Replacing rhetoric with "honest discussion" key to tackling innovation problems: David Watters

Canada needs industrial sector strategies, innovation targets and an innovation strategy that is fundamentally an export strategy. As part of this bolder approach, the federal government also needs to admit it has an innovation performance problem that requires solutions led by the private sector, not-for-profits and post-secondary institutions.

It was a familiar refrain from a former assistant deputy minister turned innovation consultant who told delegates to the 18^th annual RE$EARCH MONEY conference that the government’s upbeat rhetoric on innovation performance does not reflect the reality.

“Canada’s innovation strategy, industrial strategy, trade strategy and emerging skills strategy all need to be integrated. Right now they’re being treated as silos. We need to make sure that internally we’re collaborating and trying to be much smarter in terms of representing our interests abroad. It is a very tough world out there in which we’re a very, very small player,” David Watters, president and CEO of Global Advantage Consulting Group, said during his keynote address in Ottawa.

Ottawa, he stressed, needs to have an “honest discussion” on concrete actions to address these persistent challenges.

“We continue to be on a downward path, through both federal governments (the former Progressive Conservative government and the current Liberal government) and through six innovation strategies,” Watters said. “Each innovation strategy has had some success, but overall it certainly hasn’t changed the dynamic of some of the fundamentals of how we’ve been performing. Other countries, our trading partners, are performing much better.”

Canada’s GDP on R&D (which includes both the public and the private sectors) was expected to reach $34.5 billion in 2018, according to Statistics Canada. But according to Watters, Canada would need to spend an additional $18 billion per year just to reach the “average” annual R&D spending of about $52 billion for Organization for Economic Cooperation and Development (OECD) countries.

OECD data for 2017 show that Canada spent about 1.6% of its gross domestic spending on R&D, compared with 4.55% for Korea, 3.2% for Japan, and 2.71% for the U.S. “We need to invest more money in the R&D and innovation system on quite a significant scale,” Watters added.

Budget 2019 earmarked $552 million for new federal spending on research and innovation initiatives over the next two years. However, given the size of Canada’s economy (about $2 trillion GDP), Watters said this amount isn’t likely to have a significant impact on the country’s R&D base and innovation. “I would suggest it’s rather a meagre amount of money.”

Canada ranks a respectable 18^th out of 120 countries on the Global Innovation Index 2018, in terms of innovation inputs such as research institutions, university research and infrastructure. But when it comes to innovation inputs versus outputs such as product growth, intellectual property and exports of knowledge-intensive services, Canada ranks a mediocre 61^st.

It’s a similar story at the provincial level, noted Watters. A 2018 Conference Board of Canada report gave eight provinces a D or D- grade for innovation performance.

Canada’s quality at life at risk

Watters referred to another report, “Building a Nation of Innovators,” released in February by Innovation, Science and Economic Development Canada. It bluntly states that “without immediate and targeted action that builds upon existing strengths and addresses key gaps and weaknesses along the innovation continuum that drives growth, Canada will fall even further behind, putting its high quality of life at risk”.

Watters concurred: “Let’s acknowledge that we have a problem, and how can we work together collaboratively to make it better.”

One perpetual issue is that Canada still has silo-like “vertical” government structures and innovation programs that are not structured or aligned in terms of research or innovation capacity. Watters said this is a particular challenge when it comes to exploiting new global technologies such as artificial intelligence and cybersecurity that cut horizontally across disciplines and sectors.

There is also an imbalance between outward flowing foreign direct investments (FDI) of $100 million, versus inward FDI flows of about $31.5 million. Watters suggested some Canadian businesses are finding it easier to invest abroad than in Canada. Canada needs to identify and implement incentive structures to keep businesses investing and growing here, he said.

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