SMEs and large companies working together to strengthen manufacturing: Q&A with Jayson Myers, CEO of NGen

Jayson Myers (photo at right) has been CEO of Next Generation Manufacturing (NGen) Canada, a federally funded, Ontario-based global innovation cluster, since NGen and four other national clusters were announced in November 2018. NGen’s mandate is to fund projects with industry and other partners that support and grow Canada’s advanced manufacturing ecosystem and help strengthen collaboration across the entire ecosystem.

Myers is an award-wining business economist specializing in industrial and technological change. He has more than 25 years of experience building alliances among businesses and academic institutions, as well as community, labour and advocacy organizations. Between 2007 and 2016, he served as president and CEO of Canadian Manufacturers & Exporters, Canada’s largest industry and trade association.

Under Myers’s leadership, NGen has achieved some impressive key performance indicators:

• Total number of approved projects: 209
• Total project value: nearly $733.7 million
• Total NGen funding: nearly $291.6 million
• Total industry/partner contribution: more than $422 million
• Total project partners: 480
• Total number of SMEs: 422
• Total percentage of SME partners: 88 percent
• Total new companies created: 65

Myers talked with Mark Lowey, Research Money’s managing editor, in an hour-long conversation. This is part one of that conversation, in which Myers discusses: small and medium-sized companies’ participation in NGen- and industry-supported projects and the benefits for SMEs; who NGen works with the range of activities it supports; achievements and initiatives Myers is most proud of; and the challenges NGen has faced and continues to face.

In part two of the conversation, which will be published on December 4, Myers talks about: productivity in Canada’s manufacturing sector; his longer-term vision for NGen (including making it self-sustaining financially); NGen’s future if there’s a change in Canada’s federal government; and the potential impact on Canada’s manufacturing sector of a second Donald Trump administration in the U.S.

R$:  One of the main goals of the federal government’s global innovation cluster initiative was to engage more Canadian SMEs in innovative commercial projects with large corporations, to help SMEs scale up and expand their market reach. Has NGen been able to achieve this goal during the more than five years the innovation cluster has been in operation, and if so, how? Can you provide a couple of examples?

JM:  Our focus is on SMEs a lot. What we’re trying to do basically is bridge this gap between R&D and technology on the one hand and industrial customers – manufacturers – on the other. A part of that is making sure that people are aware of technologies and what is already out there, and the money [provided by NGen] helps to reduce the risk. But a lot of it is putting together the right partnerships and focusing the project teams on delivering a solution that’s applicable in manufacturing.

Ninety percent of our project partners are smaller companies with fewer than 500 employees. Probably 50 percent of the project partners would have fewer than 100 employees, so they’re small companies. And they’re primarily in the technology space. They’re not the manufacturers.

What we’ve found is that the larger manufacturing companies first of all don’t know what is out there in terms of technologies that smaller companies have to offer. The manufacturing companies have a challenge. They want to go from A to B [and] they think they need a “car.” A small tech company comes with a pair of “tires” and expects the manufacturer to know what to do with them, and they don’t.

So what we do often is integrate technologies. A lot of these solutions being developed for large companies require a combination of technologies, and being able to work with the manufacturer and even more than one small tech company in developing the solution that’s appropriate for the larger manufacturing company.

First of all, [NGen’s network] offers a tech company the capability of connecting to a large manufacturer that it wouldn’t have without another tech company partner. So it’s giving them [the tech company] a potential they wouldn’t have.

The second [benefit] is the connection with larger companies. But it’s a facilitated connection. It’s not just a transaction. The larger company is actually sharing their intellectual property with the smaller company, and it’s not just snatching IP from the smaller companies. All of our projects have contribution agreements that outline the IP – background IP as well as foreground IP – that’s shared among the entire project team. In no case is one project partner taking all of the IP. The IP that’s developed with small companies resides with the small companies but it’s also licensed for use by the larger customer, the larger manufacturer. These are joint solutions that are co-developed. So even in the IP development, the relationship with larger companies is giving the technology companies a tremendous amount of IP themselves.

AI is a great example of this. A small AI company working with a larger manufacturer is now in a position where they can not only leverage up that relationship to do business anywhere, but can now train their algorithms on the basis of the data that’s being provided by a larger company, giving them access to resources that they wouldn’t otherwise have.

There are other benefits. We reimburse 35 percent to 40 percent of eligible expenses, and we leave it up to the project teams to figure out how that reimbursement works within the project team. In some cases, the larger company will take a lower rate of reimbursement and allow the smaller companies to take a larger rate of reimbursement because it’s recognized that the smaller companies don’t have the financial capabilities that larger companies do. So the larger companies sometimes financially backstop the role of smaller companies in these project consortia.

