Innovation Change and Development

Making Innovation Work in Canada

2010-03-02T18:30:00.001-07:00

The Government of Canada looks likely to focus a key part of its budget this week on investments related to productivity and innovation. The concern is that Canada has “lost the plot” with innovation – rather than being number one in the world, which was the plan, we are fourteenth amongst seventeen nations as measured by the Conference Board of Canada. What should the budget contain?

What we have done in the past is to invest in university research, development and commercialization activities in the vain hope that this would produce great commercial outcomes. The reality, plain for all to see, is that it has yet to do so. The roughly $14 billion annual investment in R&D at our universities produces but modest returns. In part this is because universities, by and large, are simply not designed to create commercial value from ideas and in part because they lack incentives to do so.

Is the solution to spend even more on our universities to try and fix the path to commercialization? No. The real solution is to focus energy on where innovation really takes place – in firms. Rather than boost spending on R&D, the government should use any new funds to significantly boost IRAP – the Industrial Research Assistance Program – and to create incentives for private and public partnerships. More specifically, it should seek to make focused and strategic investments in key industry sectors we want to grow and minimize investments in dying industry sectors.

A second investment we need to see is a massive boost to funding for post-graduate student places, especially those with a co-op component or post doctoral positions in firms. Increasing the ability of firms to leverage ideas and innovation is key. Those countries ahead of us in the league table have more post-grads in the workforce in real firms than Canada does.

Third, the Government of Canada, working in partnership with the Colleges and Polytechnic institutions, should invest in the applied research they are engaged in. These institutions are close to industry, provide them with skilled people and do critical (and relatively inexpensive) applied work. Their work on the innovation agenda should be recognized and funded accordingly.

Finally, we should address the real lack of tier one venture capital in this country. Whether its Ontario, BC or Alberta, companies need to be “fed” two things – risk capital supported by expert managerial talent and realistic, current market intelligence. Tier one venture firms do this – banks and angel investors do not.

There are some other things that matter. The Federal Government needs to partner closely with the Provinces in developing appropriate local innovation strategies; it needs to simplify the processes it uses for securing IRAP funds; it needs to start pooling its intelligence; it needs to stop believing its own press releases and start getting realistic about the challenges facing Canada over the next twenty five years. Its time for some leadership and courage on the innovation file.

The Government of Canada also needs to stand firm in the interests of Canadian firms and researchers against the persistent demands of the WTO and the US as they relate to intellectual property. The demands from these organization represent an attempt to behave as a colonial power as far as knowledge is concerned. Canada should, in partnership with other countries who are also balking at the hegemony of intellectual property law demands of the US, show what a twenty first century collaborative intellectual property regime could look like.

There is a lot to do. We will see this week whether or not the Government of Canada understands the challenge and has the courage to act. Don’t hold your breath.

The Greens too Yellow to Admit they Are Red Come Clean

2009-03-29T16:01:00.002-07:00

A United Nations document on "climate change" that will be distributed to a major environmental meeting next week envisions a huge reordering of the world economy, likely involving trillions of dollars in wealth transfer, millions of job losses and gains, new taxes, industrial relocations, new tariffs and subsidies, and complicated payments for greenhouse gas abatement schemes and carbon taxes — all under the supervision of the world body.

But just what does the UN document suggest? This is the list:

Carbon Taxes coupled with Cap and Trade - intended to price fossil fuels highly to reduce consumption

Additional Subsidies for green energy technology - intended to develop industries which otherwise would not be viable (strongly supported by grant farmers and rent seekers)

Regulatory and procurement requirements for green energy ensuring demand at guaranteed prices for commodities which otherwise wouldn't be there like biofuels, wind power and solar

Protective tariffs to protect green emerging industries - going against free trade, these tariffs would inhibit the export of fossil energy

International offsets which have to be purchased at borders to offset carbon footprint (imagine that!)

Carbon impact labeling for all goods - showing what the carbon footprint looks like, which will be very difficult to do since there are no agreed rubrics for doing this..local meat has a higher carbon footprint than imported lamb from New Zealand, for example, since we have to divide CO2 costs by volumes..

Wealth transfer from rich to poor countries to help that adjust, catch up and develop - this is the equity component..pure socialism

Technology cooperation but focused on agreed technology strategies - already in place, but needs additional investment

What all this looks like – and I encourage you to read the document – is the most radical agenda since the Communist Manifesto.
. While using the cloak of science, this document makes clear that you cannot just look at climate change mitigation without rethinking the social and economic order of the world. Quite.

The Nature of Science and Climate Change

2009-03-28T10:30:00.001-07:00

Developments in science rarely proceed quickly. They go in stages. It varies by discipline, but the underlying process is basically the same. Someone, using their knowledge of a phenomena, suggests a theory and a number of hypothesis that would enable the theory to be tested. Experiments are then conducted which advance the theory – not necessarily “proving” or disproving it, but requiring refinements. As evidence accumulates, the theory either advances or is discarded. Sometimes, a plethora of direct observation (evidence from measurement) suggest a hypothesis which is a part of a theory and this can also lead to advancement.

We refer to this view of science as empiricism (after the Vienna circle) which also requires falsification (after Karl Popper). When Michael Apter, Ken Smith, Sven Svebak and several others (including myself) developed the theory of psychological reversals we had a grand theory of psychology and psychobiology which could be tested empirically by means of a number of different experiments. As each experiment was completed it either confirmed the theory or provided a basis for us having to rethink the theoretical framework, which we did constantly for some twenty five years. We also asked others, especially those who found our theory problematic, to look at the data and to challenge our interpretations both at the level of the data itself (do you get the same result when you analyze these data) and at the level of theory (given this result, can you offer a more comprehensive interpretation than we can?).

Most theorists hope to achieve a paradigm shift (after Khun) as a result of their work. For example, when the proponents of the germ theory of disease finally won widespread acceptance in the early years of the twentieth century, they achieved a paradigm shift in our understanding of disease and changed medical practice. We now know that the germ theory of disease is only partial – new developments in genomics and in the understanding of psychosomatics suggest that there are other basis for “disease”. Equally, the breakthrough in the acceptance of tectonic plates as an explanation of a variety of geological events was also a paradigm shift.

Science, it must be said, is not a democratic pursuit but rather a pursuit for truth. The term “scientific consensus” is generally a red flag to a scientist - a sign that someone is seeking to control the debate or to close an argument. For example, when Einstein proposed his E = MC2 few accepted it as anything more than a hypothesis. When told that some 200 eminint physicists objected to this formulation, Einstein suggested that it took only one “with proof” to make clear that he was wrong. Science, unlike politics, is not a numbers game. Over time, some basic ideas become accepted as cornerstones of science, such as the Laws of Thermodynamics. Such things are rare. Even then, we do not talk of “consensus”, but of generally accepted principles (meaning that there are exceptions and some still wish to argue the Laws themselves).

Recently, following Paul Feyerabend, there has emerged an approach to science which suggest that the boundary between science as a form of logical reasoning based on evidence and polemics needs to be blurred, since what matters in scientific understanding in the service of social aims. Using a variety of examples, he suggests that they have in common the fact that all common prescriptive rules of science are violated in these cases and that the progress of science itself would have been impeded had it not been for the anarchistic view of science promoted. One of his examples is the Copernican revolution. Feyerabend is a radical and he sanction the introduction of theories that are inconsistent with well-established facts if it leads to an advancement of understanding. Feyerabend also advocated that science should also be subjected to democratic control: not only should the subjects that are investigated by scientists be determined by popular election, scientific assumptions and conclusions should also be supervised by committees of lay people.

I have rehearsed these different view of science for a reason. We are challenged to make sense of the science of climate change, which is in fact a collection of different sciences. We have no theory of climate, just a set of hypothesis with a very strong focus on the following:

1. There is such a thing as the greenhouse effect in which the presence of certain volumes of gasses and water vapour have a forcing impact on the earth’s temperature.

2. CO2 is a primary cause of the greenhouse effect, despite it being a small presence in the atmosphere. This warming will have major implications for life-systems.

3. Even though humans emit only a fraction of the CO2 present in the atmosphere, humans are the primary cause of greenhouse gasses and warming.

4. Anthropomorphic CO2 emissions, being a cause of warming, will have an impact on the ice sheets which in turn will affect sea levels significantly over time.

5. By lowering anthropomorphic CO2 emissions we can impact climate over time, despite the role of other factors such as the sun, water vapour, oceans etc.
More recently, it has been suggested that CO2 emitted into the atmosphere may be present for thousands of years.

All of these are hypothesis. Each of them has been subject to a variety of evidence reviews and the jury is out, despite the political desire to call “consensus” and "time". There is evidence to suggest that the climate is a more complex phenomenon than these basic hypothesis suggest and that there is no rush to judgment needed.

Further, a collection of related hypothesis do not represent a theory. A theory offers a comprehensive understanding of a phenomenon, in this case climate. We do not have a theory of the climate which would pass the basic tests of a theory – logical consistency, consistent with observations, having a grounding in empirical evidence, be economical in the number of assumptions, explain the phenomena, provide a basis for making predictions which can be verified by evidence, be falsifiable and testable, be correctable and be refinable. Several hundred experienced and qualified scientists dispute all or some or some aspects of the hypotheses outlined here.

We do have a set of proxies for such a theory in the form of computer climate change models, but these are generally accepted as incomplete and emerging (accept by those who built them). Climate is clearly complex, dynamic and somewhat chaotic and difficult to model. Extrapolating consequences from such models – models which do not include variables for human adaptability, technological innovation and ingenuity – seems a strange thing to be doing.

Rather than develop a theory, what some climate change scientists have done (and this is the basis of the work of the political UN organization the IPCC) is to develop scenarios. Scenarios are different views of a possible future based upon a combination of facts, opinions, ideas and speculation. They are very helpful to get one thinking about options, but only if all the scenarios are viewed as equally possible.

What we have with climate change “science” is anarchy masked by democracy – a Feyerabend's delight. The IPCC alarmists have, in their own minds, a comprehensive scenario for the future which they seek to use to influence public policy. They use evidence is it appears to them to show that they are right and they seek to deny access to policy makers and public opinion those who take a different view – the “deniers” who, in the words of some, are “traitors” who should have no access to public media. On the other side, there are those who see themselves as climate realists who, looking at the evidence as they see it, see something very different from the alarmists. In Popperian terms, they can readily falsify some of the thinking (especially the idea of a linear equation between man made CO2 emissions and the earth’s temperature) and provide alternative hypothesis.

What we have is a clash of methodology (observations versus models) and ideology (Karl Popper and the Vienna School versus Feyerabend). There will be no reconciliation since the two fundamental different views of science and its purpose appear irreconcilable. But the debate is important, not least in terms of the philosophy of science and the nature of the scientific endeavor.

It is a sad fact that there will be no debate between these differing views of climate change and climate science, since one side has closed the door on science seeing all of the issues as settled or only settle-able by members of their own "team". Even Feyerabend would have loved a debate.

The Cooling Earth

2008-09-03T10:36:00.001-07:00

The earth did get warmer between 1850 and 2007 by around 0.7 degrees. Most of this warming occurred before 1940, with the more recent period contributing just 0.2 degrees to warming. Global earth temperatures have not risen significantly since 1995. In fact, several prominent climate scientists are now confidently predicting that the earth is entering a significant cooling period and that we should be more concerned with a coming mini ice age than with the dire predictions of global warming.

In August 2008, the sun failed to produce a single sun spot – a key factor in the warming of the earth. The last time this occurred was in June 1913. Some scientists now suggest that the pattern of sun spot behaviour since 1749 is showing clear signs of change in line with the same patterns seen in the three previous periods of significant earth cooling since records began. Known as the Dalton, Maunder and Spörer Minimums, each was associated with a period of rapid earth cooling, one of which was cold enough to be known as a mini ice age (1450 to 1820). The dominant prediction amongst those scientists that take the view that we are entering a cooling period is that the earth will cool for a period of two decades. Even the Old Farmers Almanac takes this view of the future.

Meanwhile, carbon dioxide (CO2) emissions continue to grow. The fact that this is occurring at the same time that the earth is cooling suggest that we should be careful in assuming that the “cause” of global warming is CO2. It appears not to be the case. There have been many occasions in the history of the planet when CO2 in the atmosphere has been much more concentrated than it is today. During the Cambrian Period of the earth’s history they were eighteen times more CO2 and in the Late Ordovician Period CO2 concentrations were almost twelve times as much as today. CO2 is not a primary cause of warming or of cooling – it is just one of eighteen factors and possibly the least important. Much more important are: the effects of the sun; the orbit, tilt and movement of the earth; water vapour; methane; ocean currents; plate tectonics; vegetation; volcanoes and cosmic rays. When looked at in a comprehensive way, these key factors all point to a period of cooling.

It has also been warmer than it is now or is likely to be in the future. There have in fact been six global warming periods over the last half million years. These include the medieval warm period, where reports of temperatures showed them to be much higher than has been the case since 1850 – it is still cooler than it was then. A preliminary study of some 6,000 ships logbooks from around the world shows that, during the 1730’s, Europe and North America underwent a period of significant warming not that dissimilar to that which has occurred between 1976 and 1998. These warming periods were all before the industrial emissions of CO2 and the rapid growth of “personally produced” CO2 from cars, heating and human activity.
Dr Richard Gee, Chairman of the International Geological Congress’s scientific committee, challenged the international community to answer a simple question at a recent meeting of the congress in Oslo. The question: “how many years must the planet cool before we begin to understand – we politicians and scientists - that the planet is not warming?”. Using a detailed and peer reviewed analysis of climate change data, he observed the current cooling period. He reminded us of Lord John Maynard Keynes observation that “When the facts change, I change my mind”. It is time for us to do the same.

It may seem odd that the planet is cooling when we see ice formations breaking off from the Artic and floating in the Atlantic. For example, the Ayles ice shelf, which is more than 11,000 football fields in size and is located just south of the North Pole, broke free earlier this month. In recent days, the buoys used to track temperature have indicated sub-freezing temperatures with surface melt coming to an end; however, bottom melt will continue for at least two to three more weeks and the ice extent decline, while slowing, will also continue. A number of polar scientists have concluded that Arctic warming and cooling in Greenland during the last half of the last century is due almost entirely to natural changes, perhaps to multi-decadal oscillations like the Arctic Oscillation, the Pacific Decadal Oscillation, and the El Niño. We need to remember that for only about 5% of known climate history could the North and South Poles support masses of permanent ice.

Some suggest that the UN’s Climate Change Panel has made clear, firm and precise predictions about global warming and that the majority of scientists agree with these predictions. This is not the case. First, the IPCC is not a scientific body it is a political body charged with promoting change in social and industrial practices that will benefit the planet. While it takes advice from a small group of scientists (almost all from the US and Europe), its key reports and recommendations are political documents drafted by diplomats and politicians, not scientists. Second, the climate change models it uses to base its suggestions on are not predictive models but “scenarios” or “story boards” of possible futures. They are based on simulations which give emphasis to certain variables and not others – the impact of sun spots or volcanic eruptions or changes in ocean currents are not sufficiently accounted for, for example. Third, a growing number of qualified scientists disagree with the direction and conclusions the IPCC has reached. As of the beginning of September 2008, some five hundred scientists from over twenty countries expressed their dissent from the IPCC findings to the US Senate Environment and Public Works Committee and this number grows weekly. Some of these scientists were scientific advisors to the IPCC who now distance themselves from its reports. The so called “consensus” is in fact weakening all the time as new evidence suggests competing theories of climate change are gaining ground.

Global cooling is much more difficult to deal with than warming, though both have their challenges. Agriculture is especially affected, as are energy demands for heat and power. Water supplies can also be adversely affected. We need to begin planning now for the possibility of abrupt cooling and balance our preparedness against continually changing data. Being seduced into thinking that reducing CO2 emissions (not a bad thing to be doing) will have an impact in climate change is misguided. We need really good strategic thinking that is open to adaptation and we do not need to be wedded to a single and growingly problematic view of climate change.

Beware: GUSTAV IS COMING

2008-08-30T16:10:00.004-07:00

New Orleans is now being evacuated. As George Bush prepares to address the Republican Party convention on Monday, just when Gustav is due to hit the Gulf States, people are reminded of Katrina and the lack of preparedness of the US Government and its failure, over time, to reinforce the defences (known as levies). New Orleans will be tested again over the next few days.

You will hear that this severe hurricane is the result of global warming. It is not. As readers of the New Scientist will know (also see also The Murgatroyd Blog's entry on wind and climate change), there is no strong and comopelling scientific evidence linking hurricanes and tornadoes to climate change. It will not stop many from claiming that it is.

SCIENTIFIC CONSENSUS

2008-08-30T06:49:00.003-07:00

Those of us who are skeptical about CO2 and global warming - the idea that global warming is man-made and, if we act boldly and spend trillions we can slow it or halt it - are often accused of ignoring scientific consensus. Not true. Largely because there is no such consensus.

For some time now, the IPCC has been coming under fire for chaining that there is. Yet for many years there have been serious and substantive critiques of the IPCC claims both in terms of the science and in terms of their claims of consensus. The IPCC "conclusions", drafted by those with a political intent not by the scientists, are largely based on computer simulations of climate change which fail to account for the activity of the sun. The sun is a major contributor to earth's temperature and has followed a pattern of activity in which it heats up and cools down the earth. The climate change models do not take this into account.

Víctor Manuel Velasco Herrera, a climate change scientist based in Mexico, has offered this critique for some time as have many others. At present, the world is going through a transition phase where solar activity diminishes considerably, "so that in two years or so, there will be a small ice age that lasts from 60 to 80 years," and the immediate consequence of this, he added, will be drought.

He is not a lone voice. A second problem with the dominant paradigm is that it does not take into full account other key factors that affects the earths climate. Stephen Wilde, writing on the CO2 Skeptics Blog,suggests that we also need to account for evaporation and condensation since they are a key part of a global heat energy removal system. When combined with planetary weather systems that involve convection, winds, clouds and precipitation, our understanding of climate change becomes more comprehensive. Those combined processes constitute the hole in the heart of all climate theory because thus far it has not been possible to collate the actual real world numbers for all those processes in order to make meaningful use of all of them in any models. Therefore, the IPCC models are partial and biased.

The way science is supposed to work is that a group or individual proposes a theory, which is what the IPCC framework and claim is. Others then seek to verify or dispute this using evidence and analysis. This is being done. Usually there is a dominant paradigm for a period of time which then, over time, gets replaced. This is what is happening now. The dominant paradigm of man made global warming linked to CO2 is being replaced by a more complex understanding of the dynamics of our climate, strongly linked to observations rather than partial predictive models.

To label those who disagree with the dominant paradigm as "deniers" is insulting and, frankly, indicative of the fact that it is not science we are pursuing here but ideology. Its good news if CO2 is not the primary culprit (which is not to say that we should not try to reduce emissions). Its bad news that, if it is the sun, there is little we can do about it other than accelerate adaptive processes.

What worries me most about the debate is that "science" has now been so politicized and corrupted that it becomes difficult to engage in any serious conversation about climate change as a scientific area of debate.

Science rarely finds consensus. When it does, it is often open to debate later. Let's get back to a scientific understanding of climate!

Worry About Global Cooling!

2008-08-26T11:30:00.000-07:00

The New Scientist magazine for August 16th-22nd, which just arrived at my location, suggests that we should commit to serious and substantive action on global warming even though we are entering a cooling period, which could last for a decade or more.

Another way of putting it is this: (a) all global warming models predicting continuous warming in the 21st century; (b) they were wrong – it’s cooling; so (c) ignore the data and stick with the ideology, since all our models predict warming later.

Some science: An analysis of climate data by two Chinese researchers (see Zhen-Shan, L. and S. Xian. 2007. Multi-scale analysis of global temperature changes and trend of a drop in temperature in the next 20 years. Meteorology and Atmospheric Physics, 95, 115–121) suggest that the earth’s temperature will cool for the next twenty years and that this trend started in many locations in 2000. This is an outlier – most others, suggest that it will cool for at least ten. Coupled with this, we see that Antarctica has an unusually high snow fall over the last several years (see Thomas, E. R., G. J. Marshall, and J. R. McConnell, 2008. A doubling in snow accumulation in the western Antarctic Peninsula since 1850. Geophysical Research Leters, 35, L01706, doi:10.1029/2007GL032529) and that it is getting more ice.
Solar scientists predict that, by 2020, the sun will be starting into its weakest Schwabe solar cycle of the past two centuries, likely leading to unusually cool conditions on earth. Beginning to plan for adaptation to such a cool period, one which may continue well beyond one 11-year cycle, as did the little ice age, should be a priority for governments. It is global cooling, not warming, that is the major climate threat to the world, especially Canada.”

Astrophysicist Nir Shariv, a prolific researcher and one of Israel's top young scientists, no longer accepts the logic of man-made global warming. "Like many others, I was personally sure that CO2 is the bad culprit in the story of global warming,” Shariv wrote. "But after carefully digging into the evidence, I realized that things are far more complicated than the story sold to us by many climate scientists or the stories regurgitated by the media." According to Dr. Shariv there is no concrete evidence — only speculation — that manmade greenhouse gases cause global warming. Even research from the Intergovernmental Panel on Climate Change is bereft of anything here inspiring confidence.

"Solar activity can explain a large part of the 20th-century global warming," he states, adding that the sun's strong role indicates that greenhouse gases can't have much of an influence on the climate — nor will cutbacks in future C02 emissions will matter much in terms of the climate. Even doubling the amount of CO2 by 2100, "will not dramatically increase the global temperature," Shaviv states.

Finally, an article formally located at www.climatecentral.org and now found at www.iceagenow.com , states that should solar activity take a dive tomorrow, the temperatures would cool significantly. "Solar activity has overpowered any effect that CO2 has had before, and it most likely will again,” the article avers. "In fact, we should be more afraid of a cooling trend because of a solar minimum that will peak in 2030 that could be fairly large. As we saw from a minor solar minimum in the mid 1900s, the earth suddenly started to cool. If we were to have even a medium sized solar minimum, we could be looking at a lot more bad effects than 'global warming' would have had.”

In a 2003 poll conducted by German environmental Researchers Dennis Bray and Hans von Storch, two-thirds of more than 530 climate scientists from 27 countries surveyed did not believe that "the current state of scientific knowledge is developed well enough to allow for a reasonable assessment of the effects of greenhouse gases." About half of those polled stated that the science of climate change was not sufficiently settled to pass the issue over to policymakers at all. Nothing much has changed.

Wind in the Willows?

2008-08-24T08:42:00.001-07:00

Wind-generated energy is presented as one of most environmentally beneficial sources of renewable energy. Germany remains the world leader in wind power capacity, with almost 24 percent of the global total (22,247 megawatts), but it experienced a lackluster year in 2007. Still, renewable energy resources now generate more than 14 percent of Germany’s electricity needs, with about half of this coming from wind.

Spain led Europe in new installations in 2007, now ranking third worldwide in total wind capacity (15,145 megawatts). France, Italy, Portugal, and the United Kingdom all experienced significant growth last year as well. In all, EU wind power capacity rose 18 percent in 2007, and the region is home to 60 percent of global installed capacity.

China was the biggest surprise in 2007. Barely in the wind business three years ago, China trailed only the United States and Spain in new wind installations in 2007, and ranked fifth in total installed capacity (6,050 megawatts). However, an estimated one-fourth of this capacity remains unconnected to the grid due to planning problems.

The global wind market was worth an estimated $36 billion in 2007, accounting for almost half of all investment in new renewable electric and heating capacity. Such strong demand is creating these industry trends:

Competition among wind turbine OEMs is rapidly intensifying as growth extends to new regions, encouraging start-ups of new manufacturers while pushing leading suppliers to expand their sales and production globally.

Turbine prices, and the costs of installation, have trended upward over the last four years after nearly a decade of cost reductions per megawatt of nameplate capacity. The global market’s boom in demand has clearly shifted the industry from a buyer’s to a seller’s market in the past three years, with corresponding price increases.

Multiple players moving on 2 MW and above segment: Vestas and Enercon— pioneers in 2 MW and larger turbines—are aiming to protect their share of this market. However, multiple proven machines from Gamesa, Siemens, Suzlon/REpower, Alstom/Ecotecnia and others are providing buyers more options.

Component suppliers face new challenges to keep pace with turbine demand, calling for major production capacity investments in the multi-megawatt segment, as well as a focus on local supply in booming new markets while keeping costs competitive.

Installed capacity in Canada (as of January 2008) was app. 1.856 megawatts, with at least another 700 MW of capacity expected to come online by the end of the year. Wind energy currently accounts for 0.8% of Canada's domestic electricity supply. Alberta currently has the largest installed capacity of any Province in Canada with 523 MW (28% of Canada’s installed capacity).

The development of renewable capacity is strongly supported by the Canadian public. In an Angus Reid Strategies report in October 2007, 89 per cent of respondents said that using renewable energy sources like wind or solar power was positive for Canada, because these sources were better for the environment. Only 4 per cent considered using renewable sources as negative since they can be unreliable and expensive.

However, according to the Heartland Institute, the costs of wind-powered energy far outweigh the benefits.

* At the risk of stating the obvious, wind power is only available when the wind is blowing; when it stops, so does the power. So as to compensate for unreliability, stand by conventional power has to be available to “kick in” when the wind drops. This results in CO2 emissions without balancing energy outputs and a more unreliable grid – as both Germany and Denmark report.

* Installed capacity is one measure. The more important one is energy utilization. The average output of a wind turbine is app. One quarter of its capacity. In Denmark, where wind power represents 20% of installed capacity, wind turbines generate just 6% of the power Denmark consumed in 2004. What is more, not all of this power could be used in Denmark – it had to export it to Norway at a loss. Also, since the wind blew at times different from peak demand, Denmark also found itself importing electricity from other jurisdictions at premium prices.

