Building B.C.’s Innovation Economy: What will it take to become a global leader?

Presentation to the Vancouver Board of Trade

Andrew Petter
President and Vice-Chancellor
Simon Fraser University

I’d like to begin by acknowledging the Musqueam, Squamish and Tsleil-Waututh Peoples on whose traditional territories we are privileged to gather.

I always welcome the chance to speak to the Greater Vancouver Board of Trade. The most important part, however, is that you have come too. It is vital to SFU’s mission as Canada’s most community-engaged research university to have a community that is keen to engage with us.  So, thank you for being here.

The focus of my presentation today is BC’s Innovation Economy and what it will take for us to become a global innovation leader. But I’m going to start by telling you a story about the Morpho butterfly. The Morpho is a neotropical butterfly that can be found throughout the forests of South and Central America.

In 2008, one of our researchers, Dr. Bozena Kaminska, and her graduate student, Clint Landrock, were studying – for curiosity’s sake – the Morpho’s luminous blue wings. And they discovered that the vivid colour came not from pigment, but from nano-sized holes that trap and reflect light. It was one of those “Ah Ha” moments that occur frequently in great universities – and all too frequently drift quietly away. Researchers are good at research. They are not always good at discerning or developing its commercial potential.

But SFU has a university-wide business incubator called Coast Capital Savings Venture Connection. It provides skill building and mentoring by people like Doug Blakeway, a Venture Connection entrepreneur-in-residence. When Bozena and Clint told Doug about their discovery, he quickly saw its potential as an anti-counterfeiting technology.  He helped them to test the market and, subsequently, to establish Nanotech Security Corporation. Nanotech can “print” materials without ink.  They punch 500 million holes on an area the size of your little fingernail – and those holes reflect light in the form of unreproducible holograms. Of course, Nanotech required further applied research to commercialize the technology.

For this, they turned to 4D LABS, SFU’s state-of-the-art material science lab.  4D LABS has a mandate to support the research needs of industry partners. They work with everyone from local start-ups like Cooledge Lighting to multi-nationals like Daimler-Benz, solving problems and supporting innovation. With the ongoing help of 4D LABS, Nanotech has, in less than 10 years, joined the world’s premier providers of anti-counterfeiting technology. For example, when my son attended the Euro 2016 Football Championships last year, his tickets carried Nanotech images that guaranteed their authenticity.

Nanotech also has a $30-million contract to develop banknote security features for a major issuing authority. And it recently signed partnership agreements with a subsidiary of the China Banknote Printing & Minting Corporation and with a leading high-security hologram manufacturer in India. All because of the fascination that an SFU faculty member and her graduate student had for the luminous wings of the Morpho butterfly.

What has this got to do with British Columbia becoming a global innovation leader?  I believe a lot.  For starters, Nanotech is becoming a significant player in Metro Vancouver’s innovation ecosystem – an ecosystem that is gaining international notice.

Startup Genome’s 2017 global ranking places Vancouver 15^th amongst the world’s top 20 innovation ecosystems – up three places from two years ago, and first in Canada. We can be proud to rank in proximity to cities like Stockholm (#14) and Sydney (#17). It’s not all good news however. We are six places below where we stood in 2012, and five places below our most direct regional competitor, Seattle (#10).

So how do we go about improving our global standing?  There are clues in the wings of the Morpho butterfly. The Morpho’s metamorphosis into a profitable security technology didn’t happen by accident. It occurred within an ecosystem that fostered innovation by linking knowledge, curiosity and talent to markets, infrastructure and resources.  True, that ecosystem was centred within a university – a point to which I will return shortly – but the conditions for innovation are not much different within the wider community.

I had the good fortune recently to hear a presentation by Nadir Mohamed, the former Rogers CEO who is now working with a venture capital initiative called ScaleUp Ventures. ScaleUp has secured $25 million in public funding, $75 million in private funding, and formed a leadership council of CEOs committed to identifying and supporting disruptive innovation. Nadir set out six key markers for successful innovation, and I think they’re worthy of our attention.

The first and foremost is talent. You might even say “talent, talent, talent,” because, as location is to real estate, talent is to innovation. Second, Nadir identified immigration, which is really a subset of talent. We need enough people with the right combination of talents, and if we can’t find them domestically, we need to draw them from other parts of the world.

Third, is: access to private and public capital – which is a serious issue in Canada, on both fronts. Fourth is: access to a customer base, something Startup Genome identifies as a strength for Vancouver due to our “Global Connectedness and … world’s highest ranking in reaching foreign customers.”

