CANADA'S KNOWLEDGE LIMITATION: ISSUES AND SOLUTIONS


Notes for a Speech by Gaylen Duncan, President & CEO, ITAC
To the Conference Board of Canada's 2002 Brain Gain Conference
March 26, 2002, Toronto, Ontario

Introduction

Good morning I'm delighted to be here and to provide my views on the issues of people, productivity, and Canada's progress in meeting the challenges of the global knowledge economy.

As we all know, the dynamic interplay between knowledge and power is not a new concept. In another century, Sir Francis Bacon wrote: "Knowledge and human power are synonymous."

The father of modern management, Peter F. Drucker agreed and added that knowledge "controls access to opportunity and advancement."

In terms of our current knowledge resources, Canada's power is limited. And we must take concrete action now to address these limitations. If we don't, then we will never gain access to the full opportunities for advancement that the global knowledge economy will certainly bring.

Today, I would like to first give you an idea of the possibilities by sharing with you how Finland - another great Nordic nation - is currently cementing an enviable position in the world economy.

Second, I'll give you a picture of where Canada stands today - by the numbers. We have made progress, but the overall portrait of our position is not that flattering.

Third, I will share some of ITAC's prescriptions for capitalizing on our strengths and addressing our weaknesses.

My message is that we need a targeted strategy to build our capacity to create and leverage knowledge. A shotgun approach is not only wasteful, it won't work and may end up doing more harm than good.

The Finnish Experience

First, let's look at the Finnish experience. Finland ranked number one on the UN's latest technology achievement index.

This index measures nations against eight parameters, including patents, royalties and license fees, technology exports, mean years of schooling and enrollment in post secondary science programs.

Canada, by contrast, ranked eighth. Yet, Finland's population is about one-sixth of Canada's and, like Canada, its economic roots lie in the resource sector. How did Finland turn its economy in a new direction?

Over the past 15 years, Finland has more than doubled its investment in R&D to fully three percent of its GDP, placing it second only to Sweden in the OECD. Over the same period, Canada also improved slightly and we are now in ninth place in the OECD.

But whereas I would be hard-pressed to tell you the specific technologies that Canada's added investment in R&D fostered, I can tell you that Finland concentrated their investments in telecommunications, biomedicine and the science of new materials.

In 1983, Finland also created Tekes, the Technology Development Centre, to drive the adoption of technology in its established industries, such as pulp and paper and mining. At the same time, Tekes led the charge to diversify Finland's economy into new areas like information and communication technologies.

Finland also supported the creation of global corporate champions. Its flagship technology company, Nokia, is now a world leading wireless communications company. Twelve years ago, Nokia was making snow tires and rubber boots.

The results:

  • One, Finland has become a world leader in the deployment of advanced technologies in established industries.
  • Two, Finland is a global hub for innovation in the wireless sector.
  • And three, in just one decade, high technology has emerged as the leading sector in Finland's export economy.

Canada By the Numbers

Like Finland, we have to recognize our global strengths and focus our efforts. It's not enough to write a big cheque for R&D or education funding and leave it at that. We must develop a coherent strategy that leverages our advantages and addresses our weaknesses.

Let's take a look at some numbers to see where we stand. First, the encouraging news: Canada has a vibrant and growing Information and Communications Technology or ICT sector.

As a whole, it accounted for 16.5 percent of the growth in Canada's GDP from 1993 to 2000 and more than a quarter of Canada's GDP group in 1999-2000.

It employs more than half a million Canadians, earns about $132 billion in revenues annually, and funds almost half of Canada's private sector R&D.

In recent years, the contribution of the ICT sector to Canada's GDP has grown six times faster than the rest of the economy. The amount we export is also growing four times faster than the economy as a whole.

However, the sector is headed for trouble - and soon. Despite the dot-com bust and the ongoing stock market troubles of many technology and telecom companies, the industry continues to face a shortage of talent.

Statistics Canada figures show the unemployment rate for ICT professionals at less than half the Canadian average. And ICT employment opportunities are growing six times faster than other jobs.

Right now, we predict that there are some 30,000 jobs in the IT sector that are unfilled because we simply don't have enough people. And this problem is getting worse.

eMPOWR, a private/public sector partnership, is aimed at aggressively accelerating the growth of Canada's engineering and scientific talent in microelectronics, photonics, opto-electronics, wireless and radio.

Their research points to some alarming weaknesses in Canada's current university system in these pivotal technologies. For example, Canadian universities do not have the faculty strength to produce the new professionals that will keep Canada internationally competitive. Our university system is so weak in this area that it cannot even renew its own research and teaching resources in the future.

Yet, this technology segment is hugely important. The global market for electronic systems based on eMPOWR technologies is worth an estimated $1,440 billion US.

And almost half of all ICT and eMPOWR professionals in Canada are employed outside the ICT sector.

They are critical to the competitiveness and productivity of all types of industries - from resource-based industries like forestry and agriculture to new emerging areas such as biotechnology and molecular engineering.