* The trick, yet to be found, is storing power from wind turbines so that it can be available when needed and we can reduce the need for “firming” wind based systems with conventional power production. We do not yet have effective storage systems for the kind of capacity wind turbines can produce when they are functioning well – when this storage technology arrives, much more economies of scale may be possible. However, this will require additional investments to upgrade currently installed capacity and new investment models for all new wind farm construction.

* To produce the same amount of energy as a conventional power plant, wind farms need 85 times more land area.

* Wind farms produce both noise pollution and sight pollution, emitting blinding strobe-light sensations at dawn and dusk, and nearly constant noise pollution.

* Wind power costs twice as much as electricity produced by traditional fossil fuels. A 2004 study in the UK showed that wind power (including the cost of stand by generation) cost 5.4 pence (10 cents Canadian app.) per kw hour versus 2.2 (4 cents) from natural gas, 2.5p from coal and 2.3p from nuclear. Offshore wind power cost 7.2pp. A lot of these real costs are masked by deep Government subsidies. This translates into significant costs - £90 per MW hour versus £45 for “normal” power sources.

* Government subsidies for wind power are the only mechanism to ensure viability . In the UK, each turbine earns its owners £400,000 (app $800,000 Canadian) of which £200,000 comes from power sold to the grid and £200,000 from subsidies. In some jurisdictions, subsidies are worth more to the owner than the revenue from power sold to the grid.

* Also, critics ask, where is the environmentalist lobby's well-known concern for animal life? The US Department of Energy plans to build 132,000 new wind turbines by 2020. By conservative estimates, the new turbines would kill between 12 million and 15 million birds.

Environmentalists ignore the clear and certain costs of wind-powered energy: higher cost and lost efficiency, increased land development, noise and light pollution and bird deaths. They are also not keen to systematically look at the economics of wind power or the CO2 output from stand-by firming power generators which use gas or coal.

Patio Heaters and Climate Change

2008-08-21T06:43:00.001-07:00

In January, the European Parliament voted to ban patio heaters in the name of climate change. Apparently, there are some1.2 million such heaters in use in the UK and this usage is expected to double. Their popularity has risen significantly in the wake of the smoking ban, which has led to many organizations like pubs, clubs, eating places installing them for customers so that they can stay warm and smoke outdoors.

This is what the Energy Savings Trust (UK) says about them, using the UK as the country of measurement:

• A propane patio heater with a heat output of 12.5kW will produce around 34.9kg of CO2 before the fuel runs out (after approximately 13 hours). This is equivalent to the energy required to produce approximately 5,200 cups of tea (or 400 cups for every hour of operation).

• 2.3 million domestic patio heaters would emit the same amount of CO2 in a year as driving from Lands End to John O' Groats 200,000 times.

• The average patio heater uses the same amount of energy as a gas hob uses in six months and emits around 50 kg of CO2 per year. But while a hob is an essential item used every day in most kitchens patio heaters are typically only used for two months of the year, mostly in July and August.

• A modeling exercise by MTP on the energy use of the 630,000 UK domestic patio heaters calculated that they could produce a total of 140,000 tones of carbon dioxide per annum. This is roughly equivalent to the CO2 emissions from all the homes in Bath.

• Unlike cars, patio heaters are not fitted with filters to reduce the gases they produce. A standard 13kg canister of gas will warm an area outside of up to 25 sq m for 12 hours, whereas the same canister used in a gas fire could heat the same area indoors for 10 times longer.

One response to this, by doctors writing in the British Medical Journal (John Guillebaud, Emeritus Professor of Family Planning at UCL, and Pip Hayes, a GP), is that the logic of this ban should apply to families considering having a third child. The doctors comment that “choosing to have a third child is the same as buying a patio heater or driving a gas-guzzling car, and that GPs should advise their patients against it”.

Dr Hayes is certainly more than willing to advise her patients on matters that many would say are outside the remit of a GP. Her practice exhorts its patients not to fly on holiday, "but if you are flying this year, please consider offsetting your carbon emissions". Dr Hayes also requests that her patients "will walk or cycle whenever possible", so as not to damage the environment as well as for their own health. She herself is off on sabbatical to Madagascar and Australia - no doubt having offset the carbon from her flights.

Rod Liddle in his regular column in The Spectator (9th August) suggests that this all getting a bit silly – fashionista politics. He wonders “what’s next?” – so do I.

Are Universities Really "The Engines of Innovation"?

2008-08-20T13:38:00.002-07:00

Canada is economically challenged in the fast developing knowledge economy of the twenty first century. Productivity is falling, Canada’s competitive position is weakening, investment in R&D in the private sector is falling, the number of firms making such investments are falling and we are not keeping up with strong market pressure to improve. While some sectors of the Canadian economy are strong, we are very vulnerable to shifts in the US economy and to a reliance on natural resource revenues. As the balance of trade power shifts to China, India, Mexico and Brazil, Canada’s place in the world will have to be won again.

Key to Canada’s future is innovation. We use the Conference Board of Canada’s definition of innovation as “a process through which economic or social value is extracted from knowledge -- through the creation, diffusion and transformation of ideas -- to produce new or significantly improved products, services or processes.”

This definition gives emphasis to both social and economic outcomes of innovative activities. It also makes clear that innovation is a process involving different phases – idea generation, piloting and testing and then market delivery. Whether the innovation is a social product such as a vaccine or an economic product such as a new kind of vacuum cleaner, these phases are common.

The Issue

The role of Universities in supporting innovation is an important question for three reasons. First, Universities have attracted a great deal of investment on the grounds that they can make a significant contribution. Second, the innovation system is not producing the outcomes expected of it. If Universities have secured a great deal of the resources available, then why are the outcomes not evident? Third, Universities have other purposes than aiding the innovation process for the economy – how are these other purposes affected by a focus on commercialization and technology transfer?

Universities claim that they are key to Canada’s innovative future. They point to the 1,000 start up companies they helped to create in the last twenty years, the $6b in annual revenues these companies earn and the 25,000 people employed in these companies and claim success . Commercialization and technology transfers from Universities to the economy are working – they want more funds to sustain this.

They also point out that Canada’s researchers are highly productive and effective. On a per capita basis, they outperform their US counterparts in terms of patents filed, publications produced and the outcomes of their research.

What Universities do not speak to is how this distorts two primary things. First, it diverts resources within Universities away from “frontier” research – research which may have commercial consequences, but is focused on challenging the frontiers of knowledge without reference to commercial gain. This is the fundamental and grounded work of a University. The new focus on commercialization is affecting this, since researchers now do not disclose research findings as freely as they once did (it may affect their economic return) and jealousy guard their intellectual property . There are also renewed questions about bias in research when the funding comes from a source with a vested interest in the outcomes of that research – an issue which challenges the independence of Universities as institutions that can be “trusted sources” for knowledge.

A second issue, equally as important as the first, is that a strong focus on commercially oriented research distracts the university from the production of highly qualified and effective people (so called HQP) – much needed for Canada’s innovation system. With lead researchers doing little, if any, teaching and funding increasingly focused on research facilities and equipment, expanding the number of graduate students (especially at the doctoral level), improving the completion rates of these students and increasing the depth of their knowledge are all seen as secondary.

A related issue concerns the balance between research which is intended to have a social impact (e.g. research on diabetes) and research which is clearly focused on economic return (e.g. improved manufacturing processes). While this distinction is artificial – a breakthrough in diabetes treatments may have significant economic benefits, including commercial benefit – it is an important distinction. Some 80-90% or more of the work of Universities in relation to research is focused on work not intended for commercial benefit.

There are other issues:

1. University research is poorly financed. The unfunded costs of research activities are generally borne by transfers from the Universities operating budgets or endowment funds (where these exist). While Government support is currently available for some of these costs, the removal of this support would have serious consequences for the work of the University as a whole, not just for research.

2. Many of the research positions funded are short-term funded. For example, at the two Alberta Universities with Faculties of Medicine, some 555 positions key to both the operation of these Faculties and their research agenda are “soft funded”.

3. The physical infrastructure of Universities has suffered from years of neglect. While some “lights on” money has become available from both the Federal Government and some Provinces, the deterioration of the campus infrastructure is a serious problem.

4. Securing replacements for the retiring Professoriat will be difficult, given both the global “war for talent” and the low level of production of PhD graduates. The Associiation of Universities and Colleges of Canada suggests that between now and 2020 some 30,000 new Professors will need to be recruited for the current level of student enrolment, never mind expansion.

5. University research generally is not commercially focused, even when it is intended to be. There are considerable efforts needed to transfer technologies developed by Universities into commercially viable and sustainable products and services .

6. University graduates with a science and technology expertise rarely make effective entrepreneurs. Most need additional marketing, management and financial support.

This is not to say that Universities cannot work on technology transfer. They clearly can and do. The question is, to what extent should they.

Universities are suffering from chronic under funding – both in terms of (a) securing access for students and improving their completion rates; and (b) in terms of competitive conditions for attracting University teachers and researchers. Chasing research funds – from whatever source – becomes a survival mechanism.

Seeking to focus more of their work on outcomes based research intended to have a commercial outcome will change the nature of Universities:

o It will make them less likely to contribute to the development of new knowledge available to all researchers, since intellectual property management will take over from the “open source” practices traditionally at the heart of the University.
o It will make them more vulnerable as organizations, since they will become increasingly dependent on “short term” funding and thus less able to cope with sudden policy changes.
o It will challenge their intellectual freedom and their credibility over the long term as they become more dependent on outcome based research and public : private partnership funding.
o It distracts from the core work of the university - namely the production of highly qualified people, the pursuit of knowledge and the support of the communities in which they are located.

Implications for Canada

Universities are currently seen as a Provincial jurisdiction, yet increasingly rely on student fees, Federal and private sector funding for their sustainability. Canada should recognize that the nation’s future is critically dependent on an improved supply of highly qualified people and should change the funding model for Universities.

A national agenda, reflecting the need to improve access to and success in University education as well as the need for lifelong learning, is needed. This should target adequate funding for students, improvement of the physical plant of Universities and reducing the dependency of Universities on short term contract appointments. While this may sound expensive, long term investment in the total infrastructure is needed if innovation is to be sustainable.

Not all Universities should be expected to engage in research activities at the same level of the major research Universities, but all Universities should be engaged in research. A new funding model should recognize this.

Of particular importance in the first phase of this new funding model is to set targets for:

1. The percentage of science and technology workers in the workforce – to be competitive we need to achieve app. 10% (we are currently at 6.4)

2. The number of executive level managers able to work in the science, technology and natural resource sectors.

3. Convergence of science and technology subjects and the need to provide all science and technology graduates with some training in basic management skills and an understanding of the commercial sector.

4. Improving completion rates at all levels of University education, but most especially at the graduate level.

5. Improving the flow of academics to Canadian Universities by removing immigration barriers and restrictive practices.

Pursuing a new funding model and a strong focus on universities as providers or highly qualified people will help secure Canada’s innovative future.

It is through the development of intelligent, articulate and knowledgeable people that Universities contribute most to Canada’s innovation agenda. Once we recognize this, we may begin to see funding for research intended for innovation differently.

Canada need to rethink the role of Universities in its innovation system and place the emphasis on: (a) improving the flow and quality of people into the community with the knowledge and skills required for both social and economic innovation; and (b) ensuring that our Universities are sustainable over time.

This requires a changed model of funding, with a new kind of Public: Private Partnership and new kinds of accountability – the Federal Government, Provincial Government and Representatives of the Communities of Interest associated with the University system in each region of Canada should develop long term, sustainable funding based on agreed outcomes and performance measures.

Warming and CO2

2008-08-13T15:14:00.001-07:00

Let us explore some issues with respect to climate change and global warming – they are different, but connected.

First, do CO2 emissions cause global warming? The dominant media view is that CO2 emissions are the primary cause of global warming. But this ignores several things: (a) Mars, which does not have humans and does not have industrial or animal greenhouse gas and C02 emissions, is also warming; (b) warming occurs cyclically on planet earth – the cycle looks like it occurs every 1,500 years, with modest changes along the way (for example, the medieval warm period, 900 – 1300 AD) and these changes are independent of manmade CO2; (c) there are several studies showing the warming is occurring independently of CO2 over time – looking especially at the role of water vapour linked to increasing sun spot intensity. There are competing explanations.

One in particular is worthy of some scrutiny. In 1991 two Danish researchers at the Danish Meteorological Institute looked at the relationship between climate change in the northern hemisphere and increasing sun spot activity. When linked to a study of cloud cover and cosmic rays, the implications are inescapable – it is a solid explanation for warming. Later independent studies also confirm these findings, and suggest that this is also an explanation for past warming events (based on an analysis of sediment cores). Solar radiation and cosmic rays are credible explanation for warming – much more credible than CO2.

Second, but isn’t there a scientific consensus that CO2 is the cause? No. Science, as it should be, is much more cautious. What you may have read are the political summaries of the IPCC reports which suggest that there is a consensus. When you read the literally hundreds of studies supposedly summarized, there are a lot of cautions, many contradictions and an awful lot of “more research is needed…”. There are several different schools of climatologists who take a contrary view to the IPCC and a growing number who support the theory of cosmic rays and sun spots.

It is also important to note that not all who have been involved in the IPCC scientific reviews are climatologists or experts on global warming.

Further, there are a great many politics involved in the work of the IPCC – a desire to “do good” and to use science as a basis for social reform. In addition, a lot of funding is at stake – research related to global warming is an industry larger than many established manufacturing industries. One US Government agency alone allocates $16 million a year for very narrow range of climate change research activity.

Third, aren’t CO2 emissions undesirable – shouldn’t we try and reduce them? Absolutely. Just take the oil sands projects in northern Alberta. By 2025 Alberta oil sands alone will produce the equivalent CO2 emissions (assuming nothing changes) as are produced now for the whole of Canada. Less would be better. But do not confuse reducing CO2 emissions with climate change mitigation. If Kyoto had been fully implemented, then forecasted warming would have been delayed by 4-6 years.

So, is global warming taking place? Yes, because of a combination of factors, most of which (vapour, cosmic rays, sun spot intensity) are beyond our control. Further, warming is occurring in a pattern quite different from that suggested by many climate change modeling experts (on which a great many of the current assumptions about global warming are based). For example, atmospheric temperature is now lower than it was in 1977 – lower by a full degree in 2000 and by 0.6 degrees by May 2007 (satellite data). Furthermore, surface temperatures are now lower (by about 0.2 degrees) than they were in 1998, according to the Climate Change Research Unite at East Anglia University. What this means is that, as CO2 emissions were rising sharply (thanks to China, India, Canada and most of Europe increasing outputs, despite Kyoto commitments), temperatures both at surface and atmospheric levels were rising – contrary to all climate change computer models. This suggest that the climate and warming are more complex than the models established to emulate them.

The implications of all this are: caution. When you hear claims about CO2 and warming – put on your skeptics hat and ask questions.

Wind Power is a CO2 Generator

2008-08-11T04:53:00.002-07:00

The green movement champions windpower as a part solution to the need to generate clean energy without CO2. Sadly, they are mistaken.

Denmark and Germany have the largest installed wind power in the world. Denmark in 2002 generated 20% of its energy needs by means of wind power.

What Spain, Denmark and Germany have found is surprising:

1. Installed capacity does not translate into generation on a reliable basis. Due to wind variation, installed capacity can remain installed but not used - wind turbines are very inefficient. Denmark has an installed capacity of 20% of power from wind turbines, but these turbines in fact generate just 8%.

2. So as to provide large scale energy, wind powered turbine systems need a reliable energy capacity (coal fired, gas fired or some other form) to "firm" the supply - make sure that power can be there even when the wind is not.

3. In the UK, for example, there were 1,200 turbines installed by 2005. Despite this capacity, wind power was generating less than half of the power of a normal 1,200 MW nuclear station.

4. Wind power is a CO2 generator - the firming requirements make it so. In fact, in Spain, Denmark and Germany, wind power leads to more CO2 generation than would have been the case had the same volume of transmitted power being generated from more conventional means.

Several countries - Denmark, Ireland and Germany - have placed a moratorium on building more wind farms. In part this is because of cost (it is twice as expensive to generate wind power than conventional power) and in part because the more wind power capacity that is installed the less reliable the energy grid is.

Wind power and biofuels don't look promising at all now do they?

Green Bubble

2007-10-24T07:30:00.001-07:00

Thomas Friedman, author of The World is Flat and a columnist for the New York Times, wrote an editorial piece in the New York Times recently about greentech and the green strategies of governments which ended with these words:

“We have a multigenerational problem that requires a systemic, multigenerational response, and that can happen only if we get our energy prices right. Only that will guarantee green innovation and commercialization at scale. Anything less is wasted breath and wasted money — and any candidate [for the Presidency] who says otherwise is only contributing to global warming by adding hot air.”

His point is that many of the “solutions” being touted to global warming are small scale and that the pace of change is too slow to make a difference.

Key to all of this, in his view, is the pricing of energy – changing behaviour through market is how real change will occur.

Several steps would be needed to make this happen. First, there would be a need to challenge energy producers to reduce carbon emissions significantly – adding costs to the supply chain, well to wheel. Second, it would be helpful to demand that cars can travel additional km’s from a litre of gas – creating better use of the gasoline or gas-ethanol blends. Third, there would be a need to increase gasoline taxes and reinvest the additional funds in public transport systems and infrastructure. Fourth, there would be a need to increase royalty rates from wells and oil production – adding yet more costs to the supply chain. Finally, a green tax on all forms of air transport – people and goods – would further demonstrate that CO2 emissions - e.g. a tax on air travel that went into a carbon offset fund.

When gas at the pump gets to be $4.50 to $5.50 a litre here in Canada, then social behaviour may change.

So too will other things. Poverty will increase – food prices and costs of almost all goods will increase significantly. Travel will become very expensive – a tank of gasoline for a trip to Calgary from Edmonton would cost $275 – economic activity would slow.

It’s a tough call. No one is willing to make it.

Energy Renaissance

2007-10-06T05:49:00.001-07:00

If we need evidence that a renaissance is taking place, look at the energy sector.

Since the emergence of personal transport felled by gasoline after the second world war and the installation of electricity in every home, burning carbon based fuels became a normative way on producing energy. We were not concerned about the green house gas effects of carbon emissions in the 1950's or 1980's and only started to become concerned in the early 1990's and seriously since 2000 as evidence mounted that global warming was occurring and that carbon had something to do with it.

As we move towards a zero carbon emissions economy as an ideal, energy is suddenly experiencing a renaissance, both in terms of technology and innovation but also in terms of how it is perceived. CleanTech energy - wind, solar, hydro and thermal - is emerging as a substantial industry, attracting very large amounts of investment. Integrated energy systems - using coal and other forms of energy supply in an integrated way - is an active discussion. Clean coal technologies, carbon capture and storage (sequestration), biofuels and bioenergy are all active conversations and developments.

Energy is truly an area where a renaissance is taking place and where leadership is required to ensure that the renaissance is sustained in a way that helps to continue to provide both affordable and clean energy.

To read more about what is going on in energy, take a look at the Energy Futures Network website by clicking here.

Biofuels Bad for the Environment

2007-09-22T04:45:00.001-07:00

A recent international study has found that BioFuels such as Ethanol emite up to 70% more greenhouse gases, particularly nitrous oxide, than fossil fuel. Nitrous Oxide is 300 times more damaging than carbon monoxide. This is the second study that has come to this conclusion, which will surely be brushed aside by the likes of Al Gore and others that want to blame humans for Gloabal Warming. The alternative fuels sources are becoming slimmer. More Green Credits please…

Another hiddedn jem in this article, that the liberal left will deny, is that the study also found that the human effect, man-made causes, is only responsible for 2% of Global Warming. Holy Jesus, what about the other 98%? Please Mr. Gore, answer that. Additionally if the US were to move to biofuels,, man-made emissions would rise to 6%, that is a 300% increase in greenhouse gases. Time to wake up America, the liberals are using smoke a mirrors, ultimately to make money for themselves.

The Al Gore campers have been trying to convince the public were are all so bad and we need to spend massive amounts of money to change to “green” engery and we will have to give up our daily convinience unless we have green credits. What a load of crap. Speaking of crap, guess what contains a lot of nitrogen based compounds that release into the air. Guess what will be used to rapidly grow corn for Ethanol. If you guessed the crap that keeps coming from the Gore campers, your were right.

A renewable energy source designed to reduce greenhouse gas emissions is contributing more to global warming than fossil fuels, a study suggests.

Measurements of emissions from the burning of biofuels derived from rapeseed and maize have been found to produce more greenhouse gas emissions than they save.

Other biofuels, especially those likely to see greater use over the next decade, performed better than fossil fuels but the study raises serious questions about some of the most commonly produced varieties.

Rapeseed and maize biodiesels were calculated to produce up to 70 per cent and 50 per cent more greenhouse gases respectively than fossil fuels. The concerns were raised over the levels of emissions of nitrous oxide, which is 296 times more powerful as a greenhouse gas than carbon dioxide. Scientists found that the use of biofuels released twice as much as nitrous oxide as previously realised. The research team found that 3 to 5 per cent of the nitrogen in fertiliser was converted and emitted. In contrast, the figure used by the International Panel on Climate Change, which assesses the extent and impact of man-made global warming, was 2 per cent. The findings illustrated the importance, the researchers said, of ensuring that measures designed to reduce greenhouse-gas emissions are assessed thoroughly before being hailed as a solution.

“One wants rational decisions rather than simply jumping on the bandwagon because superficially something appears to reduce emissions,” said Keith Smith, a professor at the University of Edinburgh and one of the researchers.

Maize for ethanol is the prime crop for biofuel in the US where production for the industry has recently overtaken the use of the plant as a food. In Europe the main crop is rapeseed, which accounts for 80 per cent of biofuel production.

Professor Smith told Chemistry World: “The significance of it is that the supposed benefits of biofuels are even more disputable than had been thought hitherto.”

It was accepted by the scientists that other factors, such as the use of fossil fuels to produce fertiliser, have yet to be fully analysed for their impact on overall figures. But they concluded that the biofuels “can contribute as much or more to global warming by N2 O emissions than cooling by fossil-fuel savings”.

The research is published in the journal Atmospheric Chemistry and Physics, where it has been placed for open review. The research team was formed of scientists from Britain, the US and Germany, and included Professor Paul Crutzen, who won a Nobel Prize for his work on ozone.

Dr Franz Conen, of the University of Basel in Switzerland, described the study as an “astounding insight”.

“It is to be hoped that those taking decisions on subsidies and regulations will in future take N2O emissions into account and promote some forms of ’biofuel’ production while quickly abandoning others,” he told the journal’s discussion board.

Dr Dave Reay, of the University of Edinburgh, used the findings to calculate that with the US Senate aiming to increase maize ethanol production sevenfold by 2022, greenhouse gas emissions from transport will rise by 6 per cent.

Is Biotechnology Stalled ?

2007-09-05T11:32:00.000-07:00

What we Know:

Biotechnology and Biopharma

1. Some of Alberta’s leading biotechnology companies remain unprofitable – Biomira Inc. Isotechnika, Oncolytics and SemiBioSys between them had net losses of $72,888,410 in 2006[i]. Part of the reason for this is the time it takes to secure regulatory approvals for products. According to the Pharmaceutical Research Manufacturers of America (PhRMA)[ii], the average total cost of moving a new drug through the development process in the U.S. is well over $800 million. The association also states that drug development takes, on average, 12 to 15 years, leaving only five to eight years of US patent protection. In addition, PhRMA notes that only one in 5,000 new compound entities actually survives the development process, receives new drug approval, and ultimately reaches the marketplace. It is a tough market requiring patient capital and a high degree of risk management.

2. The overall position of the sector globally, according to the Price Target Research Intelligence Summary (July 26 2007) is weak, with many companies showing declining margins and having low expectations for growth. None of Alberta’s “top Bio Technology Companies” appear on the industry leaders list of the top 25 companies[iii].

3. While Canada has some strengths in biotechnology R&D (University of Calgary ranks 49^th and University of Alberta 65^th in the world for biotech patents issued between 2000 and 2005), it is weak in converting technology innovation into sustainable commercial outcomes. The University of Calgary/UTI ranks 7^th in the world in terms of the strength of its innovation pipeline, but no Alberta institution is amongst the top ten for commercialization using the Milken Commercialization index (for Canada, only UBC and McGill appear in the top 25 on this index)[iv].

4. Each quarter, Revere Data LLC produces an investor risk/opportunity analysis aimed at helping investors make key biotech investment decisions. The focus is on North American biotech companies with an attractive ratio of opportunity to risk based on a diversified late stage drug portfolio built around proven technologies and strong strategic partnership with blue-chip pharmaceutical or similar companies. Companies must have a market cap of between $50 million and $1 billion to qualify. They note that too many companies have a focus on a single product, often competing against FDA approved mechanisms for treatment. Of the 23 companies listed as having pipeline potential from North America in the current assessment, non are Canadian. When their relative performance of the currently listed companies on the Revere Biopharm Index is examined, only eleven of these companies perform better than the index average – over half are between 0.2% and 68% below the index average[v].

Health Innovation

5. The Conference Board of Canada’s August 207 report on health innovation[vi] also presents a picture of a sector not performing to best in class standards. Using an innovation systems framework, the report compares Canada’s innovative capacities in health (including medical devices) with those of Japan, Italy, France, Spain, Korea, Switzerland, Finland, Austria. Norway and the US. They conclude:

Canada, in comparison to others, has a low ratio of life science/health graduates with research qualifications per capita (29 per 1 million) when compared to our competitors – the average is 60 per 1 million.
Venture capital investments in health innovation as a % of GDP is (app.) 8x smaller than in the US and has remained flat since 2003.
While public investment in health innovation is strong in Canada, investments by private sector companies in health/life science R&D is low when compared to the other countries studied – Canadian companies fund only 41% of health related R&D as compared to 58% for comparison countries.
Canadian universities are poor at commercialization and diffusion of innovation.
While Canada has a drugs/pharma pipeline that is competitive with other nations, but is poor at the development of e-health systems and health related IT. Only about 65% of Canadian GP’s are users of the internet.
Canada imports a significant proportion of its medical devices and of pharmaceuticals, creating a trade deficit of $136 per capita.

