One-on-One with Gilles Rhéaume, VP, public policy, The Conference Board of Canada

Innovation report card shows Canada is falling behind.

On the innovation front, Canada is lagging behind other developed nations. So says The Conference Board of Canada’s benchmark study, How Canada Performs: A Report Card on Canada . The report card compares 17 OECD countries across six domains — innovation being one of them. Based on factors that include the creation, transformation and use of knowledge through commercialization, as well as innovative policies, Canada ranked 14th and received a grade of D. To delve into what Canada is doing wrong, and how it can improve its environment for innovation, we spoke with Gilles Rhéaume, The Conference Board’s VP, public policy. Rhéaume joined the not-for-profit organization in 1981 as a forecaster to help with its research and analysis work. He was put in charge of its public policy division in 2003. Included in Rhéaume’s sphere of responsibility is the firm’s Innovation and Technology practice, which nurtures innovation through a mix of executive networks, conferences, training, and research publications. We asked Rhéaume six questions.

What is the greatest challenge currently facing the Technology and Innovation practice and what are you doing about it?

I think the greatest challenge that we’re facing is mobilizing our country to improve its innovation performance. We labeled innovation as an important factor to address in the late 1990s. We emphasized that quite frequently. And then we saw the innovation strategy exercise that the government went through. Now did we have an influence on that? To a certain extent. We certainly raised a cause. A few years ago we had our leaders’ roundtable on commercialization where we had about 50 leaders in Canada that are committed to innovation. And we all agreed that we needed to start focusing on areas of competitive strength. What we started seeing is provincial and federal governments trying to see what areas we should focus on. So I think we are starting to have some influence. Now is that leading to some results? I’d say some, but there’s still a lot that needs to take place. One thing that we haven’t actually done an excellent job of is looking at root causes and doing more in-depth work about those. It’s easy to come up with first order causes as to why a country is struggling in terms of innovation. But that doesn’t get to the bottom of why is that the case. And that’s something we need to accomplish.

Who do you feel is doing innovative work and in what way?

I look at the success story of Ireland, for example. In 1990 it had a standard of living that was about half ours. Today, its standard of living is higher than ours. And a lot of that was they decided they were going to focus. They decided to focus on information and communications technology and biotechnology. It encouraged foreign direct investment in those areas. It had universities focus on skills and research in those areas. Finland, with the demise of the U.S.S.R., went into crisis mode and they focused on what they could be good at on a worldwide scale. And today, when it comes to wireless devices, they have Nokia, which has a global presence. They developed that industry from scratch. They also had a major natural resource, which is forestry. And they not only produced pulp and paper products, they also developed a manufacturing industry that was producing equipment they could sell to forest product industries. And today, we are buying that technology from them. We could have done that — we were developing intellectual property 20 years ago in that area. A lot of it was sold to the Scandinavians. It’s a typical example of missed opportunities that we’ve had in this country because of a lack of an integrated strategy that looks at the overall elements of innovation and how it can fit within industrial processes.

How would you describe your leadership approach/style?

Board-wide, we have a culture of trying to encourage the development of new products and services. We have a lot of entrepreneurs at the board and we encourage entrepreneurship. Even this year in our own area we launched eight new networks, new research projects. Our organization has been in existence now for almost 54 years. And there are very few organizations that have such a long history. We’ve been successful over all of those years because we’ve been able to change and bring about new products and services that organizations are willing to pay for. And we also know when to get rid of those that are no longer necessary. There’s always this aspect of creative destruction. And we encourage that here.

Where do Canadian companies fall short in terms of innovation and how can they improve?

When we look at benchmarking ourselves against other OECD countries, what stands out is the weak level of business R&D in Canada. We are much lower than the OECD average. And also there are only a few companies that carry out most of that R&D. If we look at the top 100 R&D spenders, they account for basically almost all of it in terms of business R&D. And we’ve noticed through our research that companies that conduct or finance R&D tend to also be more innovative, and tend to have a larger proportion of revenues coming from new products. So getting business to do more R&D is a key factor. We know that the mindset in Canada is often that R&D is seen as an expense instead of an investment. And it’s a challenge for us to try to change that mindset of corporate leaders. The other thing is having corporations work more closely with universities, because they are the ones producing a lot of public R&D. They’re also producing the highly skilled workforce. And by companies working closely with universities, schools can better look at the needs of the corporate communities in terms of their labour requirements, and also in terms of research. And then we would have a greater opportunity to take what comes out of universities and make sure that it responds to the commercial opportunities out there.

You mentioned Canada ’s need to have a more focused vision — what is included in this integrated innovation strategy you propose?

If you look at innovation in terms of financial and human resources, it’s quite limited. What we’ve been doing is spreading our financial resources very thinly. In terms of government funding, R&D has been spread across a variety of areas — a little money here, a little money there. If you’re looking at venture capitalists, they’re funding a lot of ventures but in small amounts. No one ever gets the critical mass to develop world class industries that can compete in the global market space. So if we’re going to respond to that we’re going to have to start channeling these resources to some key areas of competitive advantage. Government has resisted focusing on select areas for political reasons. If you choose to encourage commercial applications in certain parts of research and support the development in certain industries then that means you’re not supporting others, and that’s difficult to accept in Canada. But you’ve seen other countries making some choices like that and having success.

There are some interesting opportunities to commercialize new and emerging technologies for which there’s a global demand. One has to do with water management technologies, where we do have a critical mass of small- and medium-sized enterprises. A lot of R&D is being done, but not at the world scale that’s required. So there’s an opportunity for us to get into that business and build it into a much larger industry than we’re currently seeing. There’s also going to be a growing need for clean energy technology. We have a lot of energy resources and unfortunately a lot of them have environmental challenges. There’s a market opportunity for us to develop clean energy technologies in Canada and commercialize them worldwide.

You’ve been part of several climate change advisory groups in your professional life. On a personal level, did you partake in Earth Hour?

Yes, I did. I was at a restaurant at that time. And it was quite an interesting experience in itself. But one hour is not enough. With things like Earth Hour, I sometimes worry that people think, ‘Ok, I’ve done my part; I’ve shut the power off for an hour.’ But how do you change peoples’ habits, not only for one hour but every day? And it’s an interesting thing — hotels in Canada, in hallways lights are on all of the time. I’ve been to Europe and I’ve been to hotels where the lights are sensor-related. So as soon as you step out of your room the hallway lights come on automatically. But as you enter your room or the elevator the lights shut back off. If you leave your hotel room you have to take your key. That key is put into a slot that permits you to have electricity in your room. So when you leave the room you have to take your key, which automatically shut off the lights. If we had hotels in Canada using that type of technology can you imagine the amount of energy we could save?