Furthermore, these professionals generate incredible wealth. According to eMPOWR, each employee in this sector generates annual revenues of about half a million dollars. What's more, each employee with a post-graduate degree in this field will generate $2 million each year in future revenues.

By 2005, Canada will need at least 25,000 more of these professionals. However, at the present rate, Canadian universities will graduate less than 30 percent of the industry's projected need.

I believe that private industry is doing all that it can to advance Canada's interests in this and other pivotal technology areas.

For example, Canada's private sector doubled its investment in R&D during the 1990s. As a result, two-thirds of Canada's total R&D now takes place in the private sector. About 60 percent of this research or $2.8 billion is in the eMPOWR disciplines of microelectronics, photonics, opto-electronics, wireless and radio.

Private industry has also increased its investments in university research from 7.5 percent in 1990 to 12 percent by the end of the year 2000. Today, 16 percent of the research in natural sciences and engineering conducted by Canadian universities is funded by the private sector.

This is about twice the average funding of university research by industry in the other G-7 countries.

In short, Canada has a vibrant IT and communications sector, with plenty of promise. It's an important and growing contributor to Canadian GDP, exports and jobs. It invests strategically in R&D. But, with the existing and accelerating shortage of talent, it's in dire trouble.

And things aren't going to get any better unless we develop a strategic focus - and a solid plan - for addressing our knowledge limitations.

Public Policy Imperatives

Let me turn now to ITAC's policy prescriptions for addressing these critical issues.

To date, the federal government's approach to fostering innovation and advancing education has been magnanimous. And that's laudatory.

Less laudatory, however, is the fact that there is often no focus to these initiatives. For example, less than five percent of the funding from federal programs such as the Canada Foundation for Innovation and the Canada Research Chairs ends up allocated to information or communications technology research.

The new initiatives outlined in the government's recently announced Innovation Strategy are similarly untargeted.

As the Finnish experience shows, focused investments in R&D and industrial development can bring dramatic economic results.

Canada must invest boldly and strategically - at least $100 million per year for the next five years - in university research in IT and communications technologies. This investment will:

  • Attract new professors
  • Fund long-term research
  • Create a self-sustaining source of future professors, and
  • Ultimately, ensure a brain gain for the industry sector that needs the most new brains.

There are a number of components that contribute to a nation's capacity for economic growth and innovation. But the key ingredient is people. Canada must take stock of its resources of highly qualified people and invest appropriately in this crucial resource

Second, we believe that government and industry must work more closely together to develop a plan to transform all Canadian industries with the productivity enhancing tools of the information technology revolution.

Whether that plan takes the shape of special incentives or marketing or both, its benefits are clear. A study conducted on behalf of ITAC by the Conference Board of Canada, showed that "investment in IT is having a significant impact on our economy, both in terms of output growth and productivity. Continued investment in this sector would likely bode well for our future."

A recent study by Statistics Canada also demonstrated the positive impact of IT and communications technologies on individual companies. It concluded that the adoption of advanced technologies is key to the growth of manufacturing plants.

It further showed that the more sophisticated the use of software, hardware and network communications, the greater the gains in plant productivity.

Third, we believe that Canada needs to pump up its business leadership and management capacity for the knowledge-based economy. It's a new global game. Markets are opening up. The competition is fierce. Leadership talent will be critical to Canada's success.

Yet, Canada's potential lack of leadership talent presents another problem area. In a recent Conference Board of Canada survey, senior executives at 100 of Canada's top companies identified "the building of leadership capacity as the most important challenge in keeping pace with change."

Yet, only five percent of these executives believed they had excellent leadership capacity for implementing major change.

Meanwhile, like IT professionals, skilled leadership and managerial talent knows no borders. More than half of the Canadian executives surveyed in a recent poll have considered moving to the United States.

To beef up Canada's leadership resources, we need to study and then integrate the teaching and learning of new leadership skills throughout the education system. We also need more formal training programs as well as mentoring, outreach and recruiting programs.

And we need rewards - such as allowing our corporate talent to keep more of what they earn.

At ITAC, we also believe that Canada must change its venture capital environment. It must invest in government-on-line and a national broadband network. And it must reform the business tax regime to ensure that as much wealth as possible remains in the innovation cycle.

Conclusion

Canada clings precariously to eighth place among the world's technologically advanced nations. Although we have a strong and progressive IT sector, a growing shortage of technical and leadership talent will jeopardize its future.

To shore up these critical knowledge resources, we need a focused approach. We must concentrate our efforts on bolstering our university system for creating new knowledge and new knowledge professionals.

We also need to enhance the productivity of more industries through IT. And we must devote more attention to strengthening our leadership and managerial talent.

Knowledge is indeed power. It does indeed control access to opportunity and advancement. As a small nation in a global marketplace, engaged in a global struggle to protect our way of life, Canada must work smarter and become smarter to win.