Nanotechnology

6. Nanotechnology investments remain strong. The Lux Research analysis of the industry sector world-wide for 2006 shows[vii]:

· VC investments in nanotech start-ups reached $650 million in 2006.

The average deal in 2006 comes to $11.5 million, 19% higher than 2005’s $9.6 million.
In 2006, 121 different institutional venture capitalists invested in nanotech start-ups, the majority of which had previously invested in the field. Familiar names, such as Harris and Harris Group (H&H) and Draper Fisher Jurvetson (DFJ), continue to dominate, while new entrants such as Bain Capital joined a number of US Fortune 500 corporations in casting votes of confidence for companies employing nanotechnology.
Ten venture-backed nanotech start-ups have managed an IPO of shares, raising an aggregate $417.2 million at their debuts with a total implied valuation of $1.69 billion.

Investors expect to exit their investment in six to eight years – twice as long as in many other knowledge/technology intensive sectors. In 2007 148 firms have structured nanotech initiatives, doubling to 290 in 2008. By then, corporate nanotech R&D spending will increase to $12 billion; 80% of high-impact companies will have nanotech in normal product development, and many of the 217 firms seeing a medium level of impact from nanotechnology will have formalized today’s loose projects[viii].

7. Nanotechnology R&D is attracting significant Government resources. Lux Research data shows that, in 2006 world-wide:

Government spending on nanotechnology grew to $6.4 billion in 2006, up 10% from $5.9 million in 2005. The U.S. leads on this metric, with $1.78 billion from federal and state governments, followed by Japan with $975 million and Germany with $563 million. However, at purchasing power parity (PPP) – a factor which corrects for the lower costs of goods and services in many nations – China reaches second place, with funding equivalent to $906 million. NINT estimates that some $200 million was spent in 2006 by Canadian Governments and their agencies.

Corporations spent $5.3 billion on nanotech R&D in 2006, a 19% increase over 2005, with the U.S. leading the way at $1.93 billion, followed by Japan with $1.70 billion at PPP. Developing nations are further behind on corporate spending, but some saw strong growth – China’s estimated corporate nanotech funding reached $165 million at PPP, up 68% from its 2005 total. Canadian corporations spent app. $26 million.

Among publications on nanoscale science and engineering topics since 1995, the largest number, over 43,000, come from the U.S. China is in second place with more than 25,000 – and added over 6,000 publications in 2006, more than twice as many as third-place Japan. International patent activity also swelled, growing 31% in 2006 to reach 10,105 patents from the countries studied. The U.S. holds the lion’s share, with 6,801 patents; Germany is in second place with 773.

The Lux report analyzes 14 countries’ nanotech competitiveness on two axes: 1) nanotechnology activity, which evaluates nanotech innovation on an absolute scale; and 2) technology development strength, which gauges the relative ability of nations to use those innovations to drive economic growth. “It’s clear that leading nations in nanotech, particularly the U.S. and Japan, aren’t going to be pushed aside any time soon,” Dr. Holman (report Principal author) said. “They will have more competition at the top, however. It was striking that even within the top tier, countries like South Korea grew much closer to the U.S. and Japan, and developing nations like China, India, and Russia made strong moves forward just in the last year. Canada is seen as a minor player - Canada has a high number of nanotech publications but is particularly weak showings in active nanotech companies.

8. Canada has some 80 companies focused on nanotechnology activities, with just one third of these with revenue mainly under $1 million[i].

9. According to the Canadian NanoBusiness Alliance, there are over 130 organizations currently involved in nanotechnology in Canada[ii]. Virtually all activities in Canada are conducted in the vicinity of five nanotechnology hubs. The distribution of organizations and principle industrial nanotechnology clusters are as follows:

Montreal (40%) with nanotech clusters developing in information technology & communications, chemicals & materials, aerospace & defence, and medical
Toronto (25%) with nanotech clusters developing in medical, and chemicals & materials
Ottawa (15%) with a nanotech cluster developing in information technology & communications
Edmonton (10%) with a nanotech cluster developing in information technology & communications[1]
Vancouver (10%) with a nanotech cluster developing in energy

- only six of the organizations in the Edmonton cluster are commercial companies.

Food Biotechnology

10. Biotechnology is reshaping links across the supply chain for food. Herbicide tolerant soybeans, slow ripening tomatoes, virus resistant squash, insect resistant potatoes, corn and cotton are all now products on the market which have an impact on the supply chain from seed production to retailer. The impact can be seen by just one example. When Bollgard cotton – a pest resistant cotton developed through genetic modification – was introduced, $150million in incremental profit was secured for Monsanto in the first year of sales. Once the EPA approved this cotton for full commercial sale, Delta and Pine Land’s (the major grower) saw their market capitalization rise from $374 million to $862 million after just five months of post EPA decision sales[iii].

11. The focus for biotechnology and food related innovation is on: (a) enhancing the health and nutritional value of food products; (b)creating new flavours – e.g. better tasting strawberries (c) improving product functionality; and (d) enabling the creation of entirely new products. Three industry features will accelerate the development of biotechnology with respect to food. These are: (a) increasing ability to engage in bio-engineering at the genome level; (b) faster time to market for new products – development times are declining; and (c) a strong focus on food quality[iv].

12. In 1990 there were some 30 companies engaged in biotechnology development with respect to food. In 2006 there are seven, including DuPont, Monsanto, Novartis and Zeneca. It is estimated that these companies have spent a minimum of $6 billion on food biotechnology since 1990[v]. While each look to third parties for innovative ideas, they are each seeking to direct a great deal of the available R&D resources and have focused plans for food innovation over any five year period.

[1] The organizations associated with this cluster are: BigBangwidth, Edmonton, AB; · BioTools, Edmonton, AB; · Canadian Light Source, Saskatoon, SK; · Integrated Engineering Software, Winnipeg, MB; · International Centre for Bioethics, Culture and Disability, Calgary, AB; · Micralyne, Edmonton, AB; · National Institute of Nanotechnology (NCR), Edmonton, AB; · Norcada, Edmonton, AB; · University of Alberta, Edmonton, AB; · University of Calgary, Calgary, AB; · University of Manitoba, Winnipeg, MB; · University of Saskatchewan, Saskatoon, SK; · Westaim Biomedical, Calgary, AB

[i] Source: Roberto Locha (2006) Canada Lags in Nanotechnology. Montreal Gazette at http://www.canada.com/montrealgazette/news/business/story.html?id=c12a98e1-b1a5-4862-8a6b-aea4bb0e8c58

[ii] Source: Canadian NanoBuisness Alliance web overview of the industry at http://www.nanobusiness.ca/hubs.php

[iii] John Cook et al (1997) Food Biotechnology – Can You Afford to be Left Out? McKinsey Quarterly (3).

[iv] John Cook et al (2006) Food Biotechnology – Can You Afford to be Left Out? McKinsey Quarterly.

[v] Ibid

[i] Summing the net loss reports in the Annual Reports to shareholders.

[ii] The Association’s web site is http://www.phrma.org/innovation/ - this particular reference is from Christopher Sprague Speeding Time to Market at http://www.ngpharma.com/pastissue/article.asp?art=270061&issue=201

[iii] PTR’s rating methodology uses an Appreciation Score and a Power Rating. Reflecting the company’s fundamentals, the Appreciation Score acts as a “governor” on the Power Rating’s measure of investor expectations during periods of high investor enthusiasm. Conversely, the Power Rating can signal caution when market attitudes are out of line with forecasts and the Appreciation Score. PTR’s reports include a rating overview, an overall investment profile, growth and profitability forecast profiles, and a price target assessment. Special reports highlight new earnings announcements and extraordinary price behavior Weekly investment research reports on over 3,000 companies•Web based investor platform with extensive research tools available – see www.PriceTargetResearch.com

[iv] Ross deVol and Armen Bedroussian et al (2006) Mind to Market – A Global Analysis of University Biotechnology Transfer and Commercialization. Milken Institute,

[v] Revere Biotech Pipeline Risk Report December 2006 available at http://www.reveredata.com/

[vi] Conference Board of Canada (2007) Exploring Technological Innovation in Health Systems. August.

[vii] Lux Research is the primary investor and industry research company. This data is based on the 2006 State of the Industry Review found at http://www.luxresearchinc.com/press/RELEASE_VCreport.pdf

[viii] Lux Research op cit

Foreign Direct Investment in Canada

2007-09-05T11:30:00.000-07:00

What We Know

1. In an analysis of the US Fortune 500’s foreign investment strategy by the Milken Institute, the major focus for investment (new plants, expansion, R&D etc) are the BRIC’s economies. Only 7% of those surveyed saw Canada as a potential point of investment as opposed to 87% in China, 51% in India, 33% in Russia and 20% in Brazil. Canada will have difficulties attracting units of MSN’s with global product mandates[i].

2. Despite this, foreign direct investment (FDI) in Canada continues to grow year on year, in 2006 reaching (app.) $450 billion (see graph below). Most of this investment comes from the US (62%) or the EU (30%).

3. Since 1985, more than 12,100 Canadian firms have been taken over by foreign interests[ii]. The most symbolic of these are the Hudson Bay Company (owned by a US entity), Inco (owned by a Brazilian company), Alcan (now owned by a an Anglo-Australian company) and Fairmont Hotels (formerly CP Hotels, now owned by a Saudi entity). Labatt, Abitibi-Consolidated, Dofasco, Shell Canada and Falconbridge are also under foreign ownership. In terms of the knowledge economy, many high tech firms are now under foreign ownership –for example, ATI was purchased by AMD in 2006. A number of leading Alberta ICT firms have also been acquired – e.g. Merak (now part of Schlumberger) and Hyprotech (now part of Aspen Technologies).

4, According to Ernst & Young[iii], the Canadian provinces of Quebec and Ontario rank just behind California and Massachusetts as top North American locations for biotech investment. Canada competes with the UK after the US for new biotech investment, patents and venture capital. Large multinational biotech companies dominate the market. Canada’s 389 private firms are largely small: 312 have less than 20 employees, 243 have less than 10 and 153 have less than five. “These are very small companies,” says Rod Budd, Ernst & Young’s Canadian life science leader. “Many of them received only seed or angel money, and they continue to operate within government or educational institutions. Their ability to grow is limited.” Montreal and Toronto host the largest concentrations of biotech activity in Canada and in many ways resemble the classic clusters found in San Francisco and San Diego. Greater Toronto is one of North America’s largest centres of biotech activity and is home to more than 100 life science companies, including GlaxoSmithKline (GSK), Eli Lilly, Aventis Pasteur and AstraZeneca.

5. Despite the growth in FDI and in the number of takeovers by foreign companies, both the WTO and OECD are warning Canada that its FDI rules are inhibiting growth. The OECD said in its annual Going for Growth report 2007[iv] that Canada's limits on foreign investors are among the most stringent in the 30-member organization. They hurt the economy, not only by curbing investments but also by limiting the introduction of new management and technology systems. The March 2007 WTO report notes that trade and foreign investment are particularly important for Canada, which is the world’s fifth-largest goods-trading nation, and urged the Canadian government to address those “remaining policy-induced distortions” to help ensure that Canadians continue to enjoy one of the highest living standards in the world. However, the Government of Canada has announced that it will review FDI and foreign ownership rules with a view to tightening them – a blue ribbon panel is to be appointed and report in time to shape aspects of the 2008 budget.

6. Thomson Financial Securities Data[v] show there were more outbound than inbound deals being done in Canada in 2005 and 2006. Looking at all Canadian companies, Canada had 348 outbound deals in 2005 and 442 outbound deals in 2006. Meanwhile, there were 277 inbound deals in 2005 and 383 inbound deals in 2006. This trend is continuing in 2007. There were 143 cases of Canadian-based companies buying foreign firms (outbound) in the first quarter of 007, with a value of $22 billion, compared to 46 foreign acquisitions of Canadian companies (inbound), totalling $15 billion.

7. China and India are securing a significant amount of available venture capital. In 2006, China overtook the UK in terms of its ability to attract capital – India is expected to follow suit in 2009[vi]. China is expected to overtake the whole of the EU in terms of venture investment 2itnin 2-3 years, with India doing the same within five[vii].

8. A key factor in FDI is the role of the public sector. In a Library House strategic evaluation of the European innovation policies of the twenty seven member states, a direct relationship is established between public sector support for early stage companies –the stronger the public sector support for early stage companies, the more likely venture capital will follow. The key examples are the UK, Ireland, Denmark – all high in both public investment and venture capital[viii].

[i] Betsy Zeidman (2005) Changing Contours of Capital. Milken Institute. See also Milken Institute’s Capital Access Index for 2006.

[ii] Source: Reality Check at http://realitycheck.typepad.com/commentary_news/2007/06/letter_from_jac.html

[iii] Ernst and Young (2007) Beyond Borders – Ernst and Young’s 2007 Global Biotechnology Report available from http://www.ey.com/global/content.nsf/International/Biotechnology_Library_Beyond_Borders_2007

[iv] OECD (2007) Going for Growth 2007 – available at http://www.oecd.org/document/8/0,3343,en_2649_37443_37882632_1_1_1_37443,00.html

[v] Available through http://www.thomson.com/

[vi] Library House (2007) Funding Growth in a Changing World – The UBC UK Venture Backed Report, August 2007.

[vii] Ibid, page 34

[viii] Ibid at page 35

The War for Talent

2007-09-05T11:29:00.001-07:00

1. According to a year long study conducted by a team from McKinsey & Co. - a study involving 77 companies and almost 6,000 managers and executives - the most important corporate resource over the next 20 years will be talent: smart, sophisticated businesspeople who are technologically literate, globally astute, and operationally agile. And even as the demand for talent goes up, the supply of it will be going down. The McKinsey team is blunt about what will result from these trends: Its report is titled The War for Talent.” The search for the best and the brightest will become a constant, costly battle, a fight with no final victory. Not only will companies have to devise more imaginative hiring practices; they will also have to work harder to keep their best people[i]. In the new economy, competition is global, capital is abundant, ideas are developed quickly and cheaply, and people are willing to change jobs often. In that kind of environment,” says Ed Michaels, a McKinsey director who helped manage the study, "all that matters is talent. Talent wins.".

2. A survey by HR consultancy Development Dimensions International and the recruitment firm Monster has found nearly three quarters of staffing directors believe competition for talent has got worse since 2005, and nearly eight out of 10 expect it to intensify even further over the coming five years[ii].

3. Time in a particular job is also going down, as employees move to better paying or more flexible places of work. In China, for example, highly skilled professional employees stay an average on eighteen months in a new position – annual salaries rise by 9% but a job change can lead to a 30% rise for highly skilled professionals working in China[iii]. Other reports suggest that India, typically considered as the first choice in outsourced professional talent, is facing a looming crisis in talent, which could push the next wave of outsourcing into China[iv].

4. When some individuals leave an organization they take clients or R&D activities with them. In a study of the private banking sector, for example, 88% of firms with assets of $2 billion or more expect to loose 10% - 12% of the relationship managers annually and their experience is that each take at least one (and often up to 5) of that managers top twenty clients[v].

5. The key to retention of employees by firms are the workplace culture and work environment, brand and reputation, strategic business direction and compensation[vi].

6. Recently Statistics Canada suggested[vii] that the demographic shifts in the workplace are not taking place as expected, since more Canadians are staying in the workforce longer. However, this simply delays the impact of known demographics. Canada will rely on immigration to sustain its economy after 2015. In 2006, 70% of the growth in the labour force came from immigration.

6. Alberta has its own labour supply challenges related not just to the expansion of the oil sands but also to the demographics of the Province. A particular gap is that for highly qualified entrepreneurs (so called “serial entrepreneurs”) who can both give weight to emerging firms but also act as mentors to others. A second talent gap relates to Tier One venture fund managers – which is an issue for Canada as a whole, as well as for Alberta. The province is facing a shortfall of 100,000 workers by 2015, with at least 40,000 of those positions in the oil and gas sector.

[i] The original McKinsey & Co article is at http://www.mckinsey.com/clientservice/organizationleadership/warfortalent/index.asp and an interview with the team behind this work is at http://www.fastcompany.com/magazine/16/mckinsey.html . Inc. magazine also has an interesting take on this issue at http://www.inc.com/resources/recruiting/articles/20050401/talentwars.html

[ii] Source: Management Issues 28^th March 2007 at http://www.management-issues.com/2007/3/28/research/war-for-talent-steps-up-a-gear.asp The actual study can be found at http://www.ddiworld.com/pdf/selectionforecast2006-2007_es_ddi.pdf

[iii] Source: Talent War Spreads to China in http://www.myglobalcareer.com/archives/2007/05/25/talent-war-spreads-to-china/

[iv] Rick Talberg (2007) War for Talent Goes Global, April at http://www.telberg.com/telbergblog/archives/658-War-for-Talent-Goes-Global.html

[v] SEI (2007) SEI Private Banking Executive Quick Poll – The War for Talent Survey Results.

[vi] ibid

[vii] See Perspectives on Labour and Income, Volume 8(8) August 23 2007 – Participation of Older Workers.

Convergent Technology

2007-09-05T11:28:00.000-07:00

What We Know:

1. According to the 2006 Rand study[i], supported by related studies by Battelle and others (including the NRC Emergent Technologies study of 2005), sixteen key convergent technologies will drive many innovations between now and 2020. These are:

· Personalised medicines and therapies

· Genetic modification of insects to control pests and disease vectors

· Computational (or “in silico”) drug discovery and testing

· Targeted drug delivery through molecular recognition

· Biomimetic and function-restoring implants (including the neurosilicon interface)

· Rapid bioassays using bionanotechnology

· Embedded sensors and computational devices in commercial goods

· Nanostructured materials with enhanced properties

· Small and efficient portable power systems

· Mass-producible organic electronics, including solar cells

· “Smart” fabrics and textiles

· Pervasive undetectable cameras and sophisticated sensor networks

· Very large, searchable databases containing detailed data and personal records

( e.g. medical data, geomatics)

· Radio frequency identification (RFID) tracking commercial products and individuals

· Widespread bundled ICT, including ubiquitous wireless technology and wearable computer devices

· Quantum based cryptographic systems for secure data and information transfer

2. These “base” technologies are likely to lead to significant product developments which will have a substantial impact on a variety of social and economic sectors[ii]. The following are likely to happen in 2007-2020, since there are few political and legal barriers to their development:

· Low cost solar energy

· The Semantic Web and enhanced IP protocols

· Filters and catalysts for water purification

· Rural wireless communication systems

· Ubiquitous, fast and data-rich information systems

· Green manufacturing systems

· Targeted drug delivery

· Rapid bioassays

· Advanced tissue engineering

· Ubiquitous RFID tagging

· Efficient and reliable hybrid vehicles

· Significantly improved diagnostic and surgical methods

· Quantum cryptography

· Drug development from genetic screening

· Body monitoring and control for disease management

· Intelligent systems – especially automotive systems, robotics and AI driven educational support and learning systems

3. Few of these developments will arise from a single R&D centre or from within a single discipline – all require cross-functional R&D and multi-jurisdictional R&D. Also required is an ability to focus the efforts of all in the “innovation supply chain” on needed activities in support of products and services that have significant market potential[iii]. Most partnerships for R&D and innovation supply chains are within nations[iv].

4. THECIS, working with the Office of the National Science Advisor, recently engaged in a consultation on the prospective application of converging technologies[v], which asked participants to categorise the Rand matrix of technologies/opportunities (given above) and assess their true potential in terms of these basic areas: (a) energy and environmental applications; (b) water, food and bio-products; (c) health and life sciences. For each of these, the most significant technology/applications which were substantive (in terms of markets) and feasible were:

Energy and Environment

· Nano biosensors that detect toxins and contaminants in the environment

Water, Food and Bio-Products

· Real time biosensors for waterway monitoring

· A variety of materials for ag-bio control (e.g.. smart release membranes, synthetic self assembly zeolite or similar)

Health-Life Sciences

· Bio nano replacement parts made using cell derived tissues

· Bio nano environmental medicine – pervasive monitoring of the environment for a range of health related pollutants and the remediation of these pollutants using automated systems

5. While Canada has some strengths in biotechnology R&D (University of Calgary ranks 49^th and University of Alberta 65^th in the world for biotech patents issued between 2000 and 2005), it is weak in converting technology innovation into sustainable commercial outcomes. The University of Calgary/UTI ranks 7^th in the world in terms of the strength of its innovation pipeline, but no Alberta institution is amongst the top ten for commercialization using the Milken Commercialization index (for Canada, only UBC and McGill appear in the top 25 on this index)[vi].

[i] Rand Corporation (2006) The Global Technology Revolution 2020 – In Depth Analysis – Bio/Nano/Materials/Information Trends, Drivers, Barriers and Social Implications. Santa Monica, CA: Rand Corporation,

[ii] Rand study, op cit.

[iii] Ross de Vol and Armen Bedroussian et al (2006) Mid to Market – A Global Analysis of University Biotech Transfer and Commercialization. The Milken Institute

[iv] Magnus Karlsson (2006) International R&D Trends and Drivers. Chapter in Karlson, M [editor] (2006) The Internationalization of Corporate R&D – Leveraging the Changing Geography of Innovation. Stockholm: Swedish Institute for Growth Policy Studies.

[iv] Debbie Mohammed (2007) op cit.

[v] THECIS (2007) Prospective Applications of Converging Technologies, Workshop Report March 30^th.

[vi] Debbie Mohammed (2007) op cit.

Clean Tech

2007-09-05T11:26:00.000-07:00

Climate Change Policy

1. Governments are taking climate change seriously. A number of US States have enacted legislation requiring the reduction of green house gas emissions by 80% below 1990 levels by 2050 (many with specific interim targets between 2007 and 2050). They include California, New Jersey and Iowa[i]. In addition, 600 Mayor of US cities agreed on July 13^th 2007 to the climate change protocol for cities which is largely based on the Kyoto protocol and follow similar guidelines to those of the US States just mentioned[ii]. Canada’s Partners for Climate Protection program has signed on 145 municipalities from every province and territory – 14 of these are Alberta municipalities[iii].

2. The EU has been taking serious steps to address its own greenhouse gas emissions since the early 1990s. In March 2000 the Commission launched the European Climate Change Programme (ECCP)[iv]. The ECCP has led to the adoption of a wide range of new policies and measures. Among these is the pioneering EU Emissions Trading Scheme, launched on 1 January 2005, which has become the cornerstone of EU efforts to reduce emissions cost-effectively. Monitoring data and projections indicate that the 15 European Union members at the time of the EU's ratification of the Kyoto Protocol in 2012 (EU-15) will not reach their Kyoto Protocol target for cutting greenhouse gas emissions[v]. This requires emissions in 2008-2012 to be 8% below 1990 levels. The EU has more recently (August 2007) agreed to a 20% GHG emissions cut by 2020 from the 1990 base year[vi].

3. Canada has announced a regulatory strategy for climate change. The federal government will impose mandatory targets on industry, so that greenhouse gases come down and Canada achieve a goal of an absolute reduction of 150 megatonnes by 2020. As well, it will impose targets on industry so that air pollution from industry is cut in half by 2015. Companies will be able to choose the most cost-effective way to meet their targets from a range of options: in-house reductions, contributions to a capped technology fund, domestic emissions trading and offsets and access to the Kyoto Protocol’s Clean Development Mechanism. Companies that have already reduced their greenhouse gas emissions prior to 2006 will be rewarded with a limited one-time credit for early action. In addition to measures to reduce air emissions from industry, the federal government is committed to addressing emissions from transportation by regulating the fuel efficiency of cars and light duty trucks, beginning with the 2011 model year. They also intend to strengthen energy efficiency standards for a number of energy-using products, including light bulbs, and the Government has recognized the need to take action to improve indoor air quality. Canada also has a target of having all gasoline in Canada contain a blend of 5 percent ethanol or diesel by 2010. In addition, diesel fuel and heating oil in Canada must contain at least two per cent renewable biodiesel by 2012[vii].

3. Carbon trading is becoming a standard response to climate change. Alberta’s carbon trading scheme began on July 1^st 2007. Effective March 31, 2008, the 100 or so plants in the province that produce more than 100,000 tonnes of greenhouse-gas emissions have to take action to cut their carbon intensity by 12 per cent, retroactive to July 1, 2007. The trading scheme prices one tonne of carbon at $15 and the trading fund is intended to support projects aimed at cutting emissions[viii]. The EU carbon trading scheme is the largest in the world[ix] and a similar scheme is managed in the US by the Chicago Climate Exchange[x]. The Winnipeg Exchange is developing the Canadian Climate Exchange for carbon trading[xi] and Montreal is considering following suite[xii].

4. Many companies have made commitments to reduce green house gas emissions and have adopted so called “triple bottom line” reporting, which includes audited statements of environmental impacts of the work of the company. Xerox, Pepsi, DuPont, AIG, Dow, Ford, GM, Shell and many other major companies with a presence in Canada have joined the US Climate Action Partnership[xiii], which intends to focus and co-ordinate efforts by the partners to achieve environmental standards not dissimilar to Kyoto.

