle but about fostering their connection. As Atkinson & Zhang (4) well stated in a recent report from the Centre for Canadian Innovation and Competitiveness: Canada must “move beyond ingredientism.” Canada is a leader in various indices of the ingredients of innovation: good universities, educated workers, robust resources, and good broadband. However they are not clearly coming together nor held together productively.

The federal and provincial governments have innumerable roles dedicated to facilitating connections between countries through trade commissioners and investment attraction officers. But, a similar, relationships-based concierge service could do wonders to connect academia, startups, funders, and resources within Canadian ecosystems. For anyone who has applied for

a government grant, many would agree that it would be much more productive to interact with a bureaucrat tasked with connecting the ecosystem rather than nitpicking expense receipts.

StartupTNT, an independent non-profit, has been instrumental in building interconnected startup environments across Western Canada by hosting weekly meetups, regular investment summits (where startups share their pitches for funding and past winners share updates) and by – very importantly – training Canadians with dollars to spare how to become an angel investor. Not only are they incredible innovation ecosystem party hosts, but they are welcoming more and more locals to the crowd through investor training and effectively building a grassroots investor network. It’s a model that could easily be replicated across Canada to great effect, especially given that wealthy Canadians, in general, tend to be highly conservative, rarely looking beyond land and property investments into investments in small businesses that could strengthen the local economy and, in turn, productivity growth, and in turn, an economy’s standard of living.

A third means of facilitating connection is by fostering a culture that celebrates innovation. As a country we do not celebrate our inventors or inventions enough, despite this history being excellent fodder for public art installations, media engagement, and cultivating a general sense of Canadian pride.

Lastly, facilitating connection is especially difficult in a country of Canada’s size. In many, if not most, funding schemes, travel expenses are ineligible for funding support. Why not? Given that distance is one of the key reasons why Canada’s innovation ecosystem is segregated, should this not be exactly the type of expense subsidized by the government to strengthen collaboration? With any new funding program, it would be a no-brainer for the government to cover expenses to ensure that the cohort of funded projects and innovators can convene in person. Those in-person opportunities for innovators at similar stages to share their concerns, challenges, and opportunities unlock crucial network effects that only strengthen the Canadian ecosystem.

In an ever changing world, a stagnant economy means you’re moving backwards. Ultimately, the success of Canada’s innovation ecosystem depends on our ability to rapidly adapt, connect, and empower. Top-down direction has failed. By embracing a facilitative leadership role we can weave together a stronger coast-to-coast ecosystem, providing a counter-force to that ever-present north-south pull.

REFERENCES

1. Fraser Institute [Internet]. [cited 2024 Oct 7]. Innovation in Canada, An Assessment of Recent Experience. Available from: https://www.fraserinstitute.org/sites/default/files/innovation-in-canada_0.pdf

2. Why does DARPA work? [Internet]. [cited 2024 Oct 7]. Ben Reinhardt. Available from: https://blog.benjaminreinhardt.com/wddw
3. Eight Scientists, a Billion Dollars, and the Moonshot Agency Trying to Make Britain Great Again. [Internet]. [cited 2024 Oct 8]. WIRED. Available from: https://www.wired.com/story/aria-moonshot-darpa-uk-britain-great-again/
4. Information Technology and Innovation Foundation [Internet]. [cited 2024 Oct 7]. Assessing Canadian Innovation, Productive, and Competitiveness. Available from: https://www2.itif.org/2024-canadian-competitiveness.pdf