Martin Lavoie2013-05-23T21:45:41-04:00Martin Lavoiehttp://www.huffingtonpost.ca/author/index.php?author=martin-lavoieCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Martin LavoieGood old fashioned elbow grease.The Difference Between Invention and Innovationtag:www.huffingtonpost.com,2012:/theblog//3.19551812012-10-10T17:42:28-04:002012-12-10T05:12:02-05:00Martin Lavoiehttp://www.huffingtonpost.com/martin-lavoie/
Like most people, I use to assimilate invention with innovation.
Two weeks ago, I watched a documentary on Steve Jobs, and finally, I understood what my boss had been talking about. I understood the difference between invention and innovation.
Commercializing the computer mouse
Like many of us, the first time I saw a "computer mouse" was on an Apple personal computer in the mid-1980s. At merely a decade old, I remember having to enter codes manually to program our favourite games on the Computer 64 before that.
I always thought Apple invented the mouse. After all, I had never seen one before.
Turns out it didn't, but the story is fascinating and typical of millions of other inventions. It's a great story of innovation.
A researcher at the Stanford Research Institute (SRI), Douglas Englebart prototyped the computer mouse in 1964, and it was patented in November 1970.
Nine years later, Steve Jobs was in the planning stages of a business computer and arranged a visit with the Xerox Park research centre to view some of their experimental technology. Jobs saw, for the first time, Engelbart's mouse, which had been incorporated into the graphical user interface (GUI) used on the Xerox Alto. Xerox had no intent to commercialize it -- it cost them $400 to build, which was out of budget for most people looking for a personal computer.
Steve Jobs was really inspired by the computer mouse. Back in his office, he asked his chief designer to stop what he was working on and design a mouse that would cost no more than $25. It was done, and they made fortune off these new "computers with a mouse."
During an interview later on, Engelbart said, "SRI patented the mouse, but they really had no idea of its value."
Engelbart never received any royalties for his mouse invention, whereas Apple licensed it for $40,000. This, my friends, is the difference between invention and innovation.
Canada's commercialization gap
The OECD recently released a study showing Canada is among the leaders in public research and patents filed by academics -- great news. It probably convinced the government its $25-billion-a-year investment in universities is worthwhile.
And yet, I think again of the computer mouse, and ask myself: so what? A mouse was really just a ball within two pieces of plastic until Jobs came and re-defined it as one of the most important components of the personal computer. What does it mean to be a world leader in filing patents if no one brings these great inventions to market?
Between January 1 and October 9, 2012, Canadian universities were granted 45 new patents, with everything from "a method and nucleotide sequence for transforming microorganisms" to "immunization of dairy cattle with GAPC protein against streptococcus infection." Canadian brains were hard at work and make us proud. But, out of these 45 patents how many do you think allowed a license to third parties so companies could prototype and commercialize them? Only one.
A new technological curling broom head for improved ice surface heating and curling performance. Don't laugh -- the Olympic team used the prototypes during the Vancouver Olympics. The researchers licensed it to Balance Plus, a company specialized in curling equipment. The product is a great commercial success.
I wish the other 44 patents were allowing companies to license the patents, too. Licensing patents is as much important as developing them.
Encouraging open innovation in universities
In his blog, law professor Michael Geist said that a Statistics Canada report based on survey data from 2008 found the total IP income, primarily from licensing, at participating Canadian universities was $53.2 million. "The cost of generating this income?" he writes,
"the reporting institutions employed 321 full-time employees in IP management for a cost of $51.1 million. In other words, after these direct costs, the total surplus for all Canadian universities was $2.1 million. The average income per university from IP was only $425,000."
Patent applications and patents issued were actually down in the reporting institutions, he wrote, and there were less than 24 spin-off companies reported by the universities.
He concludes by stating,
"while few would suggest that there is no value in the IP commercialization strategy for universities -- there is surely a role for it -- the emphasis on this approach as the optimal method of benefiting from billions in public funding for research has consistently failed. Rather, an effective commercialization strategy might recognize that the commercialization is better suited outside the university with funded research the engine for new innovation that is openly available to entrepreneurs without licensing barriers. The public pays for the basic research and might ultimately enjoy far more benefits than the current break-even approach by having more open access to research results."