5. Public response to climate change is to see it as a political priority but not to take actions individually on a large scale. A 2007 Ipsos-Mori Social Research study in the UK[xiv] shows that 59% of individuals surveyed are doing nothing personally about climate change but that 54% may do something if a large number of others also did so. In the UK, less than 1% of the population has switched to an energy company supplying renewables as part of the energy mix; under 0.3% has purchased and installed a form of micro renewable energy generation (solar or geothermal); less than 0.2% of cars purchased are energy efficient or hybrid and just 2% of air passengers claim to have purchased carbon offsets for their travel.

6. The “climate change lobby” is pushing hard on some key recommendations. Typical of these is James Hansen (Director of the Goddard Institute for Space Studies at NASA). His five key recommendations (as at January 2007) are[xv]: (a) there should be a moratorium on building any more coal-fired power plants until we have the technology to capture and sequester CO2; (b) there should be a gradually rising price on actual CO2 emissions with the offset revenue collected from carbon trading being dedicated to technology development and energy efficiency; (c) there is a need to impose energy efficiency standards on both new and old buildings, transportation, industry and air travel; (d) ice sheet stability over time needs systematic study, since current models and assumptions appear flawed; and (e) the public needs to be better informed and engaged in understanding the realities of climate change. Others have gone further – the journalist and campaigner George Monbiot is calling for a 90% cut in emissions from the 1990 base year[xvi].

CleanTech Sector Development

7. The CleanTech industry sector is already a significant market activity. Recent estimates suggest that solar energy has the potential of being a US$69 billion global industry by 2016[xvii] (up from US$16 billion in 2006) and wind-power at US$61 billion by 2016 (up from $17.9 billion in 2006). These are forecasts are strongly influenced by assessments of public policy and the implications of such policies for venture capital investments. In 2006, clean technology became the third largest category for venture capital investment in North America (11% of all investments) with as total of US$2.9 billion invested in the sector in that year (up from US$1.6 billion in the previous year)[xviii]. The 45 companies that make up the Cleantech Index (CTIUS) have an aggregate market capitalization of over US$300 billion with growth that outpaced that of the S&P 500 index[xix].

8. The key locations identified as centres of excellence for commercial clean technology, linked to R&D are Austin (US), Freiburg (Germany), New York (New York), Vancouver (Canada), Hyderabad (India), Portland (US), San Francisco (US) and Shanghai (China). The most attractive jurisdictions for investment in renewable energy are US, India, Spain, UK, Germany and China[xx]. Some highlights of activity[xxi] in 2006 include:

Cleantech innovation grew significantly in 2006: 1,500 cleantech start-ups operate worldwide, 29,874 scientific journal articles were published in 2006, and 4,093 U.S. patents focused on cleantech were issued globally
A boom-and-bust scenario looms in energy technology - IPO value was up 156% in 2006, driven by solar and biofuels
Untapped opportunities persist in air, water, and waste technologies, which have been comparatively starved for capital
Asia/Pacific leads in cleantech R&D, topping out 2006 government funding (38%), corporate R&D spending (34%), and scientific publications (38%)
Europe is the IPO leader, with a majority (55%) of IPO value in 2005 and 2006
The U.S. leads only in 2006 venture capital deployed (72%) and patents issued (46%)

The CLeanTech Network report substantial venture activity in China. The company’s China Cleantech Venture Capital Investment Report says cleantech investment in China increased 147% from 2005 ($170 million) to 2006 ($420 million) and that Q1 2007 cleantech investment in China amounted to $154 million.

9. The federal government established Sustainable Development Technologies Canada (SDTC) in 2001 with a $550-million investment fund. Since then, the organization has completed nine funding rounds, allocating $241 million to 109 projects, including $48 million for 19 projects announced in July 2007 (none of the nineteen were Alberta based[1]). SDTC’s Web site, www.sdtc.ca, reports that projects in which it invested have secured an additional $617 million from other partners, for a total project value of $858 million. Each year, some CleanTech firms in Canada compete for the title of Canada’s Top CleanTech company, the prize being access to significant venture capital opportunities across North America. In 2007, the three finalists were EcoView Analytics (Ottawa), Paradigm Environmental Technologies (Vancouver) and Sunarc of Canada (Montreal). No Alberta firms entered this competition.

[1] SDTC have funded projects in Alberta. 15% of the 1,319 submissions it has received come from Alberta and 14 projects have been funded at $23.6million with an additional $71.9million coming from other investors for a total of $95.5million. The majority of these projects relate to energy and energy utilization.

[i] Michelle Austein (2007) US States, Cities Working to Slow Climate Change. US,INFO March

[ii] US Conference of Mayors Press release, July 13^th 2007 at http://usmayors.org/climateprotection/climateagreement_071307.pdf

[iii] Federation of Canadian Municipalities web site, esp. at http://www.sustainablecommunities.fcm.ca/Capacity_Building/Energy/PCP/default.asp

[iv] For details, see http://ec.europa.eu/environment/climat/eccp.htm

[v] According to European Environment Agency’s July 2007 report, the 15 original members of the EU reduced emissions by eight-tenths of a percentage point between 2004 and 2005 (the most recent data available). The tally was seven-tenths of a point if new member states were included. Finland decreased emissions by 14.9 percent and Germany by 2.3 percent, putting 11.9 and 23.5 fewer tons of CO2 into the air, respectively. In both cases, much of the reduction was obtained by switching from coal-burning power plants to cleaner energy sources. At the other end of the spectrum, emissions rose in Austria, Greece, Italy, Ireland, Portugal and Spain. Spain had the worst increase of the Western European states, 3.6 percent. Lithuania topped the overall list with an annual increase of 7.2 per cent.

[vi] See BBC News March 9^th 2007 EU Agrees On Carbon Dioxide Cuts at http://news.bbc.co.uk/2/hi/europe/6432829.stm The commitment to cut at 20% is for EU states. Should other nations agree to partner with the EU on CO2 emissions reduction (US, India, China), then the cut will be 30%.

[vii] Environment Canada (2007) Canada’s New Government Announces Mandatory Industrial Targets to Tackle Climate Change and Reduce Air Pollution, News Release April 26^th at http://www.ec.gc.ca/default.asp?lang=En&n=714D9AAE-1&news=4F2292E9-3EFF-48D3-A7E4-CEFA05D70C21

[viii] Bill 3, Climate Change and Emissions Management Amendment Act and its accompanying Specified Gas Emitters Regulation state companies that emit more than 100,000 tonnes of greenhouse gases a year must reduce their emissions intensity by 12 per cent starting July 1, 2007.

[ix] See EU Emissions Trading Directive summarized at http://www.rff.org/documents/RFF-DP-04-24.pdf

[x] For a description, see http://www.chicagoclimatex.com/ In a price for CO2 futures, the Chicago Exchange estimates that the December 31^st 2008 price for a metric tonne of CO2 will be $21.85US.

[xi] See http://www.canadianclimateexchange.com/news.html

[xii] See Canadian Press report at http://www.electricityforum.com/news/may03/exchanges.html

[xiii] For details, including a list of member companies, see http://www.us-cap.org/

[xiv] Ipsos-Mori Social Research Institute (2007) Tipping Point or Turning Point ? Social Marketing and Climate Change. August 2007

[xv] See James Hansen web site at http://www.columbia.edu/~jeh1/

[xvi] George Monbiot (2007) Heat – How to Stop the Planet from Burning. Canada: Anchor

[xvii] Ron Pernick and Clint Wilder (2007) The Clean Tech Revolution – The Next Big Growth and Investment Opportunity. London: Collins.

[xviii] Jack Stack et al (2007) Cleantech Venture Capital – How Public Policy Has Stimulated Private Investment. California: Cleantech Venture Network, May 15^th 2007 (mimeo).

[xix] Ibid

[xx] See Ernst and Young Renewable Energy Country Attractiveness Index, 2007 at http://www.ey.com/Global/assets.nsf/International/Industry_Utilities_RenewableIndices-Q2-07/$file/Industry_Utilities_Attractiveness_Q22007.pdf

[xxi] Lux Research (2007) CleanTech Report™

Tides and Climate

2007-06-26T14:20:00.000-07:00

Scott Armstrong of the Wharton School and Kesten Green of Monash have looked in a systematic way at the methods employed by the Inter Governmental Panel on Climate Change (IPCC) and have found that the forecasting practices used by those who worked on the climate change prediction violated 72 of 140 forecasting principles taught to students of forecasting. In an interesting paper, which can be found here, they conclude that "claims that the Earth will get warmer have no more credence than saying that it will get colder".

This is interesting, as a related conversation with one of the world's leading oceanographers reaches a similar conclusion about the IPCC's views about the rising ocean. Dr. Nils-Axel Mörner is the head of the Paleogeophysics and Geodynamics department at Stockholm University in Sweden. He is past president (1999-2003) of the INQUA Commission on Sea Level Changes and Coastal Evolution, and leader of the Maldives Sea Level Project. Dr. Mörner has been studying the sea level and its effects on coastal areas for some 35 years. He suggests that the oceans are not rising in the way the IPCC report suggests at all. You can read his observations here.

Just further proof that we've been had.

Climate Change Responses

2007-06-26T13:59:00.000-07:00

Developments in response to climate change are now becoming clearer, despite the ever weakening of the so-called “science” behind this theory that human caused C02 emissions are the primary cause of “global warming”.

Britain and the EU in general seem to have got the bit between their teeth and are determined to change the way in which they operate to reflect the strength of their commitment to CO2 reduction. Two particular ideas are illustrative of how things are moving. The first is to require all homes sold in the UK (initially this requirement will only apply to houses with four bedrooms or more, but the EU directive which inspires this requires it to apply to all homes) to have an environmental certificate, so that the new owners can see just what CO2 emissions emanate from the property and what they can do to reduce such emissions and, possibly, reduce the costs of ownership of the property over time. The next logical step in this process is to require the new owners, by the time they seek to sell the property, to demonstrate that they have made improvements to the carbon footprint of the home.

A second development in the UK is the likely adoption of road pricing – fitting every car in the UK with a sensor which will track every mile driven on every road and feed this data to a satellite system, so that drivers in the UK will pay for each mile they travel – different rates applying to different roads at different times. In exchange, the government will remove other taxes and dues so that this becomes the primary method by which carbon linked to road transport is managed. This is a bureaucratic dream machine – appeals, logistics, implementation and action plans. But the government is taking this seriously.

Britain has also got into recycling, despite continued protests. But they have, of course, made it very complicated – different bins for plastics, paper, food waste, other recyclable material and rubbish. The complications arise in what kind of plastics can be recycled and what cannot and the strict conditions for acceptable paper waste – only two out of the four most common forms of plastic containers can be, the rest cannot. Given that garbage collection occurs every two weeks in many locations, all of this garbage and waste sorting becomes a big deal.

At some point there will be a significant backlash to these kind of responses to climate change. It will show itself in small defiance initially – refusing to recycle, refusing to fit the black box to the car and so on. But it will begin to build, especially when people realise that it will make little (if any) difference to climate change (the new power plants opening in China every week will quickly replace any CO2 emissions reduced) and that it is based on propaganda not science.

But it is classic bureaucracy turned loose. A symptom of this is the EU directive that requires all those wearing a sporran with their kilt to have a license for the fur material in it. The concern is that the pelts used for sporrans may come from species endangered by climate change, so the boys and girls in Brussels deemed a license necessary. I wonder if bagpipes are sources of CO2 emissions – maybe we could restrict their use as well. But this is the kind of rule making we will see in response to climate change. Believe it. You can't make this stuff up!

The Global Warming Hysteria

2006-12-21T17:24:00.000-07:00

In the middle ages the earth was 3C warmer than it is now. There were no glaciers in the tropical Andes – now there are three. Viking communities farmed in Greenland, which is now covered with permafrost. A Chinese naval fleet is said to have sailed round the Artic in 1421 and found no ice of substance. Global warming existed then, but this fact has been expunged from the UN’s global climate change ideology – its an inconvenient truth.

So too is the effect that the sun is having on our climate. The sun is hotter now than it has been for the past 11,400 years, according to a variety of sources. This inevitably has an impact on the earth’s climate. Recent Danish Space Centre research appears to confirm this. While the earth can absorb some of the new heat from the sun, some of it is reflected back, warming the atmosphere.

Another inconvenient truth is that there has been no atmospheric warming over the last 70 years, according to a significant group of scientists (see http://www.co2science.org/ ) . Data from the 1,221 sites of the US Historical Climatology Network demonstrate this – many places are actually cooler. This is not the same as surface warming, which is definately taking place.

What is more, the climate change models used to predict the “catastrophic future” of the planet cannot be used to model past behaviour of the planet – that is, when they are used to reconstruct the last one hundred years they are inaccurate, predicting a much warmer climate than actually occurred.

In the last thirty years, a great expanse of Antarctica has cooled – as much as 20C in some places, with the ice mass growing significantly in some places. While some warming of the western Antarctic ice sheet has occurred, the net result is a small (not catastrophic) loss of ice mass. While this supports some aspects of the so called climate change consensus, it does not support the “catastrophists”.

It is claimed that there is a consensus within the scientific community about climate change. There is not. 17,000 scientist signed a petition some years ago indicating their dissent. More recently, 41 of the leading scientists in Britain wrote to The Daily Telegraph indicating their rejection of the interpretation of climate change by the climate lobby. 60 leading scientists wrote In April to our own Prime Minister asking for science, not polemics, to determine strategy on climate change.

The Director of the UK’s Climate Research Unit suggests that the growingly “catastrophic” predictions about climate change by some scientists reflect their concerns about ongoing funding, the new round of post Kyoto negotiations and the blurring of the line between science and politics. Lord Monckton of Brenchley goes further and suggests that there is a blurring of the line between scientific discourse and politics – a blurring which damages both. The last time we saw such a “scientific consensus” was when it was understood that the earth is flat.

Scientists that do not follow the consensus, such as Bjon Lomberg, (author of The Skeptical Environmentalist) are castigated by others for challenging their view – yet the very foundation of science is challenge. “Group think” dominates and controls the flow of research funds and impairs our ability to get to the heart of the issues. Governments and the UN use science selectively. A recent report of a UK parliamentary committee which looks at the way in which government uses science suggests that it is selective, politically motivated and often just twisted to meet the policy position the Government has taken. There is no reason to think that any Government behaves differently. It is “politically correct science”.

There is, however, consensus that the “hockey stick” view of climate change – showing a relatively flat line that suddenly spikes at an angle upwards between the years 1800 – 2000 – is unfit for use and is based on questionable assumptions and a manipulation of different kinds of data. Yet many continue to use it. There is no consensus on the temperature of the last thousand years, other than recognition that the earth has been warmer than it is now.
What all of this has lead to is misguided policies, public fear about the future and a discrediting of science. It also leads to a focus on the wrong thing. The real focus needs to be on the future mix of our energy supplies, especially now that we know both oil and natural gas are (or will soon be) past peak production – supplies are in decline. We need reliable, abundant sources of energy. We need to revisit nuclear power, focus on substitutes to natural gas and oil and leverage investments in new energy technologies. This is the real scientific agenda.

Whatever Happened to Science?

2006-12-21T17:21:00.000-07:00

Something strange is happening to science. Science and politics have become bedfellows and some scientists are crossing a thin line between scientific endeavour and political advocacy. The more this occurs, the less value will be attached to science and the more cynical people will become about politics.

Three examples will make clear the problem. The most obvious is climate change. This is the theory that the earth is experiencing global warming, caused largely by human actions, and that the impact of such warming will be devastating for many communities, especially coastal communities, around the world. Those scientists who dissent from this view – indicating that the sun is warmer now than it has been for several thousand years, that the earth is not as warm as it was in the medieval period and that many claims are exaggerated – are termed “climate change deniers”, find themselves ostracized within the scientific community and are refused grants. “Group-think” is so strong that the basics practice science has been replaced by the rhetoric of advocacy. In February of 2007, when the next UN report on climate change is due, expect skeptics to be at the forefront. The report will indicate that the impact of human activity on climate change is much less than was previously thought and that the rise in sea levels will be half that predicted by the UN when it last reported - fertile ground for skeptis of the science.

A second example relates to cholesterol. The theory here is that “bad” cholesterol is a cause of heart disease and that controlling cholesterol will lead to a lower level of risk of premature death through a heart attack or stroke. Large drug company profits are often driven by cholesterol related drugs, such as Lipitor – statins which have an impact on cholesterol production. Yet the evidence for this theory is not as compelling as many may think. The International Network of Cholesterol Skeptics – scientists and others – have a different interpretation of the evidence and reach different conclusions based on science. They note that age adjusted incident of heart disease has not been impacted by the widespread use of the statins used to reduce cholesterol. Despite these concerns, there is a global group-think that treats skeptics as deviants and deniers.

A third example will also help us understand why science, advocacy and politics are closely tied together. There is a strong view that North America and Europe is suffering an epidemic of childhood obesity. Yet the Centre for Disease Control in the US has had to retract several studies due to poor methodology or data analysis and has apologized for exaggerating the implications of the research. The New Scientist also showed that there is only weak evidence linking obesity with mortality – only those grossly obese suffer the symptoms and consequences attributed to the many who are slightly or moderately obese. Some of the original studies were funded by the weight loss / diet companies.

The scientific method is about disagreement, challenge and the use of evidence to support such dialogue. Advocacy is about taking a position and using all available means to get things done. Politics is about creating popular solutions to problems people didn’t know they had. When these become confused or blurred, then we all suffer. For example, the insistence on cholesterol as a cause of heart disease leads to huge health care expenditures, transfer of assets from the public to the private sector. Scientists who take a different view are generally denied funds or find it difficult to secure support for their research.

Climate change believers always suggest that “deniers” are funded by the energy companies or proxy organizations established by these companies. Yet the global warming industry has its own funding resources – governments and others - who have a vested interest in promoting a future of challenge requiring political action. No one is immune from the influences of the socio-economic source of their funding and sponsorship.

The argument goes “well, we should act just in case the dominant theory is true – what’s the harm?”. All drugs have side effects – we are yet to see the full impact of a generation using statins to control cholesterol and the likely impact of the war against obesity on psychological and physical well being of the next generation. We have not yet fully understood the impact of the measures being taken to “manage climate change” on the social and economic development of communities. All acts have intended and unintended consequences. What we can see is a growing cynicism about science and about the use of science to support advocacy and campaigns. What we see is the political manipulation of science to win elections, create fear and offer solutions to problems we may not actually have.

A Happier New Year ?

2006-12-16T14:56:00.000-07:00

Many find the season to be gloomy – they spend too much, eat too much, spend too much time with relatives they don’t particularly like and watch very poor television. It makes them cranky, flatulent and negative. For many, the season brings out negative emotions and impressions about the state of the world.

Yet the world is in a very good shape. It is richer, healthier and cleaner than ever. Let’s look at some facts.

Daily food intake in poor countries is now 2,666 calories per person per day – an increase of 38% since the mid 1960’s. This has occurred despite the significant growth in population in these countries in this same time – up by 83%. One factor that helps this is the significant decline in world food prices over the last four decades – down 75% in real terms.

Poverty, though still very real for many, is on the decline. In 1820, 85% of the world’s population lived in abject poverty. Today the figure is nearer 20%. The number of people living on $1 a day is around 6% - down from 18% in the late 1970’s. The $2 a day number is also down from 39% to 18% in this same time frame. We don’t yet see the end of poverty or its implications, but these numbers represent real progress.

Life expectancy is also on the rise. In 1900 life expectancy around the world was 31 years – now its 67 years and rising. In Canada it is currently 80. While some countries are still low – Angola, Kenya, Mozambique, Nigeria, South Africa, Zimbabwe are all under 50 – the average continues to rise. The gap in life expectancy between rich and poor countries is now just 12.2 years – it was 25 years in the 1960’s.

Child labour is down. In the early 1960’s one quarter of all children under fourteen were working. Now it is less than 10%. More children are in school than ever before and global rates of illiteracy have fallen from 46% of all children in 1970 to around 18% today.

We use much less energy than we used to. One tone of coal produces twelve times more energy than it did just a century ago. Energy intensity of developed nations – a way of measuring the energy efficiency of a nation – has been falling at 1.3% each year for the last century and demand from the richest countries will fall this year, despite strong economic growth. Intensive agriculture has made it possible to produce more food from less agricultural land, enabling land to be returned to different uses. A recent study showed that our forests are making a comeback – trees are thicker now than they were one hundred years ago and the volume of trees is rising in China, Vietnam and Spain. One forecast suggests that, by 2050, the global forest will have expanded by 10%

The driver for all of these developments is economic growth. More specifically, it is the strong globalization of trade, knowledge and skills. As we support the reduction of poverty in India and China by enabling them to engage in the global economy and as we transfer skills, knowledge and resources more freely now than at any time in history, the quality of life for people improves. We still have a long way to go, but we are making real progress.

While global warming is a fact, the impact will be less than anticipated. The United Nations International Panel on Climate Change next report due in February is expected to indicate that the impact of global warming on sea levels will be less than anticipated and that the role of humans in creating warming is half that suggested in previous reports. In fact, the role of the sun in climate change – the sun is now warmer than it has been in over 11,400 years – is much greater than hitherto acknowledged. We need to leverage the opportunities of global warming rather than implementing draconian measures which will halt the war on poverty and hunger. We need to redouble our efforts to develop cleaner energy technologies and require their use, but not at the expense of a firm focus on growth.

As for critical illnesses, such as aids, malaria, TB, diabetes, treatments are improving and breakthroughs in genetic engineering, stem cell research and our understanding of the functioning of human systems are all providing new routes for cures. Just recently a team working at the Hospital for Sick Children in Toronto, the University of Calgary and the Jackson Laboratory in Maine have found a diabetes pathway that originates in the nervous system. It appears that the nervous system closes down the effective insulin production of the pancreas, but that this can be reversed by a simple injection – ending diabetes, at least in mice.

Technological innovation is this stimulating significant advances in biotechnology, fuels, the more efficient use of renewable resources and for different forms of transportation. Skilled scientists, technologists and engineers have made major contributions to global well-being and will continue to do so, provided we continue to invest in innovation, research and commercialization.

So, as you face down that final piece of turkey and set aside the seventh glass of something or other, think of the world as one of hope. The evidence is there that mankind can manage its existence on this planet – we don’t have to start looking for new homes on the planet Mars or give up all our habits to save the planet. We are making progress. There is always more to do, but we can do what is needed in the spirit of moving on rather than in the spirit of turning back the clock.

Diabetes, Science and Change

2006-12-15T09:28:00.000-07:00

When evidence emerges that a standard shared paradigm is about to shift, scientist should engage in a fierce, focused yet friendly conversation and engage the work of science in pursuit of the “new” truth. This just happened with diabetes.

For many years, the dominant assumptions has been that Type 1 diabetes, the most serious form of the illness that typically first appears in childhood, was solely caused by auto-immune responses -- the body's immune system turning on itself. Type 2 diabetes involves this same end-point, but the reason this occurs have to do with obesity, diet and life style.

New work, published today in the journal Cell challenges these assumptions. Researchers at the Hospital for Sick Children at the University of Toronto, the University of Calgary and the Jackson Laboratory in Maine have found a diabetes pathway that originates in the nervous system. It appears that the nervous system closes down the effective insulin production of the pancreas, but that this can be reversed.

Using diabetic (Type 1) mice, injections of capasucin (the active ingredient in chili peppers) fully restored the insulin production of insulin and the diabetes disappeared. They also found that there was a much closer connection between Type 1 and Type 2 diabetes – they both look to have their roots in the same causal pathways. Because the nervous system has triggered a reaction, the pancreas produces too few neuropeptides which in turn causes insulin not to be produced. The chili pepper substance reversed this.

Watch now what happens. A healthy scientific community would explore this and vigorously challenge the experiment and the data. What comes out at the other end will be some new model of diabetes, which could accelerate work towards a more effective treatment. An unhealthy scientific community, which has invested huge resources in the “old” paradigm will just ignore this “aberrant” study and continue along, trying to ridicule the work. It’s a test of how health science is.

A Glimpse into the Future

2006-12-15T09:11:00.000-07:00

Poplar Mechanics lists ten key technologies we should look for in 2007 that will begin to have an impact on daily life. You can look at their site for the full list, but these struck me as having every day implications:

Bendable Concrete

The nickname for Engineered Cementitious Composites (ECC) is self-explanatory: bendable concrete. Specially coated microscopic polymer fibers slide past each other instead of snapping under stress, so ECC bends without breaking. The material has been used to create stretchable expansion joints for a Michigan bridge, and to allow the coupling beams in a 41-story tower in Yokohama to flex during Japan's frequent earthquakes. SHORT-TERM IMPACT: LOW It could take years for ECC to be commonly used in construction, unless a major earthquake puts it in the spotlight.

Printed Solar Panels

Tomorrow's solar panels may not need to be produced in high-vacuum conditions in billion-dollar fabrication facilities. If California-based Nanosolar has its way, plants will use a nanostructured "ink" to form semiconductors, which would be printed on flexible sheets. Nanosolar is currently building a plant that will print 430 megawatts' worth of solar cells annually—more than triple the current solar output of the entire country. SHORT-TERM IMPACT: LOWSolar power still isn’t in wide use, so even a tech breakthrough will take time to have an effect. But the long-term outlook is brighter.

VoN (Video on the Net)

The first Video on the Net (VoN) conference was in 1998, but the concept of watching videos on your PC is only now reaching maturity. Products like Apple’s iTV video-streaming box, due to launch this year, promise to simplify the sometimes geeky process of finding and playing video files. And Google’s $1.65 billion acquisition of YouTube last fall is evidence that VoN is big business, though exactly what kind of business is anyone's guess. SHORT-TERM IMPACT: HIGHTiVo, DVRs and iTunes have already changed the way many people watch TV, and VoN is likely to make shows and movies more accessible than ever.

