Finding receptors for Canadian technology

By Denzil Doyle

Anyone who is involved in the management of our publicly funded R&D facilities — whether they be in our universities or government laboratories — will tell you that they are under enormous pressure to generate revenue from the technology that flows from their R&D. The choices available to them for generating such revenue fall into two broad categories: they can license it out or they can use it to provide technology-related services such as contract R&D.

As this pressure increases, the managers of those facilities are complaining about the limitations of Canadian industry as a receptor for their technology. They argue that even though they have invested heavily in technology commercialization facilities, they have no choice but to license the technology to foreign enterprises. The same is true of the contract R&D.

The result of such practice is that when the technology does get converted into products, services, and processes, the only financial return to Canada is licensing or contract research dollars, whereas if the conversion had taken place in Canada, there would be new corporate activity that creates jobs and exports and all of the economic benefits that they bring.

If you ask any technology commercialization officer in those facilities, they will tell you that more and more of the technology is going offshore and the trend is increasing with the pressure for revenue generation. Exact statistics are hard to come by because many of the receptors are Canadian-based subsidiaries of multinational enterprises (MNEs) whose missions do not include the commercialization of such technology. They are simply acting as conduits for the technology into their parent companies.

cause for alarm?

Is this a situation that our policy makers should be alarmed about, and if so, what should they do about it? The answer to the first part of the question is obviously yes because Canadian taxpayers have a right to expect maximum economic payback from their hard earned dollars that fund such research. However, we must be careful in the solutions that we come up with. We must recognize that science is a global game and that if we place impediments in front of Canadian scientists in the licensing of their technology, they will go elsewhere to practice their trade.

The basic problem is that Canada has an economy that does not need much science. Even if we did, we do not have the MNEs that make the best receptors for it. What Canada does have is hundreds of small and medium enterprises (SMEs) that are aspiring to become MNEs. One of the reasons why they never make it is because they do not have sound product migration strategies. They just go on supplying the original product or service until it is well past its "best before date" and they get blown out of the water by some competitor — very often a company outside of Canada. While few of them will admit to this, where they go wrong is that they fail to identify the next wave of technology that can be exploited to address their markets. For example, they fail to recognize that the problem they have been solving for years with hardware can now be solved with software — or vice versa. Rather than admit that they have a technology problem, they blame the government or the financial community or their customers.

bridging the academic-corporate divide

While the people who manage our SMEs and those who manage our publicly funded R&D facilities live in two different worlds, the fact of the matter is that the latter can help the former with their product migration strategies. The scientists have a pretty good idea of where their enabling technologies are going and of the steps that the SMEs should be taking to exploit the new waves.

So perhaps what we should be saying to our publicly funded laboratories is go ahead and license your technology to the MNEs, wherever they may reside but keep some of it aside for helping our SMEs with their product migration strategies. (It is assumed that they will first look for Canadian receptors, regardless of their size or type, but they are already doing a pretty good job of that.)

The next question is how to get the two communities talking to one another. The obvious answer is the National Research Council's Industrial Research Assistance Program (IRAP). It has representatives in every corner of the country and many of them are familiar with the problem being discussed here and which publicly funded laboratories should be able to solve it. In fact, some of them are playing this role now.

new program required

The timing is right for the formalization of such a program because all of our laboratories are under extreme pressure to work with our SMEs — almost as much pressure as they are getting for revenue generation. It could be kicked off with a series of product migration workshops, possibly hosted by IRAP. They would be followed up by one-on-one sessions because the SMEs will be concerned about confidentiality. Industry Canada could also assist in the process at a macro level through its technology road map program.

There should also be a policy that steers some of the MNE licensing revenue toward the funding of the SME program. The net result could be the conversion of a problem into an opportunity that works to everybody's advantage. It will not solve all of the problems faced by our SMEs (their financing problems are currently horrendous) nor by the laboratories (a lot of the contract research work they are doing is consulting work that should be done by the private sector) but it will get the two sides talking to each other.

Denzil Doyle is chairman of Doyletech Corp, an Ottawa-based consulting firm providing services to entrepreneurs, investors, policy makers and economic development authorities. From 1963 to 1981, he directed the affairs of Digital Equipment Corp's Canadian operations. From 1995 to 2005, Doyle served as chairman of Capital Alliance Ventures Inc., an Ottawa-based venture capital firm specializing in technology investments.