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Too much innovation talk can be a bad thing

The Trudeau government says it’s focussed on an innovation agenda. But what does that even mean?


 
Minister of Innovation, Science and Economic Development Navdeep Bains speaks during a news conference, Tuesday, June 14, 2016 in Ottawa. (Adrian Wyld/CP)

Minister of Innovation, Science and Economic Development Navdeep Bains speaks during a news conference, Tuesday, June 14, 2016 in Ottawa. (Adrian Wyld/CP)

It’s hard to get away from “innovation talk” these days. Almost as prevalent as “fake news”, it’s everywhere you turn. Toronto Star columnist Paul Wells recently referred to it on Twitter as a “river of baloney.” The federal government’s new chief innovation fellow, Mike Moffatt, responded that such a river would, itself, be quite innovative.

But fun aside, there is a lot of truth in Wells’s contention that much of the current innovation talk is baloney, or at least, hard even for experts to decode. When I was an associate deputy minister at Industry Canada (now renamed Innovation, Science and Economic Development), I had a hard time getting straight answers from staff about innovation. It wasn’t because they weren’t hard-working, thoughtful people. It was because the rhetoric had overtaken the reality. Here are some of the issues I encountered as I tried to decode “innovation talk”. They are important to consider because our governments currently spend hundreds of millions of dollars annually to support “innovation”.

MORE: Will Ottawa’s ‘cluster’ approach to innovation funding work?

What does innovation mean? Merriam-Webster says innovation is “a new idea, method or device.” Needless to say, this covers a pretty broad range of products and services and processes for making them. More precision might make encouraging business innovation more manageable.

Are all innovations valuable? Commercial cold fusion would a great innovation, but a new recipe for garlic and jalapeño carrot muffins might not be. Robots that help disabled people live independently could make the world a better place, but robot soldiers that terminate enemy soldiers and civilians alike might not be. Just because something is new does not mean it is good.

How is innovation measured? We generally rely on both micro and macro indicators of innovation, but neither are very revealing. Some people count the number of patents as an indicator of innovation, but lots of crazy ideas never get much farther than the patent office, while lots of good process improvements are never submitted for patent protection. Other micro measures include research grants or business R&D spending. However, these are inputs to the innovation process and say nothing about the flow of useful innovations that may actually result.

MORE: How to fix Canada’s innovation conundrum

At the macro level, we generally associate growing productivity with innovation. In its simplest form, productivity is measured as output per worker. If productivity is growing faster than sales, then the number of jobs is declining. This is great if you are a firm owner, but not so hot for workers who are laid off. It’s often forgotten that productivity growth needs to matched by sales growth for workers to benefit.

Are innovation and productivity the same idea? Productivity is a last-decade buzzword that we hear less about these days, perhaps because productivity and innovation don’t always go together. For example, productivity is declining in the oil sands, despite lots of innovation. Why? Because the (relatively) easy-to-get oil has already been exploited, leaving increasingly difficult reserves for producers to work with. Does it make sense to continue to mine the oil sands if productivity is declining? Not surprisingly, it depends on the price of oil. Even low-productivity oil may be commercial if prices are sufficiently high.

Who benefits from innovation? Consumers and firms may benefit if innovations are valuable. Who would want to go back to a 1 kg, $2,000 ‘mobile’ phone? Workers may benefit if their skills enable innovations in production, and if sales grow fast enough. Alternatively, they might lose their jobs. It’s not easy to predict what will happen.

MORE: Canada’s real economic challenge? Innovation.

Will piles of government money buy us more innovation? Piles of money may help, but we probably also want our firms to face lots of competition. Keeping a lid on anti-competition policies and practices at home and exposing domestic firms to international competition through trade may encourage the flow of product and process innovations.

Where does this leave us as we struggle to decode innovation talk flowing past in Wells’s “river of baloney”? Innovation is hard to define precisely and devilish to measure even though governments spend hundreds of millions of dollars on it. We are not sure whether workers will benefit from it.

It’s not that much of what is being done to foster innovation is bad policy and, indeed, we are continuing to support many of the same things we did in the past in the name of improving productivity. But perhaps it would be better to focus our attention and public discourse on things we care about more directly, understand better and can measure. I am thinking about things like prosperity (levels of incomes), equality (distribution of incomes) and competitiveness (costs and quality relative to other producers). Innovation policies can help us achieve these things sometimes, but not always, and not by themselves. Too much “innovation talk” may be a bad thing if it actually distracts us from our overarching goals of building the economy and society we want.

Paul Boothe is Managing Director of the Trillium Network for Advanced Manufacturing and a Fellow of the Institute for Competitiveness and Prosperity.


 