Smart Pills

These swallowable, vitamin-size sensors won’t make you smarter, but anything that lets you avoid an endoscopy is a pretty good idea. The FDA-approved sensor, from Buffalo-based SmartPill, transmits data about pressure, acidity and temperature to a 5 x 4-in. receiver that patients carry around with them during the pill’s trip through their gastrointestinal tract. SmartPill already has competition—the Israeli company Given Imaging has developed a similar sensor called PillCam. SHORT-TERM IMPACT: HIGHWhile you won't be popping them on a daily basis, these sensors — which at press time were on the verge of being shipped—could make a wide range of invasive procedures obsolete.

Another one that struck me is the really smart car. The new Lexus can park itself, using motion and visual sensor technologies, it will do parallel parking. A new S class Mercedes has also many intelligent driving options, including automatic slowing down and pacing with adjacent cars etc. There are also very exciting developments in intelligent homes, which are worth keeping an eye on.

Heddy Lamarr - Actress and Inventor

2006-12-13T20:18:00.000-07:00

Hedy Lamarr was a wonderful actress, producer and artist. She also was an inventor. She held the patent for torpedo guidance systems together with her co-inventor George Antheil.

They began talking about radio control for torpedoes in 1937. The idea itself was not new, but her concept of "frequency hopping" was. Lamarr brought up the idea of radio control. Antheil's contribution was to suggest the device by which synchronization could be achieved. He proposed that rapid changes in radio frequencies could be coordinated the way he had coordinated the sixteen synchronized player pianos in his Ballet Méanique. The analogy was complete in his mind: By the time the two applied for a patent on a "Secret Communication System," on June 10, 1941, the invention used slotted paper rolls similar to player-piano rolls to synchronize the frequency changes in transmitter and receiver, and it even called for exactly eighty-eight frequencies, the number of keys on a piano.

Lamarr and Antheil worked on the idea for several months and then, in December 1940, sent a description of it to the National Inventors Council, which had been launched with much fanfare earlier in the year as a gatherer of novel ideas and inventions from the general public. Its chairman was Charles F. Kettering, the research director of General Motors. Over its lifetime, which lasted until 1974, the council collected more than 625,000 suggestions, few of which ever reached the patent stage. But according to Antheil, Kettering himself suggested that he and Lamarr develop their idea to the point of being patentable. With the help of an electrical engineering professor from the California Institute of Technology they ironed out its bugs, and the patent was granted on August 11, 1942. It specified that a high-altitude observation plane could steer the torpedo from above.

The US Navy turned its back on the invention, concluding that the mechanism would have been too bulky to fit into a torpedo. Antheil disagreed; he insisted that it could be made small enough to squeeze into a watch. And he thought he knew why the Navy was so negative: "In our patent Hedy and I attempted to better elucidate our mechanism by explaining that certain parts of it worked like the fundamental mechanism of a player piano. Here, undoubted, we made our mistake. The reverend and brass-headed gentlemen in Washington who examined our invention read no further than the words 'player piano. 'My god,' I can see them saying, 'we shall put a player piano in a torpedo.'"

Canada's Innovation Challenge

2006-12-13T09:59:00.000-07:00

Productivity has fallen again in Canada. On average, Canadian’s generate some $6,000 less per worker in gross revenues than their US counterparts. Canada’s competitiveness also fell in 2006 – we are down from 13^th to 16^th in a listing of the world’s most competitive countries produced by the World Economic Forum. While government spending on R&D is the highest in the G7, our ability to commercialize that spending is poor –it takes $100 million of R&D expenditure to secure one patent, in the US it takes just $11 million do the same. In terms of patents issued per $1 million Canada ranks 31st in the world.

The economy is strong – we see annual GDP growth of around 2.5%, unemployment is relatively low, the Federal government and some Provinces have surplus revenues and living standards are high. Despite a slowing US economy, Canada’s economy remains robust. Yes theses issues of productivity, competitiveness and innovation suggest structural problems in our economy which create major concerns for the longer term. They mean that we do not have new industries to replace those in decline, new products or services are not emerging quickly enough to sustain our economy past the decline in the supply of natural oil and gas to the US. We are overly dependent on non renewable commodity sales to sustain our economy.

When we add in our declining birth rate – we will be entirely reliant on immigration to sustain our current standard of living some twenty years from now – and the depopulation of rural Canada, we have another structural problem – the distribution of economic activity is becoming overly concentrated in a few urban regions of the country. We are also overly dependent on a major customer base – the US. We have not diversified our markets for products and services to buffer Canada from the ups and downs of the US economy.

Canada needs to rethink in strategy for innovation, science and technology. Right now, it isn’t working.

There are several reasons for this. First, we have too few scientist, engineers and technological skilled professionals in our workforce. Canada has 6.4 science, engineering and technology graduates per 1,000 in the workforce, our competitors have between 10 and 15. Second, we have insufficient private investment in R&D. Of the world’s most intensive R&D companies that produce commercial value, Canada has just three – Suncor, Petro-Canada and Research in Motion. The ratio of private to public spending on R&D is low at 1.14:1 – our competitors are at 3:1. When we look at the raw number – private companies spend just over $14b on R&D – it seems large. But it is the ratio of private : public that leverages our skills and talents to produce economic gain. Venture capital flow in Canada is also problematic – too many small funds, not enough experienced fund managers and too many small deals.

There are seven things that need to happen for Canada to regain traction in its innovation strategy. First, we need to significantly increase the private sector investments in R&D. This requires expansion of the tax credits for R&D in terms of both tax credits available and what they can cover. It also requires expansion of the Industrial Research Assistance Program which supports applied research in companies and stimulates private R&D.

Second, we need to push universities to engage more directly in public private partnership research – firms pulling research from Universities which meet market needs – matching fund incentives, creation of sector councils to drive R&D, expansions of the networks of excellence program.

Third, we need to stop trying to be all things to all people – focused R&D on areas in which Canada has particular strengths makes more sense that a scatter gun approach. A national framework for innovation would help.

Fourth, the Government of Canada should partner and align itself more strongly with Provincial strategies, especially in terms of increasing access to and success in College and University level programs in science, technology and engineering and aligning national and Provincial R&D strategy.

Fifth, we need to create encouragement for companies to adopt best practices so as to improve productivity and performance. The big incentive is profitability, but we do not spend enough to support training and skills development once people are in the workforce. Lifelong learning is not a slogan – it is a business imperative in a fast changing world.

Sixth, we need to reposition key instruments of innovation. These include the National Research Council which needs to be in part managed by universities and in part privatized. Equally, we need to confirm the long term future of the Canada Foundation for Innovation and better co-ordinate innovation initiatives.

Finally, we need to leverage the buying power of all three levels of government to encourage small and medium enterprises to grow and to support Canadian business. The US government requires that 10% of all Federal R&D expenditure be spent with small and medium sized firms. Doing this in Canada would provide a boost to our innovation system.

At the heart of innovation are firms willing to take risks. An over-riding need in our economy is to build a strong, focused culture of commerce and to create a business environment that supports growing enterprise. Right now, this does not exist in Canada in the way that it does in Finland, Britain, Ireland and the US. We need to celebrate our commercial successes more and challenge business to be world class in all that we do.

We have had several years of “innovation policy”. Its time for a new one.

Weak Productivity - A Sign of the Times

2006-12-11T07:35:00.000-07:00

Productivity in Canada slipped 0.1 per cent between July and September. This follows a 0.3-per-cent decline in the second quarter, according to Statistics Canada. Prior to that the economy had posted seven consecutive quarters of positive growth, though not at a level which is competitive with other nations.

Productivity is one of the key indicator of an innovative economy. It shows that firms are getting smart at adapting to new conditions and fully leveraging technology they have adopted. When productivity falls or does not grow at competitive levels with other economies, then we begin to lose our competitive edge.

Manufacturing productivity is low in Canada due to a weak level of investment in both human capital (training, skills development etc) and infrastructure capital - we dont leverage technology and we dont keep pace with competitors. Service productivity is not growing fast enough due to our inability to leverage available technologies. Labour agreements also play a (slight) role.

What is needed: incentives for life long learning investments by individuals and firms and industry challenging itself to be best practice adopters.

Will it happen: no. Canada has no really dynamic culture of commerce that creates the necessary imperatives for productivity growth. We also also have such a narrow mind-set around markets that limits the scope of many firms thinking.

Dangers in Making a Sandwich

2006-11-29T03:43:00.000-07:00

Apparently, it was announced today that McDonald's is seeking to patent sandwich making. And its not a machine they are trying to patent, it is the method of making deli sandwiches. Now maybe this is intellectual property protection being taken too far.

However, it got me thinking. I have not much to do in the last week of December, so I think I will try and patent: putting on socks after a night out on the town; shaving without cutting a hole in your cheek; washing behind the knees while standing; googlewhacking - how to get just one result from a two word google search; conducting an orchestra; singing in the rain.Just think of the money I could make from third world countries who wont realise that I own all of this activity.

Time to change this thinking...

China Makes its Move...

2006-02-09T13:44:00.000-07:00

Following the Bush announcement on competitiveness and innovation in the State of the Union address last week, we innovation policy watchers have been waiting to see what China would do. They made their move yesterday.

They announced a sweeping 15-year plan to invest in technologies ranging from genetics to energy-efficient cars in an effort to spur economic growth and improve environmental protection. The plan, issued by the State Council, China's Cabinet, calls for the country to raise spending on research to 2 percent of economic output by 2010 and 2.5 percent by 2020, while progress in science and technology will contribute at least 60 percent to the country's development. In 2004, China's R&D expenditures represented 1.23 percent of GDP - the highest among all developing countries.

The document pointed out, however, that China's spending on science "is still insufficient, the investment structure is not reasonable and the basic conditions for science and technology are still weak." The plan promises to encourage private research spending by offering tax breaks and improving patent and copyright protections.

Meanwhile, the country's reliance on foreign technology will decline to 30 percent or below by the end of the planning period in 2020. The number of patents granted to Chinese nationals and the volume of their published research are expected to rank among the world's top five countries.

China will give priority to technological development in 11 major sectors such as energy and water resources in the coming 15 years in an attempt to resolve bottlenecks in the country's economic and social development. The key industries also include mining resources, environmental services, agriculture, manufacturing, communications, transport, information, public security and national defense.

By 2020, China will have developed a number of cutting-edge technologies in biology, the information industry, materials technologies and advanced manufacturing, according to the plan. China will focus on the economical, efficient and clean use of energy resources and exploration for new sources of supply. The guidelines also call for the development of technology for the comprehensive exploration of seas and oceans and laser and space advances. The guidelines list basic research projects in life sciences and diseases, the effects of human activities on the world's environment, global climate change and the forecasting and control of natural disasters.

In addition, China hopes to make breakthroughs in the study of nanotechnology, which is a strategic option for many countries seeking to promote their competitiveness. China will urge large enterprises to set up research and development institutes and encourage enterprises to share the state's R&D tasks.

According to the guidelines, China will push enterprises to spend more on research and development and establish state-level engineering labs and industrial engineering centers backed by joint R&D groups from companies, universities and scientific institutes. China will further improve its intellectual property rights system, create a legal environment in which intellectual property rights are protected, increase awareness of IPR protection and crack down on IPR infringement, the guidelines said.

All of this is inline with expectations. What is key here is that China will focus its work, seek to occupy a commanding position in key fields and will compete on R&D.

Now let's see what the EU will do...(no point in waiting for Canada's response..)

Amazing..

2006-02-08T07:33:00.000-07:00

When you look at the US and competetiveness, two facts emerged for me last week which I find surprising. Both have been around for some time, but when I heard the authors of the US competitiveness report speak of the issues on the Charlie Rose show, they appeared stark.

US companies spend more on litigation and lawyers than they do on R&D.
Many US companies spend more on health care costs than they do on their raw materials - e.g. Starbucks spends more on health care than coffee and GM spends more on health care than on steel.

These may surprise some people. But they are a symptom of a failure to realise just what is taking place globally.

In Canada, companies are paying more of the health care costs of employees, but not nearly at the same level as their US counterparts. As we move towards more private health care supports, however, health care benefits will become a lure, especially in those parts of Canada which find it difficult to attract employees. We need to be careful not to erode our advantages by drifting down this road.

Statistics from OECD show that Canadian health care is around 11.4% privately funded. This compares to 1.6% in Denmark, 0.9% in Italy, 0.3% in Japan, 6.3% in New Zealand, 3.3% in the UK, 7.3% in Australia and 35.1% in the US. Canadians also paid 16% of health expenditures out of pocket - also high against other countries.

With the Supreme Court decision on health insurance, moves towards private options across Canada - we may price ourselves out of the competitive market in some areas, especially in manufactured goods. This is a competitive health warning.

US Tackles Innovation

2006-02-06T14:42:00.000-07:00

In his 2006 State of the Union address, President Bush outlined a radical agenda to reinvigorate the innovation system in the US. His budget package, now working through congress, reaffirms his commitments with $136b given to the Competitiveness Initiative over the next ten years.

Using the recommendations of the National Academy of Sciences, the National Academy of Engineering and the Institute of Medicine Task Force Rising Above the Gathering Storm he accepted the argument that “the scientific and technical building blocks of the US’s economic leadership are eroding at a time when many other nations are gathering strength." According to the report, "because other nations have the competitive advantage of a low-wage structure, the United States must compete by optimizing its knowledge-based resources, particularly in science and technology." He is also supporting the substance of the Protect America's Competitive Edge (PACE) Act.

Bush made these commitments:

Education

30,000 new teachers in science and mathematics for K-12 supported by State/Federal scholarships worth $80,000 over four years.
Matching grants to Colleges and Universities seeking to re-engineer their programs to meet the demands of the new economy.
Upgrade some 70,000 teachers abilities to teach, inspire and enable the development of science and maths skills amongst K-12 and use these as trainers for another 150,000 teachers
Career Advancement Accounts of up to $3,000 that workers and prospective workers can use to obtain training and other employment services

Research

Double public investment in basic research in the physical sciences over the next 10 years
Keep and improve tax credits for company spending on R&D
Provide new research grants of $500,000 annually to each of 200 of the most promising young scientists in America
Challenging the research community to increase clean energy research by adding significant sums to R&D budgets for the Department of Energy and other places so that the US can reduce its dependency on foreign oil by 75% by 2025

The PACE Act carries these additional commitments, if approved by congress and funded in the Bush budget:

Visa reform for foreign Masters and PhD students studying science permitting them to stay and work in the US after graduation
More rapid development of science parks across the US
Increase in the spending on high risk / high payoff research that is not subject to the peer review and budget allocation process
A national co-ordination office for Advanced Research Instrumentation and Facilities

These developments are significant. They respond to the growing power of innovative economies such as Singapore, China, India, Japan, Finland – the US wants to lead.

Follow Up Resources

Rising Above the Gathering Storm is available at http://www.nap.edu/books/0309100399/html

The PACE Act summary at http://www.compete.org/pdf/PACE_section_by_section%20-%20final%20.pdf

Patent Power - Yet More and More..

2006-02-03T15:56:00.000-07:00

"No possible good can ever come of a Patent Law, however admirably it may be framed."- The Economist, 1851

According to Forbes Magazine, in 2005 the U.S. Patent and Trademark Office received 406,302 patent applications and granted 165,485 (41%). And while the myth of individual tinkerers dreaming up devices in their basements persists, it's the corporate giants who get the lion's share of patent approvals. Leading the list this year is IBM, which received 2,972 patents, according to research firm Wolters Kluwer Health.

While big companies have the resources to get thousands of patents through the system per year--legal costs can push the price of a patent up to $75,000 per application, estimates patent consultant Eugene Quinn, president of IPWatchdog--it doesn't mean they have any intention of bringing their inventions to the marketplace. Indeed, many patents are either protecting things which are already in the market place (e.g. add ons to iPods, such as a radio transmitter permitting the iPod to transmit music or video to a car media system) or are adopt/adapt versions of these (e.g. the ability to add an Emoticon to an email sent by a cell phone using a single button).

But patents and money from patents are two different things. Think about this. 4x 75,000 = $300,000. Multiply this by 100,000 and we get - well a lot, so the law offices are doing well.

"Very bad patents are getting through," says lawyer Mark Banner, chairman of the American Bar Association's intellectual property section. "It's draining millions of dollars that could be spent on finding a better mousetrap." So what happens, well lawyers start challenging patents as they have done successfully (to a point) in the RIM case (Blackberry).

Then there are the patents filed not so as to make money, but so as to stop others from doing so. Giants such as Intel bemoan a system they say forces them to use big chunks of research budgets to stockpile patents just to use for cross-licensing when other patent holders threaten them.

So not all patents are intended to create good or products for the market.

In pharma, some 6,000 patents are filed yet the FDA only approved 20 drugs in 2005 - that's a hit rate of 0.3%. The costs of securing a patent filing are just a part of this cost, there are also the R&D costs and compliance costs. So these 20 drugs, which took an average on 10-12 years to get to market, spend 5 years recouping their to market cost giving them 3 years to make their profit in the 20 year patent life before the generic drug manufacturers take over.

The old assumptions looked like this: (a) 75% of pharmaceutical revenue is
generated by drugs still under patent; (b) the market exclusivity lasts 9 years; (c) that the lifetime of a new drug is 25 years; (d) it will take a generic manufacturer one year to enter the market after the patent expires; (e) even after the entry of the generic, the original patent holder will hold 20% of the market share. Most of these assumptions are questionable.

Much of the case for drug patents rests on the high cost of bringing drugs to market. Most studies have been sponsored by the pharmaceutical industry and are so quite suspect. The Consumer Project on Technology examined the cost of clinical trials for orphan drugs – good data are available for these drugs because they are eligible for special government benefits. A pharmaceutical industry sponsored study estimated the average cost of clinical trials for a
drug at about $24.5 million 1995 dollars. However, for orphan drugs here better data are available, the average cost of clinical trials was nly about $6.5 million 1995 dollars – yet there is no reason to believe that these clinical trials are in any way atypical.

It is also the case that, in relative terms, the pharma industry's R&D agenda, at least in the US, is very heavily subsidised. In 1995, according to a study by two well reputed University of Chicago economists, the U.S. spent about $25 billion on biomedical research. About $11.5 billion came from the Federal government, with another $3.6 billion of academic research not funded by the feds. Industry spent about $10 billion. However, industry R&D is eligible for a taxcredit of about 20%, so the government also picked up about $2 billion of the cost of “industry” research. So private industry paysf or only about 1/3rd of biomedical R&D. By way of contrast, outsideof the biomedical area, private industry pays for about 2/3rds ofR&D.

Despite these subsidies, return on investment from R&D is declining in pharma. There may be pressure to look at different ways of getting drugs to market (using simulations, nanotechnology manufacturing, etc) to both shorten time to market and time to approval.

Patent protection may be part of the problem, rather than part of the solution. An interesting study of India (which was forced to introduce patent protection in 1978) shows that the rate of invention of new drugs has slowed in that country.

Even Business Week called patent seeking an epidemic (see Jan 9th 2006 edition at http://www.businessweek.com/magazine/content/06_02/b3966086.htm). They are right.

Its time to look for alternatives ways of recognizing investments, rewarding risk takers and creating real innovation.

Bush, Innovation and Competitiveness

2006-01-31T20:21:00.000-07:00

This is George Bush speaking in his State of the Union address a few moments ago:

Keeping America competitive begins with keeping our economy growing. And our economy grows when Americans have more of their own money to spend, save, and invest. In the last five years, the tax relief you passed has left $880 billion in the hands of American workers, investors, small businesses, and families -- and they have used it to help produce more than four years of uninterrupted economic growth. Yet the tax relief is set to expire in the next few years. If we do nothing, American families will face a massive tax increase they do not expect and will not welcome.

Because America needs more than a temporary expansion, we need more than temporary tax relief. I urge the Congress to act responsibly, and make the tax cuts permanent.

Keeping America competitive requires us to be good stewards of tax dollars. Every year of my presidency, we have reduced the growth of nonsecurity discretionary spending -- and last year you passed bills that cut this spending. This year my budget will cut it again, and reduce or eliminate more than 140 programs that are performing poorly or not fulfilling essential priorities. By passing these reforms, we will save the American taxpayer another $14 billion next year -- and stay on track to cut the deficit in half by 2009. I am pleased that members of Congress are working on earmark reform -- because the federal budget has too many special interest projects. And we can tackle this problem together, if you pass the line-item veto.

We must also confront the larger challenge of mandatory spending, or entitlements. This year, the first of about 78 million baby boomers turn 60, including two of my dad's favorite people -- me and President Bill Clinton. This milestone is more than a personal crisis -- it is a national challenge. The retirement of the baby-boom generation will put unprecedented strains on the federal government. By 2030, spending for Social Security, Medicare, and Medicaid alone will be almost 60 percent of the entire federal budget. And that will present future Congresses with impossible choices -- staggering tax increases, immense deficits, or deep cuts in every category of spending.

Congress did not act last year on my proposal to save Social Security, yet the rising cost of entitlements is a problem that is not going away -- and with every year we fail to act, the situation gets worse. So tonight, I ask you to join me in creating a commission to examine the full impact of baby boom retirements on Social Security, Medicare and Medicaid. This commission should include members of Congress of both parties, and offer bipartisan answers. We need to put aside partisan politics, work together, and get this problem solved.

Keeping America competitive requires us to open more markets for all that Americans make and grow. One out of every five factory jobs in America is related to global trade, and we want people everywhere to buy American. With open markets and a level playing field, no one can out-produce or out-compete the American worker.

Keeping America competitive requires an immigration system that upholds our laws, reflects our values, and serves the interests of our economy. Our nation needs orderly and secure borders. To meet this goal, we must have stronger immigration enforcement and border protection. And we must have a rational, humane guest worker program that rejects amnesty ... allows temporary jobs for people who seek them legally ... and reduces smuggling and crime at the border.

Keeping America competitive requires affordable health care. Our government has a responsibility to help provide health care for the poor and the elderly, and we are meeting that responsibility. For all Americans, we must confront the rising cost of care ... strengthen the doctor-patient relationship ... and help people afford the insurance coverage they need. We will make wider use of electronic records and other health information technology, to help control costs and reduce dangerous medical errors. We will strengthen health savings accounts -- by making sure individuals and small business employees can buy insurance with the same advantages that people working for big businesses now get. We will do more to make this coverage portable, so workers can switch jobs without having to worry about losing their health insurance. And because lawsuits are driving many good doctors out of practice -- leaving women in nearly 1,500 American counties without a single OB-GYN -- I ask the Congress to pass medical liability reform this year.

Keeping America competitive requires affordable energy. Here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology. Since 2001, we have spent nearly $10 billion to develop cleaner, cheaper, more reliable alternative energy sources -- and we are on the threshold of incredible advances. So tonight, I announce the Advanced Energy Initiative -- a 22 percent increase in clean-energy research at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants; revolutionary solar and wind technologies; and clean, safe nuclear energy.

We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen. We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips, stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years. Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025. By applying the talent and technology of America, this country can dramatically improve our environment ... move beyond a petroleum-based economy ... and make our dependence on Middle Eastern oil a thing of the past.

And to keep America competitive, one commitment is necessary above all: We must continue to lead the world in human talent and creativity. Our greatest advantage in the world has always been our educated, hard-working, ambitious people -- and we are going to keep that edge. Tonight I announce the American Competitiveness Initiative, to encourage innovation throughout our economy, and to give our nation's children a firm grounding in math and science.
First: I propose to double the federal commitment to the most critical basic research programs in the physical sciences over the next 10 years. This funding will support the work of America's most creative minds as they explore promising areas such as nanotechnology, supercomputing, and alternative energy sources.

Second: I propose to make permanent the research and development tax credit, to encourage bolder private-sector investment in technology. With more research in both the public and private sectors, we will improve our quality of life -- and ensure that America will lead the world in opportunity and innovation for decades to come.

Third: We need to encourage children to take more math and science, and make sure those courses are rigorous enough to compete with other nations. We have made a good start in the early grades with the No Child Left Behind Act, which is raising standards and lifting test scores across our country. Tonight I propose to train 70,000 high school teachers, to lead advanced-placement courses in math and science ... bring 30,000 math and science professionals to teach in classrooms ... and give early help to students who struggle with math, so they have a better chance at good, high-wage jobs. If we ensure that America's children succeed in life, they will ensure that America succeeds in the world.

Preparing our nation to compete in the world is a goal that all of us can share. I urge you to support the American Competitiveness Initiative ... and together we will show the world what the American people can achieve.

Open Source Science and Scientific Progress

2006-01-27T15:54:00.000-07:00

There's an excellent post on the need for collaborative approaches to scientific research over on Si Chen's Open Source Strategies Blog. Ssome think "isn't collaboration and presentation of ideas for discussion and critique a key component of the scientific approach?" Lamentably this is less and less the case, with universities and funders keen to portect intellectual property in the vain hope that research results in profitable commercial applications. In practice this results in a few sexy and well funded research areas (i.e. biotechnology, photonics and nanotechnology) undertaking a lot of work deemed commercial-in-confidence, which in turn results in a lot of secretive duplication (1), scientific competition and slows the advancement of science. This drive for marketisation is increasingly resulting in poor quality, inefficient and slow-paced scientific innvovation.

As Si Chen's post points out:

The parallel with open source is clear. There is a real benefit to research and development when knowledge is shared. Other researchers could extend your work in new and novel ways. Furthermore, there is transparency and accountability for your work. That transparency in turn grants prestige and recognition, which are often powerful motivators. Perhaps this combination explains why academia has always been, and continues to be, a very efficient way to do research, even though their budgets are limited compared to industry.

Our favorite anti-open source article, "Winning the Linux Wars", suggested that Microsoft partners should be "Playing the R&D card" by emphasizing that "Microsoft invests north of $6 billion a year on R&D. There is nobody in the Linux world that does that."