I could not agree more. Think about it: $10 billion is spent by universities across Canada in research and development, and taxpayers should expect better ROI than $2.1 million.
We need more Steve Jobs' in Canada. But, even Steve Jobs couldn't have built an innovative computer mouse without a license.]]>Why Size Does Mattertag:www.huffingtonpost.com,2012:/theblog//3.19511342012-10-09T10:35:11-04:002012-12-09T05:12:02-05:00Martin Lavoiehttp://www.huffingtonpost.com/martin-lavoie/
When it comes to performance and innovation, smaller ones often underwhelm.
I'm talking about companies, of course.
We all like small firms. All of us -- people, voters, consumers -- whatever the hat you wear. Governments, too, want to show us they help small firms rather than big corporations. Take any government program that supports the industry. Most of the time, they are designed to help small and medium-sized companies, not large multinationals.
There's nothing wrong with lending a hand to small firms. One observation, though: economies dominated by small firms are often sluggish. They are less innovative, because large multinationals are the ones with the large R&D budgets. They are less productive, because large companies have specializations and are able to offer cheaper prices.
Large firms also pay more taxes. Look at the big banks, for example. Remember the reaction when the federal government decided to go ahead with the last decrease of the Corporate Income Tax just before the last election? Another candy for the big banks, said the lefties. I understand the reaction, but year after year, the Canadian financial sector accounts for more or less one-quarter of all taxes paid by businesses in Canada. It is significant.
It is indeed difficult to take the issue of company size out of the current Canadian debate over innovation. The Canadian economy is dominated by Small and Medium-Sized Enterprises (SMEs), with 98 per cent of our businesses having less than 500 employees and 95 per cent with less than 100. This, in itself, is not a problem. The problem is that these companies don't grow. A big part of the reason they don't grow is that our governments want to keep them small.
Take the Scientific Research & Experimental Tax Credit (commonly referred to SR&ED). It offers an enhanced tax credit for eligible R&D activities to SMEs (or Canadian Controlled Private Corporations [CCPC's]) of 35 per cent. For large firms, the credit is 20 per cent. It offers a refundable tax credit to SMEs -- a benefit not available to large firms.
These rules also largely apply to provincial R&D tax credits, too. This is fine, but why would small companies with a very high level of R&D (let's say in sectors like aerospace, information technology, medical equipment) want to grow? To lose their tax return on R&D investments? The current system not only keeps our companies small, but also encourages our large companies to keep their R&D partners and suppliers small.
Unfortunately, the incapacity to grow our small firms has a negative impact on our capacity to innovate. And we all know that what matters in innovation is to make innovation matter.
Making innovation matter means bringing it from prototyping and testing (what we do very well) to mass production and commercialization (what we don't do as well). Mass production can only happen if a firm has achieved a certain size, a certain production capacity, a certain maturity in its marketing methods, and a certain quality of after-sale service.
J.A. Bombardier invented a great snowmobile in his garage. He sold some prototypes to the post, the police and the health system back in the 1940's-50s. It's a remarkable tale of a great Canadian inventor, but Bombardier is what it is today because it grew from that business in his garage. It developed a mass production capacity and a world-class distribution chain. Bombardier was able to turn these prototypes into snowmobiles sold by thousands to the growing middle-class of the 1960's and 70's.
In the end, some of us will always oppose the interests of small firms to the ones of larger companies. I wish life was that simple. The reality is that our objective should be to grow these small businesses into large ones -- not to keep them small.
