31 January 2013

Connecting the dots between Blackberry and Canadian R&D

Yesterday I was all set to do an interview on CTV's Power Play with Don Martin as part of "a discussion on research and development in Canada in terms of how Canada seems to be falling behind the rest of the world in this area. RIM seems to be Canada’s most successful technological company but even they are struggling." Miced and on stand by in the studio here in Toronto, we encountered technical difficulties that prevented the audio connection, and so I was not able to join the discussion. Too bad, as Minister of State for Science and Technology the Honourable Gary Goodyear was on right before me talking about what the federal government has been doing to promote more business investment in R&D - referring to the Jenkins Panel and other measures being taken as an output of this work. Minister Goodyear spoke enthusiastically about the new Blackberry - it was big news after all - and what it means for the state of Canadian private sector R&D. Here are a few points I would have added to the conversation:

At issue is the fact that firms in Canada do not invest in R&D to the rate of our international counterparts. We consistently lag in BERD (in 16th place in the OECD) whereas we are 4th in the OECD for HERD. This is a significant gap. But as Ken Doyle, Director of Policy for Polytechnics Canada has pointed out to me, there is about $900M of annual R&D spending by firms that takes place in academic institutions. However, this gets counted as HERD not BERD through a quirk of accounting (the performed of the R&D dictates if it is counted as public or private). Regardless, firms are still not investing enough.

The Toronto Next survey that George Brown College released last last year offers some insights into the issue. We found that that, while firms value highly productivity, they do not value the innovation inputs to productivity: investing in new technology and equipment, skills training for employees and R&D partnerships with academic institutions. This is the key point: public+ private R&D (P3RD) partnerships create value, for firms and for those engaged in the R&D pursuit. When firms partner with a polytechnic on applied research, we help them not only to get new products to market, but we do so while training the next generation of innovators.

Innovation is about adding value, to products and services. And innovation intermediaries like polytechnics and colleges offer value-added services to industry partners seeking to create value in the economy. As Minister Goodyear states in his Power Play interview, the goals of research are to create knowledge, but also to exploit that knowledge. Key here is understanding what the customer wants.

Connecting the dots between Canadian private sector R&D performance and Blackberry is analogous to the point I've made before about basic research and our resource extraction economy. In a resource extraction economy we are simply price takers. When ideas are seen as just another raw resource to be exported without adding value, we risk losing intellectual capital - and market share - to those who add value. RIM's signal achievement was email on a smartphone, but when email on a smartphone became the basic commodity - when it was ubiquitous - it ceased to add value. Apple and Android offered users an ecosystem of apps and context for the smartphone. This context is what the consumer wants, and companies that understand this, and innovate to create value based on the basic platform, are destined to succeed. This context is the exploitation of the commodity: adding value to the idea.

So while firms like Blackberry are performing R&D in Canada, they need to do more to understand what the customer wants, and how to create value based on these preferences. It's not a very complicated argument. The success of the Blackberry is contingent on the ability of the company to meet (and perhaps exceed) consumer demand for a world beyond the basics. I for one hope they succeed.

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