Nancy Hughes Anthony

A PRIVATE SECTOR VIEW ON A PROGRAM THAT WORKS

By Nancy Hughes Anthony

An eclectic group of entrepreneurs, venture capitalists and innovation leaders met for four days last year-two in Vancouver and two in Toronto-to take a hands-on look at whether a much-touted federal program designed to accelerate the commercialization of research was actually working. This "Dragon's Den"-type experience provided an opportunity for 22 Centres of Excellence for Commercialization and Research (CECRs) to show their progress in turning excellent research into innovative products and innovations that benefit Canadians. Overall, the results so far are impressive. Can we do better? Of course.

The CECR is a tri-agency program of the three federal granting agencies, managed by the Networks of Centres of Excellence (NCE) Secretariat. These centres represent all business sectors-from new applications of medical techniques to digital media and green chemistry. A Private Sector Advisory Board (PSAB) comprised of strategic industry advisors was also created to provide expert advice to the NCE Steering Committee. In November, the PSAB recently released its second report: Turning Research into Commerce - PSAB Report on Activities and Impacts of the CECR program.

The CECR program was launched in 2007 to help fill a gap in Canada's innovation system. At the front end of this system is support for academic research, through the granting agencies and related programs. At the opposite end are supports such as the Industrial Research Assistance Program and the Business Development Bank of Canada, which focus on technologies much closer to market.

CECRs work in the middle of this spectrum to mine commercially promising research. They bring together the human, physical and financial resources needed to nurture research to a technology-readiness level, and start-up companies to investment readiness. They facilitate collaborations between research institutions at a regional, national and often international level and then link those institutions to private-sector partners-including suppliers, distributors, customers, investors and end-users such as hospitals.

WHAT'S WORKING

The PSAB found much evidence that the CECR program is working. In just three years, the Government of Canada's contribution of $91 million has already leveraged more than $138 million from the private sector, provincial and municipal governments, and others.

Strong partnerships: Having industry and other receptors at the table minimizes the risk that a technology will be pushed out of a university before it is investor- and/or market-ready. The PSAB found that buyers, customers and other end-users are involved in some level with all 22 CECRs-on boards of directors, advisory committees and research review panels.

Entrepreneurs and industry scientists and engineers also act as mentors to smaller companies, providing technical support and access to facilities to speed the development, testing and validation of new technologies.

In addition to time and resources, the private sector is the largest external contributor to CECRs. It has invested $45 million since the program's launch-an amount that has been rising each year.

Risk capital for small firms: One of the biggest challenges for early-stage technology companies in Canada is a lack of access to risk capital to sustain and grow their operations. Too often, start-ups are forced to turn to foreign sources, which results in many successful firms leaving the country.

Several CECRs have pooled public and private funds to produce a comprehensive suite of funding programs for projects and companies at different stages of development. Support includes micro-loans, syndicate funds, pre-seed and seed investments, equity investments and follow-on venture capital.

Flexible business models: The PSAB report stressed that there is not one model or "one size fits all" for commercialization success, nor should there be. Industry sectors as varied as pharmaceuticals or energy efficiency have different development cycles, business risks and market considerations. A strength of the CECR program is its ability to accommodate these different models.

Most innovation will build on existing products, supply chains and customers. More radical, and albeit riskier, innovation will result in the emergence of new business sectors and markets. Many CECRs have business models that address both, creating a pipeline that delivers short-term successes and longer term prospects for "home runs" with a higher pay-off.

Best practices: Several CECRs have adopted best practices that reduce the amount of time it takes to ramp-up operations, advance research to a technology- and investment-ready stage, build sustainable partnerships, and grow small- and medium-sized enterprises.

One example is standardized intellectual property policies that make it easier for industry to license technologies. Another is to have project applications vetted by expert review panels that include participation from industry or other receptors. This helps to focus research on the needs of end-users and the commercial realities involved in bringing a new technology to market.

WHAT CAN WORK BETTER

The CECR program has many strengths and is showing good progress. Like any initiative, there is room for improvement. For example, among the PSAB's recommendations is that the federal government review the program's mandate and its funding levels, with a view to maximizing its impact within Canada's larger innovation system. To that end, the PSAB recommends allowing existing CECRs that can provide evidence of economic and societal impact to apply for an extension.

The CECR program has demonstrated impressive diversity and creativity in overcoming many of the practical challenges of commercialization. The PSAB is encouraged by the results to date and optimistic that the benefits from this program will continue to accrue for many years to come. It is a valuable tool in Canada's innovation system that should continue to be supported.

Nancy Hughes Anthony chairs the NCE PSAB. She is the former President and Chief Executive Officer of the Canadian Bankers Association. The PSAB report is available at http://www.nce-rce.gc.ca.