Well, Merck (MRK) invests about $4 billion a year in R&D. Bristol-Meyers (BMY) $669 million. Eli Lilly & Co. (LLY) $2.7 billion. Pfizer (PFE) $1.8 billion. Sanofi-Aventis (SNY) a whopping $10.2 billion, or nearly half of its $20.5 billion in revenues. Together, that's about $19.5 billion a year in research and development.

Apparently, though, that's not enough. The Friday January 20, 2006 edition of The Wall Street Journal's "Science Journal" ran article entitled "In Switch, Scientists Share Data to Develop useful Drug Therapies" which pointed out that there is a "crisis in 'translational science,' or turning basic discoveries into therapies," and that only twenty new drugs were approved by the US Food and Drug Administration in 2005.

One billion a drug, approximately.

...

"But there is hope: one key gene for multiple sclerosis could now be turned on and off in mice "a year sooner than they would have been, thanks to a unique collaboration that is slaying some of the most sacred cows in bio-medicine."

What is the unique collaboration? Sharing knowledge. The foundation which sponsored the research is apparently requiring the scientists it funds "share results in real time," rather than keep their discoveries proprietary. As a result, it has made the scientists feel more accountable for their work and therefore become more engaged in curing diseases.

That sounds a lot like science the way it was meant to happen. Apparently the US NIH agrees with that view, at least in part, because in May 2005 they introduced a policy requiring all research funded through them to make any publications arising freely available on the web. Needless to say not everyone has been thrilled with this approach but making journal articles more widely available would seem to be a useful first step towards a new vision of making scientific debate accessible. As Si Chen points out:

The parallel from open source is also interesting. If open source and collaborative development is a successful model, could it help make research and development in other fields more efficient? The medical industry is sliding from open knowledge and collaborative research into a proprietary world of patents, licensing, and investors.

But if the billions aren't enough, should they be considering a return to open collaboration?

Innovation in Alberta

2006-01-24T07:56:00.001-07:00

The Innovators..

Tom Ogaranko of Edmonton’s Redengine Inc.– a software development and net support company – is a classic innovator. Using existing technology as a base, he and his team adopts, adds to and adapts technology to many different situations for his clients so as to improve their business performance. He is surrounded by former friends who have given up on risk ventures, and moved into safer activities – property investment, oil and gas activity and government jobs. A smart guy, he has put everything he owns on the line for a powerful vision of what a smart, twenty first century company can be. He is a respected Alberta innovator.

So too is Paul Dean of Glenow Windows and Doors in Calgary. This long established manufacturing company started to use robotics to improve manufacturing speed and quality while at the same time responding to the increasingly sophisticated needs of customers. To make use of the robots, Glenow needed to develop a resource engine – a technology that provides the robots with their instructions. This engine was developed with the help of both the National Research Council’s IRAP program and the Alberta Research Council. Smart technology, widely used in automotive production and assembly plants, adapted to window manufacturing. The result: they can now produce some 1,500 windows a day – a significant step up from the 200-300 a day they produced before this innovation.

Most people wouldn’t think of innovation this way. For them, innovation is a big breakthrough that changes the way we think about something – penicillin, television, the internet, the steam engine. But more than 90% of innovative activity in any economy is adopt/adapt – exactly what the Glenow and Redengine teams do every day. Less than 10% of innovation that impacts economic activity in a developed country comes from “disruptive” technologies or new inventions.

Innovation Weaknesses

Canada is not doing well at adopt/adapt – the key to an innovative economy. We can see this in three simple measures. Productivity – currently low and slow to grow, especially when compared with our US counterparts. Where economies are better at adopt/adapt, productivity is higher. Canadians are earning an average of $6000 less for their firms than their US counterparts.

Competitiveness is also low and declining – Canada is currently ranked 13th on business competitiveness by the World Economic Forum (Finland, US, Sweden, Denmark and Taiwan are the top 5) and 18th on the growth competitiveness index for macroeconomic stability. Key to competitiveness is willingness and speed in adapting to new global market conditions – what others call “being nimble”. Canada is not as nimble as many of our competitors, in part because so few of its small businesses are involved in export activity and even fewer are engaged in research and development.

Private sector investment in R&D in Canada is also declining as are the total number of companies making such investments. Without such investment, it is unlikely that firms are engaged in leading edge, best practices and unlikely that they will lead future export markets.

With the growing competitiveness of other nations – China, India, Brazil, US, and the EU – as well as the fast development of more innovative economies, such as Finland, Japan and the US, Canada has to innovate to compete. What is more, India and China are fast becoming much more innovative economies, both in terms of adopt/adapt but also in terms of breakthrough innovation. In one week alone, India attracted Cisco, Microsoft and Intel into investing $5b between them to expand their already significant R&D activity.

Innovation Imperatives

Canada’s innovation “system” is problematic. According to Dr Alan Cornford, one of Canada’s leading innovation policy researchers, we have not done enough to increase the flow of skilled labour with a science and technology background into the workforce. Ask any firm looking for skilled and experienced labour, especially those companies seeking managers and executives – it’s a tough challenge. Even in Alberta, the most successful Province on this measure, we have just half the number of such people when compared to Finland - seen by many as the most innovative economy in the world. Alberta faces serious labour shortages as our oil and gas economy heats up and developments in a range of related industries demand skilled labour. We need more graduates and more skilled immigrants to help bridge the skills gap.

A bigger problem is the Government of Canada’s innovation strategy. The federal government has made the mistake of seeing universities as the primary engine for commercially viable innovation. They are not. They are an engine for producing excellent people and for outstanding research, but they are not designed to generate a significant number of successful new companies that can sustain an economy going forward. Last year some $9b was spent on research by Universities across Canada. Their collective revenues from commercial activities, patents and licenses were $55m but it cost an additional $36m to secure this revenue. This makes clear that the bulk of investment in University research is generally not about commercial applications. Nor should it be. Universities should be undertaking research that helps us understand and better manage our environment, our health, our natural and social systems and our organizations: commercialization is not a primary function of a University.

There is an emerging and strong role for polytechnic institutions like NAIT and SAIT as commercially focused innovation centres. Through partnership with industry and specific firms, these organizations can undertake an increasing range of applied projects that help firms to get better at adopt/adapt. For example, NAIT’s Centre for Manufacturing Solutions, opened in partnership with Microsoft, will look at software supports for the oil and gas industries. SAIT is also engaged in key skills developed not just in Alberta, but around the world.

But a reliance on Universities and public bodies to produce innovation that helps the commercial economy has lead Canada in general and Alberta in particular to have a very poor ratio of private investments to public funds for R&D. In the most successful innovative economies (Finland, Japan, US) this ratio is close to 3:1 – for every $3 of private funds for R&D there is $1 of public money. In Canada, this ratio is nearer 1:1 and falling, with Alberta’s ratio already low at 0.73:1. Since it is this ratio that actually drives the number of “product opportunities” that produce commercial revenue, the further away from 3:1 we get the fewer commercial opportunities we create. “You can’t substitute public money for private capital and expect the same result”, says Cornford. So Canada in general, and Alberta in particular, have low levels of commercial innovation. “Put bluntly, any US state has between 7 and 30 times greater capacity to innovate then any Province in Canada”, says Cornford.

Innovation Investments

Many innovators and entrepreneurs complain that there is a lack of venture capital, especially in Alberta. Yet Canada’s deal flow – the number of product opportunities in which investors invest – is in line with most innovative economies. The problem, according to most venture capitalist, is management. There are not enough skilled and experienced managers bringing fresh ideas to market with sound market driven business plans in which venture capitalists wish to risk their hard earned money. “There are some whacky ideas out there – what we need is a strong sense of confidence in the people behind the ideas which want to use our money” said one seasoned investor. The other side of the coin is that so much management time is taken in trying to secure relatively small investments that there is little time to develop the business. It is also the case that many are reluctant to invest in Alberta unless it is oil and gas related.

Both Calgary and Edmonton now have some mechanisms in place to connect people with money with those who need it. The Keiretsu Forum, now operating in both cities, provides an opportunity for accredited investors to make “angel” investments (small but critical start-up funds) in pre-approved businesses. Since the forum began in Calgary two years ago, they have invested some $2.5m in nine companies ranging from Wayto Golf, which makes a new kind of golf club, to PetLynx, which uses technology to track missing pets. Interestingly, none of their investments relate to oil and gas. Other mechanisms – private capital funds and venture arrangements with banks – are also available for those, like Axia NetMedia Inc in Calgary who needed risk investment throughout the first phase of its development to support its work on the SuperNet and help it win significant contracts.

But it is the case that available venture funds in Alberta are around 2% of those spent in the whole of Canada – with Ontario and Quebec attracting some 65% of venture capital funds between them. This makes it tough for Albertan’s to attract new venture deals.

Innovation Infrastructure

Research institutions, polytechnics and venture capital “systems” are all part of an innovation supply chain which aims to produce sustainable commercial enterprises which create jobs and support the Alberta economy. But there are other key aspects of this infrastructure that need to be in place if Alberta is to unleash its innovation potential.

The recent development of Tech-Edmonton (a joint venture between the University of Alberta and Edmonton Economic Development) and the continued success of University Technology International (The University of Calgary’s commercialization arm) and Calgary Technologies Inc. are all signs that some infrastructure is in place. The key challenge these organizations have is to pull technologies and “solutions” from research that the market actually wants to buy rather than rely on the market to respond to technologies which are just developing.

This makes firms and their industry associations very important. By large firms partnering with Universities and Polytechnics and smaller firms grouping together through industry associations and then partnering with Universities and Polytechnics to pull from them research which will help them be more productive or better meet customer needs, we can start to create more commercial opportunities. The newly created National Institute for Nanotechnology (NINT), based in Edmonton, would do well to create real partnerships early with likely buyers in the fibre, energy, water and health sectors so that their research can focus on solutions people want to buy.

John McDougall, President of Alberta Research Council (ARC) understands this “market pull” imperative all too well. ARC, celebrating its 85th year in 2006, works on two kinds of innovation – new to the industry and new to the firm. His idea is simple – ARC should be trying to help firms get solutions to real world problems in real time and they should be leveraging the best thinking and skills available to do so. While basic research helps, ARC’s role is to connect this to market needs.

CV Technologies (CVT) is the Edmonton-based biopharmaceutical company behind COLD-FX ® - fast becoming Canada’s most popular natural health product used in preventing colds and flu. CV Technologies' research and development team worked on site in NuRx Services labs – a group within ARC located in the Edmonton Research Park. The company team has access to all NuRx facilities including equipment, analytical services, quality assurance (QA) documentation and quality control (QC) micro/analytical support, as well as infrastructure services within ARC’s building, the largest facility in the Research Park. This partnership helped CV Technologies get quality products to market faster and with real local support. In 2005 ARC worked with some 900 companies helping them become more competitive and productive. This is where commercialization and innovation happens.

Another place that exemplifies the kind of infrastructure needed to support innovative enterprises in the Northern Alberta Business Incubator (NABI), based in St. Albert. With over sixty eight businesses graduating through their mentoring and support programs since it began in 1989 with an annual economic impact of some $92.5m, NABI is one of the most successful business incubators in North America. It now wants to expand and help more companies in northern Alberta start, develop and innovate. It also wants to partner with others supporting incubation activity – such as NAIT’s new Duncan McNeill Centre for Innovation or the growing number of virtual incubators.
Innovation Flagships

Most successful innovative economies are driven by a few large firms around which smaller firms and research activities “cluster”. Alberta’s effective clusters are the oil sands in the North, the oil and gas cluster in Calgary, a diffuse high tech cluster in the Edmonton-Calgary corridor with agriculture and fibre in a few key locations forming dispersed clusters across the Province. While there are many firms doing great work – both domestically and internationally – few have become flagship companies around which others gather.

Such clusters only thrive and develop when the flagship companies invest in research, continually hire science and technology graduates and skilled managers and actively foster networks of customers and suppliers within their region. Flagship firms also pull technology from Universities and Polytechnics and challenge all with whom they work to innovate and improve. Alberta has a very small customer base and many who supply flagship firms are either small, located out of Province or very focused on delivery of goods and services rather than R&D. Cluster development is problematic.

Most businesses do not make significant investments in research. Work by Doug Barber for the Information Technology Association of Canada (ITAC) suggests that just 281 companies account for 80% of the $12b invested in R&D by firms across Canada. Given how few large firms there are in Canada – 75% of Canadian businesses are small and of these 85% have fewer than 10 employees – this is not surprising.

Encana and Nova Corporation are amongst those who excel in using R&D to leverage their assets for future development. But these are unusual companies. In oil and gas, for example, total R&D investments are small relative to the revenues generated by current activities and have been declining. – oil and gas revenues in Alberta in 2004 were $64.4b and R&D investments were a modest $0.7b.

Recognising this, the Government of Alberta has made some smart choices. They have created and made real investments in a number of key agencies – The Alberta Heritage Medical Foundation, The Ingenuity Fund, the Alberta Energy Research Institute, iCore and the nascent Information and Communications Technology Institute. All aim at supporting R&D which firms and industries can support and which will help place Alberta at the forefront of specific areas of innovation. But they need to do more. Each of these organizations needs to focus on a few things that are likely to produce gains and work on increasing the role of the private sector in shaping their work.

EnergyINet – an Alberta based national network of energy innovators and researchers – provides a model. It has chosen six areas of work that would solve some near-term and long-term energy problems, found industry partners and is focusing the work of researchers so that they will help make progress on issues that matter to the energy sector as a whole.

Innovation Imperative

If there was a report card that focused on the innovation supply chain in Canada, the report would say “Must do much better”. For Alberta it would say “now is the time to start doing much better”.

As our fibre and forest sector see global challenges disrupting their industry and as high oil and gas prices force many to start to look more seriously at alternative energy choices, Alberta could become a model of effective innovation. We need to if we wish to compete with fast growing innovative economies and with those who are already better at innovation than we are. China and India’s R&D growth, especially in technology and energy, will surprise many people according to Goldman Sachs consulting. By 2030, China and India will outstrip the US in innovation leading Canada a distant player in the innovation sweep stakes.

The danger, especially given our position as a natural resource economy, is that we will begin to believe our own publicity and assume that the oil sands and our other natural resources will somehow protect us from global competition. It will not. “Our current boom, which is due to high commodity prices, will not last for ever” says Peter Josty, Director of the Centre for Innovation Studies at the University of Calgary. “When the boom goes away, we will have to ensure that we have a very solid and innovative economy to sustain our way of life” says Josty. He’s right. Now is the time for action.

Nano Change and Time

2006-01-13T09:39:00.000-07:00

There is a lot of buzz around nanotechnology and its significance for the future, especially in relation to health care. Some of this buzz is justifiable, but there needs to be a stronger commercial focus to this work than many scientists would like and a much stronger market driven rigour. Nanotechnology is a support technology for primary industries.

Given this, here is a likely timeline for some nano developments which seem supported by many in the field:

2008: Nano-agents for analysis inside cells
2013: Nanotools for manipulation inside cells
2015: Self-repairing in artificial systems
2018: In vitro construction of human organs
2021: Nanomachines inside the body

So within 10-15 years, we can transform diagnosis and some key treatments, especially in relation to some common health problems like diabetes and cancer.

The issue is not whether or not these dates are realistic (they come from the scientists, so add 3-5 years but if the health buyers really get behind this stuff, take off 3-5 years) the issue is how we manage a transition from external diagnostic systems (MRI etc) to internal diagnostic systems (nanobots) and how we manage the ethics of such things as the artificial pancreas.

What will be the price mechanism that encourages a shift of methodology and what will be ethics of distribution of new "cures" (the artificial pancreas regulated by nanobot technology) ?

The change management strategy is not talked about at all by many involved in this field (but see the Lux Research web site at http://www.luxresearchinc.com/) nor are the commercial imperatives, but with some major developments just 12-18 months away that may begin to change the cost structure of health care, expect this to be a major topic of conversation amongst those engaged on the buy side of these new products and services.

Its not about technology, its about changing the paradigm of health care - never an easy task

(For more information about the time-line for nanotechnology and related issues, see an excellent presentation at http://www.ictaf.tau.ac.il/wp5_meeting_dec2005.pdf .

Innovation in Europe

2006-01-12T15:03:00.000-07:00

The EU published its innovation scorecard for the EU25 this week. Its not good news generally, since the EU is falling behind the US and Japan as a whole, though Germany, Finland, Denmark and Sweden showing the most innovation in terms of the EU scorecard.

The UK, with some strengths in technology (mainly broadband adoption levels) and access to venture capital, ranks 7th in the EU, mainly due to its education strategy. On a critical measure - new to market product sales - the UK is massively underperforming at only 33% of the EU average.

It is an interesting read. See http://europa.eu.int/rapid/pressReleasesAction.do?reference=
MEMO/06/5&format=HTML&amp;amp;aged=0&language=
EN&guiLanguage=en

Canada's Challenge

2006-01-10T13:21:00.000-07:00

There are five developments in Canada which are creating the conditions which will challenge all of our assumptions about Alberta’s prosperous future.

First, Canada is declining in our competitive position in the world. While some aspects of our economy appear to be strong, the underlying trend is that we are underperforming in many key sectors and failing to compete in others. Objective measures show that we have fallen to 18th place of 24 in measures of competiveness. A key reason for this is our failure to invest in science, technology and engineering. We simply do not produce enough science and technology graduates to compete – on average, we have 6.5% of our workforce with this background compared to 15% in Finland, the most innovative economy in the world. We are also overly reliant on an a troubled US economy – an economy with rapidly growing public and private debt, declining competitiveness and structural weaknesses in key sectors (automotive, steel, manufacturing). To grow, we need to become significant players in key sectors of the global economy – aggressively pursuing world markets and delivering on time, price sensitive quality products and services.

Second, we are not as productive as we need to be or can be. Our productivity growth has slowed during the last five years and we are “behind” the US and many other countries in terms of leveraging the skills we have for commercial gain. In part, we invest too little in technologies and training and too little in business process improvement. Just to catch up, productivity needs to grow at an average of 2.5% each year for the next decade - in 2005 it barely reached 1%. One key reason for this is the nature of Canadian business – though we have a few large companies, most companies are either small to medium in size or are branch plants of foreign companies. In both cases, investments in R&D and productivity improvements are slow to be made.

Third, our demographics are such that we will rely entirely on immigration to be able to maintain our current level of activity after 2015. There is a bland assumption that it will not be difficult to find some 300,000 – 500,000 foreign nationals a year to sustain our core economy. This is a big assumption – many of the countries we have relied on in the past (China, India, Pakistan, Russia, Mexico) are becoming prosperous and competitive and are attracting their nationals “home”. Attracting and then retaining new labour will be difficult for Canada. Attracting them to Alberta will be even more difficult. The growing tax costs of health care, social services and other supports for an ageing Canadian population will not help either. We are already in the moderate to high tax bracket – watch to see this change to very high.

Fourth, Alberta has defined its future as an energy super-power but has assumed that this is about the oil sands and the export of refined bitumen and related products as well as oil and gas. This is only a part of the story, though an important part. As prices rise, so will the market for alternative fuels – bio-fuels, solid oxide fuel cells, solar power and wind. The demand for the very product on which Alberta is placing its bets will shift and require us to refocus our efforts on agriculture, fibre and related technologies. We are not doing enough to mitigate the risks of an economic strategy focused on oil and gas. We need to do more to build a vibrant bio-fuels sector and much more to build an effective technologies sector. Talk of 100 years of prosperity from energy is misleading.

Finally, we are weak at innovation. We have assumed that pushing money to Universities to undertake research will create new commercial enterprises. They create some, but few produce the kinds of returns that we need to see from the close to $10b a year spent and even fewer produce significant economic gains. According to the November 2005 edition of Re$earch Money broadsheet, Universities received $9.3b in R&D funds in 2004. Using the same data, they secured commercial revenues of app. $55.5m, but spent $36.4m securing these new revenues. A 0.2% return on investment on the $9.3bn. Not good, but not surprising – commercialization is not the work of Universities.

We are also weak at encouraging and enabling private sector investment in R&D. In the most innovative economies, the ratio or private to public spend on R&D is generally 3:1. In Canada its closer to 1.14:1 – with new announcements making it increasingly likely to reach 1:1 (in Alberta it is already the case that public funds exceed private funds in R&D investment). What we know is this: it is this ratio that drives commercial outcomes not the total amount of funds available. This makes Canada very vulnerable. Unless we can encourage more private R&D, we will continue to lag behind other countries.

Most innovation comes from firms. Most innovation is focused on what is known as “adopt/adapt” – taking ideas from one sector and applying them to another. Most innovation is not disruptive or breakthrough, but incremental and gradual.
Innovation should this show itself in profitability of firms, the growth and sustainability of firms and in productivity growth. It is not doing so at the level we need to see to sustain economic growth.

Innovation is key to Canada’s future – without it we will have a lower standard of living, find it difficult to sustain our social systems, difficult to attract immigrants and we will find the tax burden intolerable. What we are doing now will not create either the level or range of innovation we need to sustain Canada in the future.

Understanding The Dragon

2005-12-29T08:24:00.000-07:00

Here are a list of some key engineers from China, all of whom have two things in common:

Hu Jintao - Hydrolics Engineering
Wu Bangguo - Radio and Electronics Engineering
Wen Jiabao - Geomechanics/Engineering
Jia Qinglin - Electrical Engineering
Zeng Qinghong - Control Systems Engineering
Huang Ju - Electrical Engineering
Wu Guanzheng - Thermal Engineering
Li Changchun - Electrical Engineering
Luo Gan - Machine Casting Mining and Metallurgy - Senior Engineer

- the two things these people have in common are: (a) they are all skilled engineers; and (b) they constitute the politburo running China. That is, engineers are planning China's future. In Canada, our leaders are largely lawyers, accountants and small business owners.

In this last year, China graduated some 600,000 engineers - the US and Canada between them graduates less than 70,000. By 2010, China plans to graduate 1,000,000 engineers each year. One of the key metrics Alan Cornford has identified in terms of understanding the innovation supply chain is the need for qualified scientists and technologists to be significantly present in the workforce - around 10% triggers significant adoption of innovation. China understands this, and is working towards this very fast indeed. Canada is "stuck" at around 6.5% of the workforce with and S&T backgorund.

Some 300,000,000 chineese are now middle class - around the total population of the US. What's more, wages in China grow on average at 6% each year and have done so for the last 20 years. This leads some, notably Harvard's Richard Freeman, to suggest that wages in China will surpass those of the US by 2035-2040 (the wages of India will surpass those of the UK at roughly the same time).

Many dismiss these developments since they see them as China growing through a focus on low cost manufacturing. Its a mistake to do so. China, as is India, is moving up the value chain and focusing on biotechnologies, energy and life-sciences. For example, China will likely be the country that finds the cleanest use for coal and will sell its technology to Canada. India received some $5b in inward investment in ICT from Micorosoft, Cisco and Intel for advanced R What is shifting here is not manufacturing, but the innovation agenda. Look to China and India for new thinking about what this agenda will become.

The News from Tokyo...

2005-12-16T07:42:00.000-07:00

Science and technology research and development spending by Japanese companies, universities and others hit a record 16.93 trillion yen ($US144.3 billion) in fiscal 2004, marking a fifth straight yearly increase and a 0.8% gain on the year. The Ministry of Internal Affairs 2005 report also showed that investments as a percentage of gross domestic product remained at an all-time high of 3.35%.

Given the 2% level ratios of the US, France and Germany, Japan's outlays are among the world's highest, according to the report.

R&D expenditures increased in four areas: information and communications, life sciences, the environment, and materials and nanotechnology. Nanotechnology spending posted the highest gain at 9.3%, while growth in life sciences was the lowest at 2.7%.

The number of researchers at the end of fiscal 2004 increased for a fourth consecutive year to a record 790,900, up 0.5% on the year.

Think India and China Then Canada

2005-12-08T07:10:00.000-07:00

Microsoft announced this week that it will invest $1.7b in India and create 3,000 new jobs to add to the 4,000 it already has in India. All of these jobs will focus on research and development.

This announcement came on top of earlier announcements that Cisco, a network builder, would also spend $1.1b in India and that Intel, the computer chip maker, would spend $1b in India. Not a bad week for India’s technology innovation system, based around Bangalore.

India is one of the fastest growing economies in the world. Its middle class population is the same size as the total population of the US and Canada combined. It is a highly educated population, with a preponderance of science, engineering and technical skills. It is emerging as a powerhouse for technology and science based research. It is a stable democratic country where English is the language of business. By 2025 it will be the most populated country in the world and by 2035 its per capita income will be the same as that of the UK.

As it attracts significant venture capital, India is working on bridging the digital divide. A lot of the development work for low cost computing is being done in India as are a lot of major development projects on artificial intelligence, simulation (linking with India’s film industry- now the largest film industry in the world) and biotechnology.

India is truly unleashing innovation. China is quickly following behind. China announced that it will dedicate a significant portion of its GDP growth to biotechnology and nanotechnology and that it will seek to transition from being a centre for low cost manufacturing to being a value provider for the converging technologies of biotechnology, nanotechnology, cognitive technologies and information and communication technology. Given the rate of growth of the Chinese economy – 8% in 2004 – and the Indian economy – 4% in 2004 – these developments are real threats to staid and slow moving economies like Canada.

So what to do ? First, we should be seeking our partnerships with Indian and Chinese technology companies focused on marketing and distribution. Canada is an ideal gateway to the US and South American markets. Second, we need to partner with India and China on research and development, harnessing the power of organizations like the Alberta Research Council to prototype embryonic products and improve their design for large scale manufacturing. Third, we should seek to secure inward investment in our own R&D efforts from China and India. In this way, we create relationships that, over the long term, will pay dividends.