R$:  Can you provide a couple of examples of projects with SMEs and how they’re benefitting?

JM:  We’ve got some really interesting projects where we’ve got large companies that are working with one or more tech companies to automate their processes or introduce AI into their processes. For example, PolyML is a very small AI company in Waterloo that began working with Martinrea [a Vaughn, Ont.-based auto parts manufacturer] to digitize some of their processes. Now Martinrea is taking those solutions across all the Martinrea facilities around the world. For PolyML, it’s given them not only experience in working with large companies but the recognition as a supplier to a global auto parts company.

There was a group of small companies that helped ArcelorMittal [which has locations in Quebec and Ontario] digitize their hot-ladle steel production. The group included a variety of companies including AI and materials research and [the project] brought in McMaster University and other partners. That’s helped small companies innovate their technologies to develop a solution that they wouldn’t be a part of otherwise. It’s helped ArcelorMittal develop a process that they wouldn’t be able to develop on their own dealing with individual technology companies. Now ArcelorMittal is taking that solution worldwide through their facilities.

Their IP relationship with small companies is to say, ‘We don’t want you to sell this solution to another metals company. But really what you’ve got is a process to handle hot hazardous liquids. So feel free to use the IP and the solution and sell it to chemicals [companies] or pharmaceuticals or food processing, because it’s not competitive with something that ArcelorMittal is doing.’

We’ve got [small tech] companies that are automating processes for Saputo in the dairy processing business, and with Linamar, Magna, and MDA Space. We’ve got some very prominent large companies involved. But in all of these cases, the IP agreements that are signed allow the smaller companies to keep control of their IP. It’s all about scaling up and commercializing their IP and their solutions.

For the smaller companies, through their relationships with the larger companies, it does a lot for them in giving them a better understanding of how their technology can be used in industrial applications.

R$:  What are some of the accomplishments that you’re most proud of during your time as NGen’s CEO? Any new or recently launched initiatives you’re particularly proud of?

JM:  We’ve gone through all the slings and arrows of a startup. I think our ability to move quickly to support technologies to address the COVID pandemic is one of the highlights right at the very beginning. We were able to very quickly approve projects and get them funded that brought out some really innovative treatments as well as innovative types of medical devices to fight the COVID pandemic.

There’s one project in particular where we had 10 companies designing new manufacturing components for medical equipment that could be used in ICUs that came together very quickly and everybody contributed to the development of the medical equipment. They were all designed to be sourced in Canada. That [project] was led by StarFish Medical [based in Victoria, B.C.] We did support the development of a Canadian mRNA vaccine [made by Providence Therapeutics in Calgary] and we were the only group that supported it.

One of the very first projects we funded was in biomanufacturing and development of stem cell processes. We were criticized at the time because people said, ‘Well, that’s life sciences, it’s not manufacturing.’ Well, welcome to the new world of manufacturing. One of the greatest things that we’ve done is support OmniaBio’s facility in Hamilton, providing ecosystem support for stem cell companies developing new therapeutics there and they’ve had some really, really good successes.

We’ve supported a biomanufacturing facility at Cape Breton University, again providing smaller companies with access to clean rooms and wet labs [in an initiative] focused on sustainable biomanufacturing materials.

That’s another area that I’m very proud of – our support for these ecosystem facilities that are providing small companies with access to resources, whether it’s expert advice or through test beds or scale-up facilities of some sort. That type of ecosystem funding has really gone a long way in providing smaller companies access to those types of test beds or training centres that can really help them grow.

More recently, we were allocated $50 million in the federal budget in April for an accelerated home-building innovation fund. And we’ve approved $50 million in projects as of the end of October. There are other organizations still waiting to get funding approval for the money that they got, so it shows how quickly we can operate and how effective we are. We actually have more highly-rated projects that our assessment team said were good projects to be funded, but we didn’t have enough money to provide them with the funding. So now we’re going out and looking at raising other sources of funding for them. I’m very proud of our ability to move very quickly to bring these project consortia together and the quality of these innovation projects and applications in real industry.

R$:  Apart from NGen’s network partners in the project consortia, who else are you working with in Canada’s innovation ecosystem?