Nadir’s fifth marker is ecosystem, which he described roughly as collaborative capacity, and which I might call “engagement.” And finally: “risk culture.” For our purposes, you could look upon that as entrepreneurship – which is another Canadian strength.

The Global Entrepreneurship and Development Institute ranks Canada third in the world in its entrepreneurship index, behind only Switzerland and the United States, and well ahead of countries such as Israel, Singapore and Ireland. I don’t plan to dig deeply into all of Nadir’s markers, but I’d like to expand on a few – especially talent. As the Board of Trade well knows, this is an area where Metro Vancouver needs work.

The Board’s 2016 Economic Scorecard gave Vancouver a “C” grade for the percentage of residents 25 and over with a bachelor’s degree or higher.  Just 31 per cent of our population has this increasingly necessary credential, compared to 46 per cent in San Francisco and 40 per cent in Seattle. Province-wide, BC also lags behind other provinces in the number of bachelor and graduate degrees granted per capita.

The Conference Board of Canada estimates that BC’s talent deficit is costing the province $7.9 billion in lost GDP and $1.8 billion in lost tax revenues. This is not a situation that can be fixed solely through immigration. Immigration can help. Indeed, given events south of the border and elsewhere, we have an opportunity to attract great talent to Canada. But we have a greater opportunity – and responsibility – to make sure our own citizens are getting the education they need and deserve. Especially when the Conference Board estimates that 95,000 BC residents are unemployed due to lack of post-secondary education. For the sake of a functional economy – never mind an innovation economy – we need to make major investments in post-secondary education.

On the issue of public and private investment, the news is also discouraging. As documented in the federal government’s recently released Fundamental Science Review, Canada’s spending on research and development has declined dramatically over the past 15 years, such that we have fallen below the top 30 nations in the world. This has substantially weakened the research capacity we need to compete in the innovation race.     

To its credit, Ottawa took an important first step in its 2016 budget by increasing funding to its three research granting councils. But regrettably, there were no further increases this year. We can only hope, given the urgent recommendations of the Fundamental Science Review, that we will see more positive movement in 2018 or sooner.

This public investment is all the more necessary because of Canada’s disappointing performance in private sector R&D. Our Business Enterprise R&D has been in decline since 2000 relative to the OECD average – to the point that Canada now ranks 15^th out of 16 peer countries. This in large measure is a reflection of our business composition – we have lots of Small and Medium Enterprises that lack resources to create their own research capacity.  And our larger companies are often branch plants of multinationals that concentrate their research in other countries.

These are hard problems for a government to fix. Which makes it all the more important to maintain public investment, at both federal and provincial levels. And here, British Columbia really needs to catch up. StatsCan shows that BC, with 13 per cent of the nation’s population provides only 6.3 per cent of provincial government R&D spending. Clearly, this is not the level of investment required of a province committed to pursuing an innovation strategy. In sum, we need greater federal and provincial investment in talent and research if we are to become a global innovation leader.

But the challenge is not governments’ alone. As core developers of talent and major drivers of research, universities also have a responsibility to do more. If we are to play our full part in driving an innovation agenda, we too must be prepared to innovate:

• to help students acquire entrepreneurial knowledge and skills, and to gain experience from work-integrated learning;
• to connect our research engines to the needs and capacities of the communities we serve; and
• to provide support for starting and scaling up business enterprises and social innovation ventures.

Shifts like this do not come easily for traditional universities.  But having made it our mission to be Canada’s “engaged university,” we at SFU have set about showing how it can be done. To this end, we have created SFU Innovates – a university-wide innovation strategy. SFU Innovates rests on four pillars:

1. Industry & Community Research Partnerships
2. Incubation & Acceleration
3. Entrepreneurship
4. Social Innovation

Turning to the first pillar, SFU is nationally recognized for its research strength. Our annual research income is approaching $120 million, and the international rating agency, QS, ranks our faculty members second in Canada for their research impact. This research strength is one of the reasons Compute Canada chose SFU to lead a national network of high performance data centres, including the one just opened on our Burnaby campus with the most powerful academic supercomputer in Canada.

Given our strong research foundation, our goal has been to harness it to support innovation. This has required a significant change in approach. The gap that commonly separates university researchers from consumer markets is so well known and so wide, it’s been dubbed the “Valley of Death” – a place where good ideas go to die. We at SFU have sought to bridge this divide by developing new ways for researchers to engage with industry and communities.