If we do nothing, we will face the consequences. Canada’s innovation system is very weak, relying too much on public finance and too little on the private sector R&D. We also have a low supply of highly qualified people, especially managers with experiencing of taking high technology start-ups to maturity and growing companies which compete globally. There is also a shortage of angel and early stage venture capital. Unleashing innovation here means doing things differently.

The Hollinshead Observation

2005-12-06T17:29:00.000-07:00

Mike Hollinshead, a colleague working on foresight activities here in Alberta, makes an observation about the Booz Allen study, reported below.

He notes that the organizations studied are all treated as a an aggregate body - that is, all of their activities are aggregated as if they were all equal in all respects. In fact, and this is his key point, each organization is at a different point in its life-cycle. Lumping together a mature, 700 person company with a start up nanotechnology company of 16 people and taking the average of their actions makes no sense.

What would make more sense is for them to be looked at in terms of where they are in the life-cycle of a firm and taking all like-staged companies and then looking at where they are - it would make a difference.

While some other aspects of the Booz-Allen study make sense (e.g. their comments on patents), other observations may thus be more problematic.

Innovation Is Not R&D

2005-12-02T11:37:00.000-07:00

There is no direct relationship between R&D spending and significant measures of corporate success such as growth, profitability, and shareholder return, according to a new global innovation study by management consulting firm Booz Allen Hamilton. However, the pace of corporate R&D spending continues to accelerate, as many executives continue to believe that enhanced innovation is required to fuel their future growth.

Booz Allen analyzed the world's top 1,000 corporate research and development spenders to identify the linkages between spending on innovation and corporate performance, and to uncover insights on how organizations can get the greatest return on their innovation investment. Key findings of the study include:

Money doesn't buy results. While the study identified individual success stories, there is no discernable statistical relationship between R&D spending levels and nearly all measures of business success, including sales growth, gross profit, operating profit, enterprise profit, market capitalization, or total shareholder return.

R&D spending appears to yield better gross margins, the percentage of revenue left over after subtracting the direct costs incurred in making the products or services sold. This narrow departmental success, however, is not generally translated into overall corporate performance. "There is no easy way to achieve sustained innovation success -- you can't spend your way to prosperity," said Booz Allen Vice President Barry Jaruzelski. "Successful innovation demands careful coordination and orchestration both internally and externally. How you spend is far more important than how much you spend."

But innovation spending is still a growth business. The 2004 Global Innovation 1,000 spent $384 billion on R&D in 2004, representing 6.5% annual growth since 1999.

And the pace is accelerating -- measured from 2002, the annual growth rate jumps to 11.0%. Larger organizations have an advantage. Scale provides an edge in innovation; larger organizations are able to spend a smaller proportion of revenue on R&D than smaller organizations with no discernable impact on performance.

Spending more doesn't necessarily help, but spending too little will hurt. Companies in the bottom 10% of R&D spending as a percentage of sales under-perform competitors on gross margins, gross profit, operating profit, and total shareholder returns. However, companies in the top 10% showed no consistent performance differences compared to companies that spend less on R&D.

R&D spending by companies in developing nations is relatively small, but growing rapidly. While companies headquartered in North America, Europe, and Japan account for 96.8% of the Global Innovation 1,000's R&D spending, and are likely to remain dominant players for the foreseeable future, companies with headquarters in China, India, and the rest of the world are turning up the volume on R&D investment.

The annual growth rate for R&D spending from 1999 to 2004 in China and India was 21.1%, significantly higher than in North America (6.6%), Europe (6.2%), and Japan (4.8%). These lower growth rates are likely functions of the relative maturity of companies in these countries and the magnitude of their current spending.

However, the developed economies show a higher ratio of R&D spending to sales. Here China and India lag, spending only 1% of revenue on R&D, compared with 4.9% for firms in North America, 4% in Europe, and 3.8% in Japan. The differences among the three main spend regions are partially explained by differences in industry mix.

Industries can't agree on how much innovation spending is enough. Instead of clustering into any coherent pattern, R&D spending levels vary substantially, even within industries. It's the process, not the pocketbook. Superior results seem to be a function of the quality of an organization's innovation process -- the bets it makes and how it pursues them -- rather than either the absolute or relative magnitude of its innovation spending. For example, Apple's 2004 R&D-to-Sales ratio of 5.9% trails the computer industry average of 7.6%, and its $489 million spend is a fraction of its larger competitors. But by rigorously focusing its development resources on a short list of projects with the greatest potential, the company created an innovation machine that eventually produced the iMac, iBook, iPod, and iTunes.

"The competitive value of a fast and effective innovation engine has never been greater," said Kevin Dehoff, Booz Allen Vice President, noting the trend toward shorter product life cycles and an ever-faster flow of new offerings. "Yet of all the core functions of most companies, innovation may be managed with the least rigor. The key is to identify the priority areas where process improvements will have the greatest impact."

Additional study findings include:

R&D spending is highly concentrated. While the top 1,000 corporate R&D spenders invested $384 billion in 2004, the second 1,000 spent only $26 billion -- only an additional 6.8% beyond the top 1,000 spenders. -- As a result, Booz Allen estimates that the Global 1,000
captures between 80-90% of total global corporate R&D spending, and approximately 60% of total global R&D, including spending by governments.

The top 10 global R&D spenders in 2004 are, in descending order: Microsoft, Pfizer, Ford, DaimlerChrysler, Toyota, General Motors, Siemens, Matsushita Electric, IBM, and Johnson & Johnson.

On average, the Global Innovation 1,000 spends 4.2% of its revenue on R&D. This average has been relatively stable over the last five years studied.

Patents don't always lead to profits. In a separate analysis, Booz Allen found no relationship between the number of patents issued to an organization and its performance.
R&D spending is heavily concentrated in the Technology, Health, and Automotive sectors. Computing & Electronics tops the list representing 25% of total spend by the Global 1,000; Health follows with 20%, and Auto with 18%.

Software & Internet, at 15% per annum, and Health at 12.4% have experienced the fastest pace of R&D growth over the past five years, while Telecom (2.2%) and Chemicals & Energy (1.4%) have grown the slowest.

The Global Innovation 1,000 study is available online at www.boozallen.com. For additional information, contact Karen Guterl, PR Manager, at guterl_karen@bah.com

High Profile Business Process Patents

2005-12-02T09:17:00.000-07:00

Most associated with the world of innovation are aware of the battle RIM (developer of the Blackberry) is having with their patent infringement case in the US.

But there are other important cases. The U.S. Supreme Court agreed to hear a case involving eBay Inc. that could determine whether companies must stop using any technology that has been found to violate a patent held by someone else. The case involves a 2001 lawsuit against eBay by MercExchange LLC, a Great Falls firm that developed software for online sales transactions. EBay uses the technology for its "Buy It Now" feature, which lets sellers post information about products they are selling, fix a price for them and complete the transaction. EBay was found to have violated MercExchange's patent and was ordered to pay $25 million in damages. The Supreme Court is not taking up that issue, only whether there should be an injunction to prevent eBay from continuing to use the technology.

EBay's appeal asks to overturn a U.S. appellate court's ruling that it should be customary to issue a permanent injunction when a company is found to have violated a patent. In an earlier ruling, a district court decided not to issue an injunction against eBay, despite finding it in violation of a MercExchange patent. EBay argues that judges should have leeway to consider hardship on a company before prohibiting the future use of technology through injunctions.

In considering the case, the Supreme Court is taking on a topic that could have far-reaching implications for patent law. Small firms argue that they cannot compete against big, wealthy companies such as eBay if the bigger companies are allowed to continue operating in violation of patents. Ebay issued this statement:

"EBay is gratified that the Supreme Court has agreed to hear this important case. We have believed all along that MercExchange -- which does not practice its own patents and only exists to sue others -- should not be entitled to an injunction."

Another case that is brewing concerns the patent granted that covers the use of streaming video over the internet. Acacia Media Technologies claims that it has ownership of this process, and is asking all Universities and Colleges in the US to sign up to a license agreement by December 1st 2005 "or else". The license fees vary by size of institution. The good news is that for those institutions that have an FTE enrollment of 1,000 students, there is no royalty fee. The bad news is that for those of you with more thant 1,000 FTE the yearly fee ranges from $1,500 for institutions of 1,00 to 5,000 FTE to $5,000 (plus an additional $1,000 per 10,000 FTE's) for institutions of more than 20,000 FTE.

There will be other legal challenges, as a previous post made clear. The issue is really whether patents are the best way of dealing with business processes.

Here is where we are in the RIM case as of December 2nd. In late 2001, NTP sued RIM for patent infringement. After a lengthy trial, a jury found that NTP's patent was valid and that RIM had willfully violated it, awarding damages that have grown to $240 million. Now, as a result of RIM's refusal to accept the lower-court judgment and strike a licensing agreement with NTP, a federal judge in Richmond on Wednesday 30th November moved a step closer to silencing every BlackBerry in America not used by government officials. The price of settlement has now grown to at least $500 million. RIM continue to pursue a "scorched earth" policy in their defense. Its risky.

The EU's Lisbon Declaration on Innovation

2005-12-02T07:12:00.000-07:00

The European Union is getting its innovation act together. Here is a summary of what the commission (as opposed to individual member states) intends following the Lisbon Innovation Manifesto declaration:

First, they are supporting the continuous development of business clusters in Europe. The EU already has many clusters, but they tend to be too small, too few and not sufficiently inter-connected with European or beyond. Clusters are powerhouses for innovation and competitiveness. They give firms competitive advantage. For a high tech firm today to find itself in a dynamic cluster is like a heavy industrial plant a hundred years ago being situated on a coalfield next to a deep-water port. It is a major competitive advantage. Clusters bring together entrepreneurs, innovators, researchers, education and training institutions, financial intermediaries, local and regional development bodies. Clusters help firms cooperate and learn from each other. They stimulate the flow of ideas. They facilitate access to finance and business partners, the life-blood of innovators.

WThey have just launched a family of projects to support and encourage clusters across Europe. The brand-name is Europe INNOVA. Its target is to help clusters to be more dynamic, to help key sectors to manage their clusters better, to support their development and to build on good practice.

Second, they are helping regions to pull together in developing their innovation potential. There is enormous potential in Europe to build on the complementary strengths of our regions. Many of the regions, not least in the new Member States, lack the full array of strengths to develop their potential. But strategic alliances and cooperation can help build that strength. The Commission has already made a significant contribution to the development of regional innovation strategy and to policy learning between regions. Now they are encouraging regions to cooperate in developing complementary strengths. The brand name fir this initative is PRO INNO Europe, an action that is just getting started and from which all have high expectations. If it goes well, they anticipate continued development in regional cooperation under the Competitiveness and Innovation Programme, which will become the funding mechanism as of 2007.

Third, they have agreed to improve access to venture capital. Innovation is a risky business and it depends on a supply of risk capital and early stage loans. But venture capital and early stage loans are in short supply. This is not just a European problem, but it is accentuated in Europe because of the fragmentation of the European financial market which is divided up into packets that are too small, with insufficient expertise or scale to support innovation in general and new technology in particular. Both legal and informal barriers inhibit the development of the European venture capital market. And that is only the supply side. On the demand side, investors are too often unprepared, without clear enough ideas as to how to prepare for investment or of what it will imply.

The Commission intends to move in the regulatory area to lay the foundations for a Single Market in Financial Services. The financial instruments provided by the current Multi-annual Programme for Enterprise have been remarkably successful in attracting and supporting private capital in support of early-stage investment. This too will form a part of the Competitiveness and Innovation Programme from 2007.

Fourth, the EU Commission will continue to develop their support for the internationalisation of small technology based companies through the services we provide to small businesses in our Innovation Relay Centres. This network of service providers operates across the EU and is hosted by major national and regional institutions that already support innovative companies. Its aim is to support international technology transfer. That is, the Centres help small companies assess their technology assets and needs. Then they help them find partners in other Member States who can complement them by helping complete their technology, or by licensing their technology for their own needs.

The Innovation Relay Centres have been around now for some years. A recent evaluation has confirmed that they are doing a good job. The EU is working systematically to improve their work on technology transfer. They want to be sure that any small business will be sure to receive a basic support service from any Commission sponsored Centre, and will be directed to specialised resources as appropriate.

There are important resources being allocated in support of these actions at Commission level. At the moment they are using the Research Framework Programme to support INNOVA, PRO INNO and the Innovation Relay Centres. As of 2007, they expect to finance all these activities from the new Competitiveness and Innovation Programme and this should increase our scope and flexibility. Of course, exactly what we can do depends on the outcome of the debates on the new financial perspective.

But these are not the only resources available to support innovation. First, the new programming period for the Structural Funds gives a high priority to actions in support of innovation. While the choice of what to do with these funds is exercised by the regions themselves, but the work now being organizedin support of the regions, in particular under the Pro Inno brand, and in the financial instruments in favour of early stage finance for small business, prepares the regions to make the best use of these structural fund resources. Further, work is at an advanced stage to clarify the rules that govern the use of State aids in support of innovation. The Commission has been running a public consultation on new rules that should make it much clearer what will be regarded as acceptable use of State aid as a means of offsetting market failure.

In the last analysis, the effect of EU support for innovation is not measured by the contribution of the relatively limited funds that we spend directly, or even by their capacity to mobilise the far larger resources available to the Member States, but by the effect that all of this has on mobilising the private sector itself.

We will watch with interest.

Innovation in the UK

2005-12-01T06:55:00.000-07:00

The Confederation of British Industry (CBI) is a major, industry driven think tank in the UK. It is influential in shaping policy. Today it commented on the UK governments innovation strategy.

It said that Government policy focuses too heavily on research and development (R&D) and fails to support much of the innovation being conducted by businesses. A survey from the employer’s group published this week shows that just 41 per cent of companies agree that R&D is the best indicator of innovation activity. More than nine out of 10 firms (93 per cent) believe innovation is critical to the success of their business.

‘UK firms take innovation very seriously and invest significant amounts of their profits in developing new ideas and finding better ways of working,’ said CBI director general Sir Digby Jones.

The Department of Trade & Industry’s (DTI’s) annual R&D scoreboard estimates corporate spending on R&D to be about two per cent of sales, or about £17bn in the UK, while the CBI’s report suggests companies are spending six times as much on innovation-related activities.
To better capture the range of activities that firms undertake, Jones is calling for an innovation scorecard to accompany the DTI’s annual R&D scorecard.

‘Government expresses strong support for business innovation, but most of it is focused at the R&D technology end,’ he said. ‘Service sector innovation may be more difficult to pin down, but as services now account for 70 per cent of the UK economy, government must put this sector on its innovation policy radar.’

Jones says that outside of policy changes, government could make the most impact on stimulating innovation in firms. ‘Government spending power is enormous – £125bn a year,’ he said. ‘It should engage with companies in a more informed way, buy more innovative goods and services, and get more involved with firms at an earlier stage in the procurement process.

The same things could be said of Canada.

Riding the Innovation Wave

2005-11-28T17:01:00.000-07:00

Innovation is a very serious business. In a single decade (1990 to 2001) industry financed R&D across the OECD countries rose a dramatic 51% in real terms from USD $ 244billion to USD $368b. This is equivalent to 1.5% of the OECD's GDP. It has continued to rise to now close to 2% of the OECD's GDP. Most of this growth has been fueled by ICT and pharmaceuticals and, more recently, biotechnology.

OECD Governments have also stepped up to the plate - notably Canada - and increased their investment in public research facillities, especially Universities and medical research centres.

There are some other interesting features here too:

1. In the US, rate of growth in R&D investment in the small and medium enterprise sector outstripped that of the larger firms. In fact, the growth rate was almost twice that of large firms - fuelled largey by venture capital investment in ICT.

2. In this same decade, unique patents applications across the OECD grew by 42% - the rate of growth of patent applications at the US patent office, the EU patent office and the Japanese patent office is now averaging 10% per year, fuelled again by biotechnology and ICT.

3. Foreign ownership seems to stimulate rather than inhibit R&D. Between 15% and 17% of all industry R&D undertaken in OECD countries is "foreign funded" - i.e. funded by a multinational headquartered outside the area in which the patent is filed. Foreign investment in OECD R&D grew by 50% in the decade 1990-2001.

4. Most commercial revenue from R&D comes from industrial R&D not from universities or publicly funded R&D. As Alan Cornford has pointed out elsewhere, it takes $22.5m of public funds to secure commercial revenue from a patent versus $1.5m of private R&D to do the same.

Look Out, China is Coming!

2005-11-27T10:22:00.000-07:00

Many see China as an economy focused on low cost manufacturing. They point to textile manufacture, where China now dominates, as the example. But watch. China is moving up the value chain.

In a key speech yesterday, President Hy of China addressing a gathering of 3,000 to mark the country's second successful manned space flight that took place last month, said the strategy should focus on the central task of economic development and the frontiers of the world science and technology. He said that, in the meantime, China should formulate its strategic goals of independent innovation and step up the establishment of the State innovation mechanism. When the President of China says "step up" he means it. Watch for very substantial investments, especially in nanotechnology and biotechnology.

Describing independent innovative capability as the core of national competitiveness, Hu said a nation should underscore independent innovation provided it wants to succeed in development and benefiting the world. China should do much more to advocate the spirit of independent innovation, improve its mechanism for such innovation and its capability for original innovation, and innovation through integration or learning from imported technology, said the president.

So, China is moving. And fast.

Patent Power - Good Thing or Bad ?

2005-11-18T10:56:00.000-07:00

There are growing degrees skepticism among academics and others about whether such state-imposed monopolies as patent protection help a rapidly evolving market such as the Internet.

What is "novel," "nonobvious" or "useful" is hard enough to know in a relatively stable field. In a transforming market that changes weekly (just look at Google stock price today at $400), it's nearly impossible for anyone - let alone an underpaid worker in the U.S. Department of Commerce who spends on average of eight hours evaluating the prior art in a patent and gets paid based on how many he processes - to identify what's "novel." Costly mistakes get made. On average it takes $1.2 million to challenge the validity of a patent, which means it is often cheaper simply to pay the royalties than to establish that the patent isn't deserved.

"Bad patents" are the debris of cyberspace. Nowhere is this clearer than in the context of business-method patents. There are an increasing number of business-method patents that now haunt Internet space. Patent No. 5,715,314, for example, gives the holder a monopoly over "network-based sales systems" - we call that e-commerce. Patent No. 5,797,127 forms the basis for Priceline.com and effectively blocks any competitor. Patent No. 4,949,257 covers the purchase of software over a network.

To those of us connected to e-commerce development, it seems bizarre that the US Patent Office consider these ideas to be novel and nonobvious. But the real problem is the incentives such a system creates. Awarding patents of that type siphons off resources from technologists to lawyers - from people making real products to people applying for regulatory privilege and protection. An increasingly significant cost of Net startups involves both defensive and offensive lawyering - making sure you don't "steal" someone else's "idea" and quickly claiming as yours every "idea" you can describe in a patent application. It is getting silly (unless you happen to be a lawyer or someone producing lawyers).

When the world was given TCP/IP and the collection of protocols it induced, a billion ideas became obvious to anyone who took the time to think. These were not ideas that were "discovered" because some lone inventor spent years toiling away in his basement, but because TCP/IP was a language with which practically anything could be done. And with very little promise of protection by government, lots was done. The Internet revolution was born long before lawyers arrived on the scene. Now they look like they may kill it.

The question economists are now asking is whether expanded patent protection will do any good. Certainly it will make some people very rich, but that's different from improving a market or stimulating innovation. The questions are many, while good answers are few. Does it make any sense in the context of computer code to protect an idea for 20 years, let alone the 95 years that copyright law gives code? Berkeley economist Joseph Farrell has floated the idea, although he has not endorsed it, of a moratorium. Berkeley lawyer Robert Merges has proposed badly needed changes to the patent system, to force better disclosure to competitors so that the government can determine which ideas really merit protection.

These ideas are good, but they underline a more fundamental problem. Washington is obsessed with intellectual-property rights. It lives under the mistaken idea that stronger IP always means a stronger economy. No doubt it means larger campaign contributions, but whether it means a better market is a tougher question.

Rather than unbounded protection, our tradition teaches balance and the dangers inherent in overly strong intellectual- property regimes. But balance in IP seems over for now. A feeding frenzy has taken its place - not just in the field of patents, but in IP generally, as copyright protections are increased.

We should also be concerned that the U.S. Congress is toying with a dangerous database-protection bill.

Its no surprise, then, that we see the growth of open source science - for example, biology (see http://onthecommons.org/node/470 ). As some scientists challenge the idea of commercialize or perish, they model their thinking on what has happened with Linnux. Maybe there is a new model for the academy after all.

For a realistic, challenging and creative overview of patent issues in OECD countries read David Levine's report to the OECD in 2004 which you will find at http://www.dklevine.com/archive/refs4122247000000000502.pdf

2005-11-15T06:29:00.000-07:00

From Ayinde O. Chase - All Headline News Staff Writer

Portland, OR (AHN) – According to U.S. electronic engineers the United States is believed to be slipping in its technology leadership position.

The survey, a quantitative study of more than 4,000 engineers augmented by in-depth qualitative interviews, also found U.S. electronics engineers suffer from long hours and have little sense of job security or recognition from employers or their communities.
"The results of this study paint a stark picture of the future of technology innovation in the US," said Paul Miller, Senior Vice President of CMP Media's Electronics & Software Development Groups.

"The discussion and speculation about the future of the U.S. technology leadership position is not new," said Kerry McClenahan, McClenahan Bruer Communications principal and co-founder. "What's new is for the first time you're hearing about it from the very people responsible for that leadership position: the technology creators themselves. Their assessment of our current and future position is sobering, and we as a country need to wake up, take notice and take steps to correct the decline."

The attitudinal survey results come in the wake of two national trends stifling U.S. leadership in technical innovation: reduced federal research and development (R&D) spending and fewer U.S. citizens studying engineering.

Despite the need for U.S. youth to study the engineering profession in college, many of the participants interviewed during qualitative research said they would not recommend electronics engineering to American schoolchildren. "No. They're living in the wrong country," said Jim C., a software development engineer.

TAMING THE TECHNOLOGY TIGER ..

2005-11-14T16:37:00.000-07:00

We can currently undertake transplants for eyes, hearts, kidney, pancreas, lungs, liver and the small bowel. Using microsurgery and tissue engineering it is possible to replace hands and feet pr parts of these organs. Given the shortage of organs available for transplant, scientists and many policy makers now consider it inevitable that we will begin to transplant animal organs into humans, providing strict guidelines are followed. Recently, scientists have genetically engineered pigs so as to minimise the chance of organ rejection when their organs are transplanted into human bodies. The breeding of animals just for this purpose – so called “horizontal humans” is now taking place.

We are also used to artificial hips, knees, legs, arms, hands and other body parts. Advanced engineering and new information processing tools are making it possible to engineer artificial limbs which connect with the nervous system and mimic or improve on the performance of natural organs. Also taking place are systematic attempts to create an artificial organs, such as the pancreas. Tejal Desai of Boston University has built such a pancreas which measures about the size of a dollar bill. It uses a combination of laboratory grown cells and nanotechnology to function. Others are working on nano-robots (known as nanobots) that will flow in the bloodstream and monitor blood-glucose levels, send instant messages to the artificial pancreas and, when the glucose levels are too high, the pancreas can react in an appropriate way.

Many people are walking around with small computers inside them – the pacemaker being a simple example. There are now extremely small computers that have been used to help restore hearing and sight or enable paralysed persons to interact with computers for speech and other activities. As we understand more about how the brain works, it will be possible to engineer technologies to replace biological processes that are failing or have failed using nanocomputers or other “smart” devices.

In terms of our food, it is now possible to process several forms of meat – chicken and pork, or example – without the need of animals. Using biotechnologies and effective manufacturing, we can “grow” meat on a large scale without harming animals or polluting the environment or losing standards of taste. WE can also use genetically modified rice to save lives in Africa or use genetically modified “purificants” to clean polluted water. While some have objected to genetic modification, such objections are usually based on ideology rather than science.

All of these developments provide hope – hope for improving the experience of life for many people, of ending hunger and avoiding political conflict over water. There are many other developments too which will change the way we experience the world and do so within the next twenty years. We should encourage and enable all of these developments.

The challenge, however, has nothing to do with the science or technology associated with these developments. It is about the nature of the human condition – about the nature of humanity. As we become a combination of technology and biology – what science fiction writers have called “cyborg’s” – and as we begin to use technology to deal with diabetes, cancer and ageing – what are the implications for society and for our understanding of what it is to be human.

There are three issues. The first is, under what conditions do we permit the adoption of technologies which can fundamentally change the biological functioning of a person. The emergent technologies – especially genetic technologies which will permit the manipulation of DNA and cells so as to inhibit or cure disease or minimise the possibility of illness – will challenge our notions of what it is to be a person. Second, given that some may have implants which give them access to superior intellectual power of supercomputers working a ten million times faster than our own brains, what are the social implications of these developments. Finally, if we use technology to prolong life and people do live to the splendid ages of many forecasts (between 130 and 145 years), how will this impact our already future strained economy?

Systematic foresight is an important activity that we all require be done well so that we can anticipate these issues, engage in the conversation and develop appropriate policy and practice both to make best use of emerging science and technology and to do so in an appropriate and informed way. Canada has no foresight mechanisms, has no Institute for Foresight and no systematic training for those whom we should expect to have foresight skills. We need to develop a systematic approach to foresight if we wish to lead rather than follow and if we wish to retain a sense of “ownership” of the future of our own bodies and communities.

These developments will not go away if we ignore them. They may in fact be critical to the knowledge economy we will need once the oil and gas revenues no longer sustain our prosperity. We need to focus on the issue of how we fast track the development of needed science and technology and we need to both deepen our understanding of the issues we will then face and broaden the involvement of voices in the debate about the use of science and technology. The prairies are so flat one can see the future coming – and its coming very fast.

