INO in discussions with Ottawa to support ambitious expansion plans across Canada

The Institut national d'optique (INO) has begun informal discussions with the federal government to support an expansion of its services across the country. The plan comes as the Quebec City-based organization celebrates its 25th anniversary as a key player in the development and commercialization of optics and photonics technologies in an ever widening range of industry sectors.

INO already has business development offices in Calgary and Hamilton and it hopes to establish R&D facilities in those cities — as well as Vancouver — to serve industries where optics and photonics have yet to be fully exploited.

The proposed expansion will cost an estimated $50 million over five years (including $10 million for capital acquisitions) with the federal government providing half the necessary funding to be matched by the relevant provinces. INO currently receives support from Ottawa and the province of Quebec in about equal measure, with Quebec also contributing funds for capital expenditures of $2.5 million annually. Its budget in FY11-12 was $37.6 million.

INO has one of the highest leverage ratios of any R&D organization in Canada, with more than 50% of its annual revenues coming from research contracts, primarily with industry. Its funding model is similar to that being pursued by the National Research Council (NRC) which makes INO particularly attractive to the collaborative, outcomes-based innovation model currently being developed by the Conservative government.

INO was last refunded in 2011, with the federal government committing first, followed by the province. Ottawa is contributing $45 million over five years (R$, April 18/11) and the province is providing $35 million over the same period as well as about $2.5 million annually to cover capital outlays.

President and CEO Jean-Yves Roy, says INO's approach of conducting contract R&D to disseminate optics and photonics technologies throughout industry and spinning off companies auger well for future expansion.

"The federal government renewed INO quickly in 2011 because it recognized that our model was very similar to the new NRC model that had just been developed," says Roy. "We have a specific plan to expand beyond Quebec and we are discussing this informally with the federal government. We need to demonstrate that we can reproduce our Quebec success elsewhere."

INO's expansion plans were part of its current funding agreement with the federal and Quebec governments, but it found that a target of 60% external funding was unachievable. It conducted a benchmark analysis with other optics research facilities which showed that INO's current financing of 50% from external sources or autofinancing was the highest among those surveyed. In comparison, the Fraunhofer optics institute in Jena Germany, achieved autofinancing of 46% and the VTT Technical Research Centre of Finland achieved 42%, while optics facilities in Ireland and France scored 5% and 15% respectively.

It also discovered that the original idea of serving other regions of Canada from its Quebec City facilities was untenable.

"We found new customers but it was hard to establish long-term relationships ... Each program we add in other cities requires 15 of 20 people so the expansion plan needs about 80 more. We need to be close to the customer," says Roy. "We have been talking informally with people at Industry Canada and Fed Dev (Federal Economic Development Agency for Southern Ontario) and overall it has been quite positive. The challenge is, there is no specific program for this type of request."

Roy says that if the expansion is approved and funded, a 1:1 leverage ratio can be achieved within five years and it plans to initiate several programs in the coming months to make its point and demonstrate both the benefits of, and demand for, its services and business development model. Once the expansion rollout is completed within 3-5 years, INO will then approach the relevant provinces for matching support.

Hamilton — with a focus on the automotive and biomedical sectors — is the furthest advanced. INO already rents lab space from McMaster and has established a relationship with the Univ of Toronto and the University Health Network. If funding is approved, it will hire up to 40 people in the region.

INO has had considerable success moving the technologies it has developed through its internal research program into the marketplace. Over its 25-year history, it has spun out 29 companies, all of which remain active although a few have been absorbed into larger firms through acquisition. It plans to accelerate the pace of spin-offs although commercialization poses a challenge on the research side as it must replace technological capacity and associated revenues with new initiatives.

INO's highly disciplined technology development capabilities are based on nine R&D programs – four technology pillars and five targeted application fields. It employs the nine-stage technology readiness level (TRL) scale to determine who to partner with as technology moves from the lab to the marketplace.

TRL 1-3 will typically see INO researchers partner with universities and research institutes before moving on to TRL 4-6 using internal research expertise — an area Roy calls INO's "sweet spot". To move beyond TRL6, Roy says INO must have engaged a customer.

"We are managing an enabling science. It's a de-risking process and reducing time to market. If a customer cannot be found (beyond TRL6) the project will be shut down," says Roy. "We adopted this approach six or seven years ago and it's a good tool to make decisions for our programs. Each program manager has to make a three-to-five year roadmap and we use TRL to mature the technology development process."

INO has also forged extensive contacts with the venture capital industry to facilitate spin-offs and recently received $200,000 from theb provincial government to establish an entrepreneur-in-residence program.

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