In the economy, as in many other sectors, size does matter.]]>Canada Should Trade Some White Collars for Bluetag:www.huffingtonpost.com,2012:/theblog//3.15366372012-05-25T18:07:18-04:002012-07-25T05:12:18-04:00Martin Lavoiehttp://www.huffingtonpost.com/martin-lavoie/
Since the mid-1980s, manufacturing's share of the job market has sloped progressively downward, due to a combination of various domestic and international factors, such as outpaced productivity, the growth of low-cost manufacturing countries with large domestic markets, the rapid appreciation of the Loonie and a general business taxation regime that was by-and-large uncompetitive until the early- to mid-2000s. As a result, manufacturing was labeled by many as an "old industry" that should be abandoned for more promising areas of the Canadian economy.
Those pundits were dead wrong. Rewind to December 13, 2004: That was the date Canadian import tariffs on textile products were dropped to zero per cent. "We are free-traders," said the politicians of the day. "We are an exporting country -- we have to open our borders." The very same day, seven textile manufacturing plants in Huntingdon, Quebec, shut down, directly costing roughly 800 workers their jobs in a community of only 2,600 people.
At the scale of a province or country, this would have been a national catastrophe. At the scale of Huntingdon, it was merely the reflection of the new economy -- at least according to the media. But they, too, were wrong. The Huntingdon case was just another example of our own collective choice to let manufacturing down in this country.
Today, many of the talking heads argue that while manufacturing is still an important part of Canada's economy, it does not deserve any particular attention or support from government. In other words, what happened in Huntingdon could simply repeat itself in any other manufacturing sub-sector, and we should not intervene. Again, wrong.
Parallel to the decline in employment in manufacturing over the last quarter century, we have witnessed a number of other disturbing trends. For example, income inequality -- the gap between the wealthiest and the poorest -- has sharply increased. The key year here is 1982, when the growth of personal revenues came to a screeching halt. In sociology, income inequality gaps are seen as precursors of major revolutions, because they propel individuals with lower incomes to define their interests in opposition to those in upper economic classes.
In Canada, however, the gap in income inequality has not had the impact like in other countries for one reason, and one reason only: Today, compared to 25 years ago, women are fully participating in the labour market. When I was younger (I am now 34), one manufacturing job allowed any family of four to live well, access a middle-class quality of life, to buy middle-class bungalows in middle-class neighbourhoods and to send their kids to public schools full of thousands of middle-class kids.
The overall slowdown in manufacturing has shifted jobs into the services sector, which, on average, pay 20 per cent less than jobs in manufacturing. In the lives of everyday Canadians, this means that both parents must now work to maintain the same quality of life.
Another factor complicating the income inequality gap is the high dropout rate amongst high school students. A recent investigative report by a Montreal-based newspaper discovered that in some poor neighbourhoods of Montreal, one out of every two male students don't graduate. According to Statistics Canada meanwhile, nearly one in four dropouts in the labour market could not find a job during the 2008-09 economic downturn.
In the past, this major problem was offset by a strong manufacturing sector which employed thousands of people with not much education, while offering wages that allowed them to access middle-class amenities. Today, they end up in the services sector, where wages are lower.
While it is true the dropout rate has declined in the past few decades, there are still close to 200,000 Canadians aged between 20 and 24 who have not completed their high school education. In the early 90s, there were almost 400,000. Today, those 400,000 are still relatively young (in their early- to mid-40s) and are available to work. Unfortunately, with little education, many of those individuals are competing for jobs in the services sector that pay low, sometimes minimum wage.
We've all heard the message time and time again: We need to send more people to colleges and universities, and ensure our country is well-educated. This is great in theory; after all, no one is against apple pie. The reality is that we can't flip a switch and guarantee everyone has a university degree in 10 years -- but that's not necessarily a bad thing, either. China has not grown a middle-class larger than the entire population of the United Sates by sending them to university. They were smarter -- they developed their manufacturing sector.
It's no secret: The income inequality gap, the shrinking middle class -- all of this strongly relates to our education gap. It always has. And sectors such as manufacturing no longer offset the adverse effects. Sure, part of the blame can be placed on circumstances beyond our control -- the rise of the BRIC economies, globalization, open borders -- but the dismal truth is that we ourselves are at fault. When we had the chance, we systemically refused to support manufacturing.
Always remember December 13, 2004.
This blog originally appeared in 20/20 Magazine.]]>