JM:  We’ve also allocated quite a bit of money to support what we’re calling ecosystem projects. As part of that, we’re organizing Canada’s presence at Hanover Messe, the Hanover trade fair that’s the biggest industrial trade fair in the world. Canada is a partner country. We’ve been asked to organize the entire thing. We’ll have over 200 exhibitors in April of next year in Hanover. I’m really proud and excited about the quality [of the companies] and what Canada has to offer to the world.

We’ve been able to help new immigrants by providing them with certifications for skills training. We’ve had a very successful program attracting young people into advanced manufacturing careers. [I see] the excitement with young people who come in to manufacturing facilities and a lot of them changing their attitudes toward what technology is all about and some of these applications when it comes to health care or environmental sustainability.

We started up Canada’s first Indigenous manufacturing network of Indigenous small companies looking to come together to increase their business in Canada and internationally. We’re working with Indigenous public schools and high schools to provide manufacturing entrepreneurship and financial literacy courses. This year alone, close to 2,000 Indigenous students are going to be enrolled in those courses. To see a video of Grade 6 Indigenous students so excited about designing and sourcing materials and manufacturing and distributing and selling pizzas, then figuring out that this is the best-attended course in the entire school – that’s pretty good.

We’ve got a great track record. I think we’ve been very successful. We’ve now topped $17.2 billion in sales and licensing agreements for the projects that we’ve funded. For every dollar that we’ve put in to projects that have finished up, we now have a return of 32 times that in terms of sales. Sixty-six new companies were created. In the last three years, we’ve created twice as many IP rights as the Canada Foundation for Innovation has and they have a budget 10 times more than us.

R$:  What are a couple of the biggest challenges do you think NGen has faced?

JM:  It took us some time to get going. I look back at that and NGen and all of the clusters were new and I think it was time well spent to make sure that we were in a good working relationship with ISED (Innovation, Science and Economic Development Canada). When we were able to provide funding, we were able to move very quickly and establish a great amount of trust with our major funder. That was certainly a challenge, because the expectation was as soon as we were given money that money should be flowing out to people. There are a lot of people who think because we have money that they deserve it. Frankly, the biggest challenge isn’t getting the money. It’s making sure that we are able to allocate it in a responsible and effective way.

In terms of operational challenges, our biggest challenge is keeping up with the business. We’ve got so much on the go here in terms of projects and other initiatives that we’re running. We’ve got a relatively small team doing all of this. That’s a big challenge for us, just making sure that we’re prioritizing and allocating our resources well.

The other challenge is we do a great job and the other [four] clusters do as well, but I don’t think we’re known as well as we should be. We’re not as integrated into the innovation system – the innovation system isn’t integrated nearly as much as it should be, either. There are areas where we could co-invest or look at joint common objectives across the innovation programming where I think we could be playing a much more constructive role and a much more active role.

One of my frustrations is that NGen isn’t taken into consideration when it comes to launching major government initiatives in technology or in innovation. We’ve been able to attract funding from the pan-Canadian AI strategy and the quantum strategy but there are so many other opportunities, even with IRAP (Industrial Research Assistance Program) or with NRC (National Research Council) or with Regional Development Agencies or the Strategic Innovation Fund or the biomanufacturing strategy or the blue ocean strategy.

Even with the success that [the innovation clusters] have shown and the leverage that we’ve shown and achieved with federal funding, we’re sort of an afterthought – if a thought at all. Because we are dealing with grassroots innovation in putting together these project consortia, we’ve got a really, really good feel for what’s going on at a grassroots level and at an industrial level and [we have] lots of insights about what works and what doesn’t work around innovation programming. Some of this is probably our responsibility, too, but those insights are not often taken into consideration. So I think one of the big challenges is making the case that NGen and the other clusters are really doing very good work and should be seen not just as a 10-year wonder, as most innovation programs are, but could be seen as very integral parts of an innovation system at the federal level.

One of the other frustrations and challenges I have is that, especially today when politics tend to intervene in federal-provincial relations, we’re not seen as a resource that the provinces can leverage, either. Forty percent of our projects are interprovincial projects – we’ve got project teams from different provinces involved in this. As the other clusters are, too, we’re operating across Canada. We’ve got members and project partners across the country, not only in every province but in the territories, too. We’re really operating nationally. I think one of our strengths is we can do things, especially in training and education and maybe in startups and promotion of our innovation capabilities, that government can’t do because government is so siloed. Our strength is we’re focusing on industry and industry-led [projects] and we operate at the speed of industry. We’re just not integrated as much as we should be in the overall innovation funding ecosystem. It’s not just at the federal level, it’s provincial, too.

To be continued . . . 

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