I have already spoken about 4D Labs, and its mandate to support the research needs of academic and industry partners. Another model is Innovation Boulevard – a community-based initiative led by SFU and the City of Surrey. Innovation Boulevard brings researchers together with industry, health care professionals, entrepreneurs and others with the shared purpose of making BC a leader in healthcare innovation. It has already drawn in more than 40 companies, from small start-ups to global giants.

I have also touched on our second pillar – incubation and acceleration – with Coast Capital Savings Venture Connection, the university-wide business incubator that provides mentorship and support to SFU students, faculty and alumni who have business ideas and aspirations. But Venture Connection is not an isolated example. Our next-stage program, VentureLabs®, is now BC’s leading accelerator for job creation, revenue growth and capital formation.

Located in the heart of Vancouver, it’s also the West Coast hub of a pan-Canadian accelerator network that includes Ryerson University and the University of Ontario Institute of Technology. VentureLabs® is linked internationally to ZoneStartups, an SFU partnership with Ryerson and the Bombay Stock Exchange Institute – and the first Canadian-led accelerator in India. And it’s the Canadian hub for a China-Canada accelerator network we have created with Hanhai Holding, a high-tech conglomerate connected to leading Chinese universities.   

The third SFU Innovates pillar is Entrepreneurship. Entrepreneurship training happens everywhere at SFU, from the classroom to a co-op network that places more than 8,500 students every year. We also have two entrepreneurship certificate programs. The first, the Charles Chang Certificate in Innovation and Entrepreneurship, is open to undergraduate students in every discipline. That’s as it should be.  Entrepreneurs don’t emerge only out of business schools; students in all disciplines can benefit from learning about how to function in the marketplace, and how to transform creative ideas into profitable enterprises. The second is a Graduate Certificate in Science and Technology Commercialization. In both programs, mentors lead multidisciplinary groups through early stage innovation and, when relevant, incubation.

The final SFU Innovates pillar is Social Innovation, a reminder that innovation isn’t just about ideas and inventions that generate profits – it’s also about ones that produce value to people and the world.

RADIUS – which stands for RADical Ideas, Useful to Society – is our social innovation lab and venture incubator. Located in the new Charles Chang Innovation Centre on the corner of Hastings and Hamilton, RADIUS has supported more than 100 new ventures and fostered numerous programs since it was created in 2013. And it shares premises with our new RBC First Peoples Enterprise Accelerator, which is working with First Nations communities to support entrepreneurship and innovation.

RADIUS also supports Change Lab, a community-based course that promotes social innovation in diverse fields of study. The most recent cohort involved students from many disciplines developing solutions to complex health challenges. I’m pleased to report that three of these students went on to win the Oxford Global Challenge – in which competitors from around the world were asked to demonstrate deep understanding of a pressing social or environmental issue and to identify missed opportunities. Our team came first amongst an international field of 14 finalists, with a project proposing solutions to problems associated with medical waste.

I hope you see that there is a common theme running through all four pillars of SFU Innovates, and not surprisingly, it relates to the value of engagement. By engaging communities, students find that the problems of medical waste can become the inspiration for world-class solutions.

By engaging entrepreneurs, researchers find that the wings of a butterfly can become the inspiration for a security technology that, with further research support, is transforming tickets and currency around the world. And I daresay our commitment to pursuing this engagement theme contributed to Times Higher Education this month naming SFU one of the world’s top 55 “technology challengers.”

Times Higher Education describes technology challengers as institutions that “have innovation at the core of their strategy, strong industry links and research that excels in technological areas like engineering.” Such institutions they note are at the centre of “innovative areas of research associated with the technological and digital revolution.” Much as we cherish our Maclean’s ranking as Canada’s leading comprehensive university, it’s especially gratifying to be globally recognized in this way, particularly given how hard we’ve worked to earn this distinction.

So, is there then a final lesson in the story of the Morpho butterfly? I believe there is. And it is this. While there is value in simply observing the beauty of the  Morpho’s luminous blue wings, and additional value in understanding the physiological features that make them blue, these are values of observation and discovery, not innovation.

Innovation arises when you make something new of your observations and discoveries. The lesson for SFU – and the inspiration for SFU Innovates – is that there is so much more we can do when we engage – when we connect our students, link our researchers and share our capacities with the communities we serve.

The lesson for governments is that innovation demands their engagement too, in helping to ensure that BC has the talent and resources required to realize its full innovative potential. And the lesson for communities is to seize the opportunities that engaged universities and supportive governments provide, so that – together – we can create an innovation ecosystem that is second to none.  

If we get it right – if universities become engaged; governments provide support; and communities take up the challenge – I’m convinced that BC will indeed distinguish itself as a global innovation leader.