Too much innovation talk can be a bad thing

  1. Boy, it’s no wonder Canada doesn’t get anywhere with talk like this!

  2. Innovation is the leading edge but in some sense the author is right, innovation alone is just a small piece of the puzzle: every economy has it’s mainstream activity which to some extent is the exploitation of past innovation. However, the author makes a big deal about the uncertainty of innovation; that’s nonsense as innovation is always risky and even for successful innovation the path from inception to market is often long and tortuous; for example, it took more than 2 decades for electrical starter systems and electric headlamps to gain acceptance in automobiles and even today the emerging refinement of stop-and-go operation is far from universal. It is always true that ‘you don’t know what you don’t know’, consequently, innovation is fraught with risk and failure. Something the writer completely ignores is the experience curve which shows that the cost, functionality, efficiency, reliability, etc of a product grows with cumulative sales, consequently promoting a product and facilitating the path to market is as important as investing in early stage R&D.
    The writer also advances some random mumbling about 100s of millions spent – it’s not clear whose money. The fact is the fed spends about $2.7B which is dwarfed by $15.5B from industry and $13.3B by post secondary education; the latter is perhaps telling if the writer is concerned about innovation that is distant from commercialization: academic work is purportedly about free thought – nothing wrong with that – and has no reason to be grounded in economic potential (although a lot of politicians see it otherwise). But back to the money: Canada’s GDP peaked at $1840B where something like $31.5B in R&D would be less than 1.7% which is much less than an ideal.
    The article embeds the notion physical product is the only commercial result of R&D which totally ignores the fact that intellectual property is itself a marketable product and that soft products are one of the fastest growing market segments. The writer also ignores the fact that investment funds and, equally importantly, capital investment are in limited supply; more importantly, that government policy plays an important role in directing that money: among other things, any IRR study includes tax policy and cost of borrowing as important factors. As noted, the Harper government directed as much as half of all such funding into resource extraction which starved other economic sectors with higher employment and ultimately resulted in GDP crashing by $287B in the last few years. One of the telling stats is that Canadian investment in R&D in the areas of science and engineering has continually declined; it is actually disturbing to see how much federal funding labeled as R&D was actually used to backstop commercial business losses.
    To some extent, one might contemplate what others are doing: we see economic giants like the US and China investing heavily in new energy technologies and industrial modernization. There’s no point to crying over lost buggy-whip manufacturing jobs! Random public discourse is likely of little value since many of the well known recently successful innovations are the result of skunk works projects often going against the grain of common assumptions.

  3. I would agree with the author above, and commenter Geraldr below, that a river of unfocused baloney talk on innovation is not going to get us far. A river of baloney from a political source usually means a desire to hide a lack of understanding or a lack of desire to get at underlying fundamental issues.

    I’d define Innovation as new or improved goods and services that support the needs to society today and in the foreseeable future. “Improved” in this case would be defined from the point of view of the consumer, and yes, it might require multiple measurement methods to quantify the various aspects of “improved”, but what’s so complicated about that?

    As Geraldr mentioned, other successful countries have invested heavily in new and improved energy systems. It seems to me there is a whole new world of innovation waiting to be realised, with resulting economic benefit to investor and worker alike, in the area of sustainability, whether it is sustainable energy production, sustainable resource extraction from renewable sources, improvements to a product’s recyclability, reductions in a product’s production toxic by-products, energy inputs, and so on. Increasing pressure from Global Climate Change will drive the trend towards sustainability, and Canada would be well advised to be on the up-side of that trend curve. Laggards such as the Trump administration and their procrastination and obfuscation can only temporarily delay the inevitable move away from wasteful and unsustainable production.

  4. GeraldR and JAS-Toronto have the right of it…….would that they were in charge!

  5. These same issues have been fumbled with for the past 25 yrs, with never any real solution coming to the forefront. Perhaps the author should use the definition of innovation provided by the OECD, of which undoubtedly his policy analysts advised him. It is unfortunate that the federal government, particularly Industry Canada, now known as Innovation, Science and Economic Development, is never able to develop real, meaningful policy. Perhaps employing analysts who have experience and who understand economics and business would alleviate that black hole, which has been prevalent for the past 20 yrs. Let’s come up with solutions rather than bemoaning the difficulty of addressing the problem.

  6. The most important thing we have to know, in order to understand that most of this talk of innovation is largely pointless, is that virtually every single individual talking about it has never set foot in any kind of manufacturing facility in their lives. They’re having a useless and pointless discussion because they know less than nothing about what innovation actually is.
    I spent a lot of years in manufacturing, and can tell you with complete certainty, that as much innovation in manufacturing comes from the shop floor up as comes from engineering down. If you look at many modern machine tools, for example, you’ll find features that are the result of the makers of such products going in to the field, and seeing how customers were modifying the equipment when they used it. Thousands of products have evolved the very same way, from manufacturers looking at how other manufacturers were using and modifying their products, and much of that modification came from the lowest paid workers finding ways to be more productive.
    Their ain’t a policy in the world that any government can institute to make our industry/economy more innovative. I, however, have a far more innovative idea. Ship 1/3 of our federal workforce up to Baffin Island to freeze, and put an equal percentage of our parliamentarians in canoes. On Lake Superior. In November.
    Then give the accumulated savings back to the populace. Now that would be innovative. The problem with innovation however, is that it’s a lot like the weather. Everybody talks about it, but nobody wants to do anything about it.

  7. The author makes a great point in that all innovation isn’t necessarily good. At the International Association of Innovation Professionals (IAOIP), we did not focus too heavily on the definition of innovation as the mechanics necessary for development of a body of knowledge. One of the reasons we did that is precisely because of what Mr. Booth states.

    I personally see innovation as any incremental benefit that serves at least one person. It’s a little like the tree falling in the woods. If one individual benefits, even if no one else in the world learns of it, did the innovation not happen?

    Accordingly, one of the most significant needs in innovation is to develop a body of knowledge in an independent working group, then promote and teach those techniques constantly, until society no longer needs to “work” at innovation. When we reach that point, the way we think, the ideas we develop, what we do with the “hashed out” ideas will be the ideal. Having an accepting organization or society that will have a mechanism in place to exploit those ideas is the job of companies and governments. This is where the catch 22 takes place. Much like a highway system, the government needs to create the mechanism to encourage and support innovators. Innovation will take place, and cars can drive on unmaintained dirt roads, but the ride is usually bumpy and it takes a lot longer to get there.

    If you want to find out more, go to http://www.iaoip.org. We also have a Canadian Chapter

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