Canada Tries Hard, Misses the Point..

2005-11-14T16:29:00.000-07:00

The Government of Canada is seeking to position Canada as an innovative economy. It announced today that, over the next five years, it will :

1. Add more than $2.1 billion in new funding starting in 2005–06 and over the next five years to increase support for the granting councils, the Indirect Costs of Research program, the Canada Foundation for Innovation and the Canadian Institute for Advanced Research. These measures will support cutting edge research and strengthen international research networks.

2. Invest close to $200 million over the next five years in funding to provide up to 3,500 R&D internships for natural and health sciences and engineering graduates; to provide up to 100 scholarships each year to engineering and natural and health sciences graduate students
who wish to obtain a Master of Business Administration (M.B.A.); and to support knowledge based clusters to enhance the capability of firms to perform R&D, adopt new technologies and commercialize discoveries.

3. Spend $485 million over five years to implement a new international commerce strategy—CAN-Trade—to better position up to 5,000 Canadian firms, particularly small and medium-sized enterprises, in priority markets such as China and India.

4. Accelerate the capital cost allowance (CCA) for certain forestry bio-energy equipment to support additional investment in technology that contributes to a reduction in greenhouse gases and air pollutants, while helping to improve the international competitiveness of Canadian pulp
and paper mills. This is the latest instalment of the Government’s commitment to accelerate CCA for green technology. The Government will identify additional measures in future budgets, as appropriate.

5. Spend $90 million over the next five years to use the Internet to substantially reduce the administrative burden on small business and to improve entrepreneurs’ access to information, advice and referrals on programs and services across all levels of government to improve and streamline the regulatory framework in which businesses operate in Canada.

While these measures are generally welcome, they will not do much to create the necessary conditions for accelerating innovation as a commercial activity.

What Canada needs to do is stimulate more private sector R&D and more sustained investment in Canada as a whole. While other measures were announced aimed at tax cuts and creating a more robust infrastructure, they may not be sufficient to make a considerable difference.
The message needs to get through – you can’t replace private capital with public funds to stimulate commercialization.

Innovation From Acquisition - A Tough Route To Follow

2005-11-09T07:40:00.000-07:00

From the Wharton School of Business:

If you can’t beat them, buy them.

That was the mantra of leading technology companies in the tech boom days of the 1990s, when innovation was moving at such a frantic forward pace that even industry leaders like Cisco couldn’t keep up with the latest advances. Faced with the prospect of falling behind the competition, top companies began buying up smaller firms -- and their promising, if untested, technologies -- to stay on the cutting edge.

For a while, the strategy seemed to be a good one, or at the very least, a popular one. Companies spent $3.5 trillion on acquisitions between 1992 and 2000, making those eight years the most active M&A period in history. Then the tech bubble burst and M&A activity came to a screeching halt. Acquisition leader Cisco, which purchased 70 companies between 1992 and 2000, bought just two in 2001. It became evident that while some purchases helped acquirers reap benefits, many failed to create the intended value. Wharton management professor Saikat Chaudhuri believes he knows why. His research is especially timely given the recent growth in M&A activity in the tech sector and other innovation-driven industries.

Companies who once were acquisition-crazy, says Chaudhuri, soon realized that while buying technologies was easy, making them pay off was not. Indeed, researchers looking at mergers and acquisitions in tech fields have acknowledged for years that the challenges of successful acquisitions are significant, as are the challenges of post-acquisition integration. Yet they have also suggested that the strategy of buying young companies with early-stage technologies in emerging markets is a good way of hedging against the possibility of missing out on major technological advances. Further, they have generally agreed that once a purchasing company finds an integration strategy that works well, this strategy can be applied to almost any acquisition.

But after spending two years studying the M&A activity of three top communications equipment and software firms, Chaudhuri says those assumptions are wrong. “What I did was reframe how we look at acquisitions,” he notes.

Four Major Challenges

By examining the challenges of the innovation-through-acquisition strategy in detail, Chaudhuri’s work offers suggestions to managers on what kinds of target companies are worth pursuing and what strategies should be used to integrate those companies once they have been bought.

Innovation acquisitions, according to Chaudhuri, present four major challenges at the product, organization, and market levels: integrative complexity due to technological incompatibilities, integrative complexity due to the “maturity” of a target company, the unpredictability of a product’s performance trajectory (“technical uncertainty”) and the unpredictability of that product’s market (“market uncertainty”). Different target companies present different degrees of these variables, he says, and so each acquisition presents its own benefits and drawbacks.

For instance, by buying a company whose products are based on a different technological platform, a purchasing company can gain new technological functionalities and capabilities. But such a deal would also pose a significant integration challenge because the platform disparity would have to be resolved. Chaudhuri points to Microsoft’s purchase of Hotmail as an example. At the time of the deal, Microsoft was based on Windows, Hotmail on UNIX. “It took a few years to integrate those functionalities seamlessly,” he says.

Similarly, acquiring an older, more mature firm can offer stocks of proven competencies as well as optimized processes, but poses greater integration challenges due to entrenched work routines and cultures and more cumbersome task reallocations. Microsoft’s acquisition of Great Plains to link front-end applications with enterprise resource planning (ERP) applications is a case in point, Chaudhuri notes. “The idea behind the deal is to have seamless integration between the back-end ERP applications -- like manufacturing planning, supply chain management, HR management and financial accounting -- and front-end Windows and Office applications. But since Great Plains’ relationship-based consulting approach, supporting processes and IT systems are very different from Microsoft’s infrastructure (which is geared towards selling packaged software), these differences are naturally taking time to be reconciled.”

The important takeaway from these deals is not the difficulty Microsoft had in overcoming the integration complexity, says Chaudhuri, but rather the fact that the problems could be, in fact, overcome. Through detailed planning and piecemeal execution, Microsoft has been working through the product and organizational differences.

While “complexity” challenges in innovation acquisitions are real, visible and significant, it is the “uncertainty” variables -- the unpredictability of markets and product success -- that present the larger challenge for purchasing firms. According to Chaudhuri’s research, technical incompatibilities between two merging companies slowed the time it takes to get a product on the market, but did not hurt financial performance; target maturity was positively correlated with performance. Technical and market uncertainty, however, were shown to both slow the time to market and result in diminished financial returns.

In one of two papers that resulted from his research project -- ”The Multilevel Impact of Complexity and Uncertainty on the Performance of Innovation-Motivated Acquisitions” -- Chaudhuri says that while “companies have been able to recognize, and have learned how to manage and even exploit, integrative complexity,” they have been unable “to cope with product and environmental uncertainty in these innovation acquisitions.... The findings suggest that companies tend to give attention to those innovation acquisitions which are complex, but underestimate, or are unsure how to handle, those deals surrounded by uncertainty. Existing acquisition processes appear to be geared towards managing complexity rather than uncertainty.”

When a company buys a target with unfinished products, it brings the possibility of securing promising technologies and the ability to influence their progress, he says. “But there’s also the risk that the technologies just won’t develop as expected, and less knowledge about the technology means that less focused planning can be done upfront in resource allocation and integration.” He cites the example of Nortel’s purchase of the startup Xros, which had pioneered an early prototype of a photonic switch that the acquirer hoped would form the backbone of an all-optical network. “Unfortunately, the micro-mirror system never became stable enough to turn into a fully functional product, even after much engineering effort,” he says.

Chaudhuri observes that “with markets, it’s a similar situation. If you get there early, you might dominate a new area. But it also might be a premature commitment to a market that may not evolve.” He again uses Nortel as an example. “Nortel acquired Qtera, a startup developing an ultra-longhaul optical transport product, intending to sell equipment to the many telecom carriers who were furiously building networks globally. Soon after, however, the telecom service providers realized that the projected growth in demand for bandwidth was grossly optimistic, and stopped spending on next-generation, long-haul transport devices, upgrading their existing platforms instead.”

Flawed Strategy

Among his more important findings is Chaudhuri’s contention that “buying companies with early-stage products and entering uncertain markets had substantially adverse effects.” That’s significant, because it flies in the face of the notion that buying these “uncertain” products and companies is a good strategy simply because it might pay off down the road. “Contrary to what everyone expected -- that doing things early is good -- the uncertainty was actually so high that it had tremendously negative consequences for a firm,” he says, “including fairly established and successful firms.” Even companies that had been making acquisitions for years and could easily handle older firms and those with different technological platforms -- both of which increase integrative complexity -- could not effectively do anything to account for uncertainty.

That’s because “complexity is intrinsically predictable,” Chaudhuri notes. “If one places sufficient resources and project management strategies in the right places, it’s possible to manage the complexity. You can learn how to do it. But uncertainty, by its very nature, requires constant adjustment. This type of flexibility is tough to achieve, especially in the middle of integration activity.”

So the question becomes: Is the entire innovation-through-acquisition strategy flawed? Should companies abandon it entirely?

No, says Chaudhuri. The strategy itself can be a valuable one, if applied correctly. For managers, that means first, targeting and buying only the right companies, and second, using smart strategy to integrate them into their company’s structure. As he writes: “Fundamentally, the challenges in conducting acquisitions surrounded by high levels of product and environmental uncertainty lie in selecting the right technologies and markets, and adjusting to new information as external conditions evolve. The managerial implications are that technical and organizational complexity can be planned for and thereby handled effectively, while it may perhaps be safer to delay acquisitions” to a time when the uncertainty of technologies and markets has lessened.

In other words, purchasing firms can help themselves by only buying those companies that bring along limited uncertainty. Even highly complex deals with low uncertainty may be attractive, Chaudhuri says. “One of the options, and one of the immediate implications of the research, is to delay acquisitions until uncertainty is reduced. The disadvantage, of course, is that [the longer a company waits], other players will likely become interested as well, and the price will go up. There’s a very clear tradeoff there.”

Cisco, once the leader in innovation-through-acquisition, appears to be doing just that. Chaudhuri says the company has adopted a wait-and-see approach to technology acquisitions. “My advice would be to wait as long as possible for uncertainty to be reduced, but to go ahead and engage in these more complex acquisitions.”

After all, there are still valuable targets to be had. And companies should not shy away from pursuing those that fit the profile, Chaudhuri suggests, so long as managers are prepared to craft an integration strategy specific to the deal.

Always a Tradeoff

With few exceptions, companies and researchers have assumed that one integration strategy can be employed for any number of deals, and have tried to find “optimal models to follow,” particularly during the tech boom. But Chaudhuri says his research provides convincing evidence that a rethink is necessary. Instead, companies must be flexible when bringing a new company under their wings. Different acquisitions will demand different approaches. Sometimes, it may be best to blend operations of the two companies immediately; other times, keeping them separate may be preferable.

As Chaudhuri notes in the second paper from his research project, “Managing Innovation-Driven Acquisitions: Contingent Effects of Integration Strategies on Performance,” the findings “suggest that each of the challenges inherent in innovation-targeted acquisitions can be managed with aligned integration strategies, where levels of organizational integration, process adoption, and product knowledge sharing are aligned with the nature of the specific complexity or uncertainty variable.”

For instance, if a large firm buys a small company about to complete development of an exciting new product, it may not be in the best interest of the purchasing company to rush the integration process. Rather, the better move may be to allow the smaller company to continue operations as usual, until the new product is ready. In fact, Chaudhuri found that in such situations where a purchased company brings to its new parent a product with high levels of technical uncertainty, the buyer sees improved financial performance by employing a strategy of low organizational integration, low levels of process adoption from the target and delayed product knowledge sharing.

“In that case, since the technologies are still uncertain and the group is still working on it, lower integration allows the group to keep working … and gives it the flexibility it needs to adjust to evolving requirements,” Chaudhuri says. “Your intent here is just to get [team members] to build the product. They don’t need any distractions, so joint product work and knowledge sharing are also not beneficial.” At the same time, he says, since the larger company likely has a set of processes that have been proven effective in bringing new products to market, simultaneously giving the target team such methodologies and tools is helpful in yielding a positive outcome.

The trick is to find the right integration strategy for the right deal, by understanding the “explicit tradeoffs involved.” Chaudhuri’s research identifies these tradeoffs. “A high degree of integration enables scale and coordination efficiency, but can potentially disrupt routines underlying capabilities and lower flexibility. Adoption of target processes by the acquirer preserves codified knowledge, but sacrifices scale and replicability. Knowledge sharing expands knowledge bases, but distracts resources from operations,” Chaudhuri explains.

The bottom line? Making an acquisition work is just as difficult as finding the right company to buy in the first place. “It’s necessary to figure out what works and under what conditions,” Chaudhuri says. “You have to look at what the inherent challenges are to determine whether to buy the firm, and then design the appropriate strategy to manage it.”

For more information see Wharton School of Business web site.

On the BINCE

2005-11-09T07:03:00.000-07:00

Biotechnology and nanotechnology are complex domains of work, actively engaged in by a growing number of science and technology professionals around the world. When linked with information technology (on which both of these domains depend) we have a convergent technology intensive industry emerging around the world. We should also add what are known as “cognitive technologies” – see The Cognitive Technology Journal at http://www.memoryzine.com/cognitivetechnolgy.html - which are the skills and processes required for engaging in complex tasks and the basis for simulation and artificial intelligence. These so-called family of BINC (bio, nano, info and cognitive) technologies will together shape the future of health, education and other areas.

For example, work is in progress on an artificial pancreas (biotech), which uses minute sensors flowing in the blood stream to monitor in millisecond speed the glucose level in the blood. A small implanted computer sends signals to the pancreas which then adjusts its activities so that blood sugar levels are regulated. The implanted computer uses continuous simulation of ideal states as the basis for “its decisions” as to what messages to send. (For more information see an article in The Daily Californian (http://www.dailycal.org/article.php?id=15896) August 31st 2004.

Using powerful computers, Professor Christoph Sensen at the University of Calgary Faculty of Medicine has built a powerful, three dimension space (a little like the 3D room on Star Trek) known as the CAVE. Here 3D images taken from MRI scans can be experienced – a doctor can walk inside the brain of a patient he is about to operate on and see the tumour she hopes to remove and the way it is connected to other local tissue. She can then simulate the surgery and look at “what if” using complex artificial intelligence and smart technology tools that mirror the actions of scalpels.

Another use of the CAVE is to look at what if scenarios. The example Professor Sensen uses is of a person injured in a car accident with significant facial damage. Using all of the available information, computer simulations of the actions of the tongue and its role in speech, swallowing and regular human functioning can be simulated. If surgery is required to reduce the size of the tongue so as to save a significant facial feature, the CAVE can help the surgeon see just how much of the tongue they can remove without it affecting core functions (or, put another way, know the full impact of the decision they are about to make).

These bioengineering examples are powerful, but become more powerful when we look at them from a nanotechnology perspective. When we coat a drug with nano substances that permit: (a) time release of the drug; (b) the drug to attach to cells that match specified characteristics – e.g. diseased cells versus healthy cells, so they only attach to cancerous cells and not to the healthy ones surrounding them; (c) the drug to send signals back to the outside world from inside the body indicating progress – then we have technologies that could massively change the way medicine works. Now imagine being able to simulate all of these cell transactions in the CAVE – how would this help speed drug design (and testing).

All of these are part of a coming wave of BINC medical developments which will, over the next twenty years, change our world.

But they raise important issues. These issues are explored fully in a powerful new book by Ray Kurzweil The Singularity is Near (http://www.singularity.com/). Kurzweil should be taken seriously. He holds some twenty patents, is widely regarded as amongst the best scientific foresight persons in the world and has an outstanding intellect – just look at his website for more (http://www.kurzweilai.net/index.html?flash=1). His argument is this: the singularity is an era in which our intelligence will become increasingly non-biological and trillions of times more powerful than it is today. It requires us to harness the global power of intelligent machines and devices in the service of our future. He suggests that technology is a continuation of the life-improvement process commonly called evolution. DNA created biological life forms. Biological life forms advanced over eons and developed Homo sapiens. Their big brains and opposing thumbs and forefingers made them adept toolmakers. Today their cutting-edge tools -- computers, software, gene-splicing techniques and nanotechnology -- are poised for integration with human biological systems to evolve a hybrid life form.

Kurzweil says progress occurs at an exponential rate. At first, things take forever. Eons elapsed between the primordial soup and Homo sapiens. It took thousands of years for the hunter-gatherers to get their hands on the computer mouse. But once that happened, things started to get interesting, and quickly. Now gadgets like cell phones get smaller, faster and cheaper thanks to Moore's Law, which says microprocessor power doubles every 18 months or so. Kurzweil's law of accelerating returns posits that this same exponential pace governs efforts to splice DNA, unravel genomes, reverse-engineer the brain and develop nanotech machines.

Given all these developments, converging at exponential rates, Kurzweil considers it inevitable that our own technological creations will infuse new capabilities into human biological systems that have been resting on their evolutionary laurels for the last 100,000 years or so. "We will combine the subtle capabilities of human intelligence, which is basically pattern recognition," he said in San Francisco, "with the things that a thousand-dollar computer can already do better than us."

Technological implants will improve our bodies, he claims, citing a research paper that theorizes how nanotechnologists might build respirocytes -- artificial red blood cells that can carry 236 times more oxygen than the natural alternative. "We will not just have designer babies," he quipped, "but designer Baby Boomers."

Kurzweil believes post-Singularity humans will cheat death. He writes: "When our human hardware crashes ... software-based humans ... will live out on the Web, projecting bodies whenever they need or want them, including virtual bodies in diverse realms of virtual reality."

The examples cited at the beginning of this article show the benefits of these kind of developments. When we have an artificial pancreas holding out a real solution for Type 1 diabetes just 5-6 years from now, then elements of Kurzweil’s vision of the future are desirable – technological implants prolonging life and in doing so making it more bearable.

But imagine the use of implants which are inappropriate – in the hands of Mugabe, for example.

Its time to integrate another group of thinkers into the BINC world – ethicists so that we start to explore the social consequences of the work we are all engaged in as it develops in the laboratory and before we have to confront dramatic choices which will confront us.

(Thanks to Tom Abate at the San Fransico Chronicle for some of the resources here)

THE MIXTURE FOR BREAKTHROUGH INNOVATION

2005-09-30T13:09:00.000-07:00

Here is how you can encourage high impact, breakthrough innovation (based on material from Business Week) :

Hold a high-stakes competition.

In 1989, Mazda had two teams, one from the U.S. and one from Japan, compete to come up with a design for what was to become the Miata. This winner-take-all approach introduced a great amount of stress and unleashed the breakthrough thinking that resulted in one of the world's most popular sports car.

Fund exploration.

Fluke Corp. creates new business opportunities through the use of "Phoenix teams," which are empowered to spend "$100k and 100 days," as they see fit, to develop and prototype a disruptive innovation. Senior executives have green-lighted enough projects to double Fluke's revenues in five years.

Remove the naysayers.

Every organization has powerful people who immediately know three reasons why any new concept won't work. One company we studied simply removed two such execs from the leadership group that governs service innovation. The atmosphere changed immediately to focus on how to make unfamiliar concepts succeed.

Change your risk-analysis mindset.

In lieu of a risk-adjusted return-on-investment approach, one company evaluates high-potential concepts by defining the worst-case outcome and asking the leadership team, "Can we survive it?" If the consensus is "yes," they charge ahead and work to make the successful outcome occur. This conversation often occurs at the board level.

Form a special petri-dish environment where new concepts can grow.

Pitney Bowes (PBI) has a concept studio designed to explore opportunities far afield from its existing lines of business. IBM (IBM) has a similar unit, called "EBO" for Emerging Business Opportunities. This approach minimizes distraction to the ongoing business and permits concentration of special innovation skills. Successful projects are then sold back to the business units.

Canadas Innovation Agenda

2005-09-02T09:04:00.000-07:00

Five facts speak for themselves. First, despite major investments over the last decade in the innovation system, Canada’s economic productivity and overall competitive position continues to weaken. We now rank 18th in growth competitiveness in the OECD, 15th in overall business competitiveness and the productivity gap between Canada and the US continues to widen in a way that alarms some - Canada’s is currently ranked 13th in the world (a fall from second place) in the OECD (2004 data). Canada is ranked 27th out of 30 in the OECD on our ability to compete in value added products and services - overall innovativeness.

Second, we produce just 4% of the world’s science and technology innovations[i] . While many say this respectable for a small nation, many of those ahead of us are smaller and spend less – Finland, for example. What is more, this figure is declining over time. Since business spends less than 1% of GDP on R&D that generates the largest proportion of these, this may not be surprising.

Third, we are not meeting the target number for science and technology graduates working in the labour force. That target is 10% - based on best in class performance for an innovation system – and Canada sits at 6.5%.

Fourth, while we have many great innovators, but innovative companies are not staying the course and turning Canadian inventions into Canadian products and services – many are seeking a quick sell to the US or other investors so as to recapture their venture capital[ii].

Fifth, we have many positions in Universities funded from the Canadian Foundation for Innovation that are short term contracts, some of which will be renewed and some not. The unfunded costs of these scholars and our reliance upon them makes our Universities vulnerable.

The Governments Innovation Strategy

The basic strategy being pursued by Canada is to increase general expenditure on R&D, mainly through significant and substantial increases in Federal Government spending – it has grown 10% per year during the last five years. While this may produce strong social outcomes, it is not a policy that will produce major economic gains. Research undertaken by the Innovation Expedition suggests that it is not the absolute level of R&D expenditure but the ratio of private to public expenditure which drives economic gains from R&D. In the highest performing economies – Finland, Japan, US for example – the ratio approximates 3:1 private to public. In Canada, this ratio is currently 1.18 to 1 and falling.

A second element that drives economic outcomes is the availability of high quality people in the workforce – so called HQP. This takes two forms – one is the number of S&T graduates working in the economy, while the other is the availability of skilled managers and leaders who in turn attract venture capital for ideas that have passed through the pre-commercialization stage. Contrary to many statements, there is no absence of venture capital, only of proven and tested ideas and skilled managers to take these ideas to market. The Universities produce HQP and they too are struggling to find the 25,000 - 40,000 academic staff they need to cover retirements, growth and demand for new subjects.

A third element that is key are the number of product opportunities produced by the inputs and processes of what might be thought of as an “innovation eco-system”. When the right input relationships between the HQP, public R&D and private R&D investments are established, then approximately each $2m of inputs produces a commercial opportunity. It is these product and process opportunities-- that may incorporate copyrights, patents, trademarks, proofs of concept and prototypes from both public and private R&D – which drives investment levels. Canada currently produces in the order of 8,000 opportunities annually, 25% less than the that of the US and Finland from the same level of overall R&D investment

Universities Key to Success

The good news is that Universities have worked hard to develop and refine their technology transfer processes and they are reported to be among some of the best in North America according the to the Association of University Technology Managers (AUTM). According to data obtained from the National Research Council, there are now some 816 spin off companies providing over 21,000 jobs generated over the past several decades. They secured $4.5 B in sales in 2002 that continue to grow. Universities, especially the larger ones, have embraced a new commitment – to support and aid regional economic development through technology transfer.

But we need to do more. Canada needs to think of the innovation system as an eco-system – one in which the relationships between the variables as well as their absolute size determine outcomes. More public R&D will not of itself produce the outcomes we need, unless, it helps us achieve higher volumes of HQP in the workforce leading to higher levels of private R&D and benchmarked ratios between these variables. It is these inter-relationships of the key drivers that make the most difference.

Smaller firms --SMEs with lower receptor capacity for R&D and new product development -- will have to look to the University sector for more joint ventures between science and technology researchers to undertake the needed increases. Joint ventures leverage the overall asset base, connect R&D to market needs and are more likely to produce economic returns faster. Indeed, our calculations suggest that increasing joint venture activity by 1% each year for seven years at Canada’s Universities would produce double the current level of public R&D outcomes.

We also need to do more to hasten the flow of HQP into the workforce –, more part-time degrees, more online learning at the undergraduate and graduate level, more professional Masters and Doctoral degrees in science, technology and management linked to market needs. A strong focus is also needed not just on appropriate curriculum, but student retention and completion to competitive standards.

The Innovation Eco-System that Works

To make the system work and produce economic innovation that will help to create regional development and support existing and new ventures, Canada needs to achieve certain benchmark standards. These can be captured in terms of the primary drivers of the innovation eco-system and are derived from a systematic study of high performing innovative economies. We show them below:

Private: Public Ratio for R&D Spending: 3 : 1 (Canada is at 1.18:1 and falling)
% of HQP in the Workforce 10% (Canada is at 6.4% and improving)
Product Opportunities/$1mR&D 0.51 (Canada is at 0.38 and falling)

To secure more product opportunities, we need to improve on these three variables – venture capital will flow to the opportunities so created.

What is interesting about these observations is that different results can be achieved within the same fiscal resources. That is, without investing significantly new dollars, different and improved outcomes can be achieved.

Conclusion

Universities have several challenges that relate to the innovation system – the unfunded costs of research, the sunset clauses on some research funds, the short term nature of Tier 2 Canada Research Chairs, the capital implications of big science and so on. Our purpose here is not to deal with all concerns about the eco-system, but to focus on the concern that matters most: the eco-system is not producing the “oxygen” the system needs in terms of sustained economic innovation. By changing the mix of nutrients, it could.

[i] Tom Brzustowski, President of NSERC: Increasing R&D in Canada – How the Universities Can Help Make the Innovation Strategy a Success. NSERC, 2003 (mimeo)

[ii] Douglas Barber and Jeffrey Crelinsten: Growing R&D Intensive Firms in Canada = Views of the CEO’s in the “Greenhouse”. March, 2005, Toronto: The Impact Group (mimeo)

Alan Cornford was formerly President of SFUniventures at Simon Fraser University and Assistant Deputy Minister of Science and Technology for British Columbia

Stephen Murgatroyd was formerly at Athabasca University and is now a partner in the Innovation Expedition.