Cutting through the ‘future fog’ of innovation economy

By Barry Gander

Many nations have achieved a surge in GDP because of their mastery of the innovation economy. We are all familiar with the Information Economy, and that is still with us, but the broader and more useful term of “innovation economy” is taking hold as the benchmark for success capability.

Does Ottawa have an innovation economy and how does it rank against other centres?

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The answer to this question will predict whether your income will go up or down in the next five years.

It is a daunting question, not because we have no information, but because we have so much we are in a “future fog.”

There are two crystal balls we can use to forecast our future prosperity. One shows a glamorous picture: Canada is a leading research nation. Ottawa has many research labs. We should be confident that we are entering a bright future. The other crystal ball shows a more dismal prospect: Canada is falling steadily behind in innovation. Our relative economic vitality is suffering.

How can these two futures co-exist? How can Canada be ahead in research while stalling in innovation?

The answer is that research is the mirror opposite of innovation. In research, money is invested in an effort to find knowledge. Canada is very good at investing money to find knowledge. Generally, this investment is not connected with a rise in GDP. You can be in the best research country in the world and yet watch your income decline year after year.

Innovation, by contrast, is a process where knowledge is used to make money. You start with knowledge. You use it to get money (or some other value).

As examples, think of the companies that are highly valued today. Facebook, which did not rely on research but used social innovation, is now worth more than Walmart, the world’s biggest retailer.

Google, which creates no original content and is not based on any newly researched invention, capitalizes on its improved search functionality to generate more than $50 billion annually from advertising services.

Apple, Microsoft and Google top the list of most-valued companies in the United States and, with respect, it would be hard to characterize their offerings as a product of research rather than innovation.

The Internet itself – an innovation, not a new research project – now accounts for 21 per cent of the growth of global GDP among developed countries.

The market cap of companies in the technology and innovation sector is now bigger than the mining sector on the Toronto Stock Exchange.

Innovation has been credited with creating two-thirds of all economic growth in places such as Great Britain from 2002-08, when all growth stalled.

And perhaps the most important stat: high-tech, innovation-based goods are predicted to lead trade growth over the next 15 years.

These stories are volcanoes rising from the sea, driven by the immense power of the new innovation economy phenomenon. Innovation economists believe that what primarily drives growth in today’s knowledge-based economy is not capital accumulation, as neoclassicalism asserts, but innovative capacity spurred by appropriable knowledge and technological prowess. It is based on the combination of entrepreneurship and innovation.

Innovation has been a very elusive concept to measure. Now, however, thanks to work by Sorin Cohn, leader of innovation metrics at the Conference Board of Canada, and through the i-Canada Alliance, information about firm-level management of innovation can be used to measure the contribution of innovation effectiveness.

It is the first time this kind of measurement has been applied.

Invest Ottawa’s innovation benchmarking study is asking business, social and technology organizations to give their views on how well Ottawa is doing as a platform for competitive innovation. An online questionnaire solicits views on how innovation is used to enhance competitive status. The resulting dashboard will provide insight into Ottawa’s business competitiveness as it is perceived by its top managers. A companion personal interview survey dives more deeply into a firm’s innovative potential.

In parallel, another Invest Ottawa study is asking community leaders to give their views on Ottawa’s progress on the evolutionary path of becoming a Smart Community. A Smart Community is the end product of a successful innovation economy. The results of this survey will determine the necessary activities to transform Ottawa into a centre that competes intelligently in the global knowledge world of today and tomorrow. The study features an online questionnaire asking for personal opinions on how well Ottawa is prepared to compete.

The results of both studies will be two dashboards on Ottawa’s underlying innovativeness and its resulting “Smart Community” strength. This could trigger new programs and initiatives and set new targets to satisfy unmet needs. Invest Ottawa’s goal is to supercharge the community and give all of our colleagues and citizens a direction and a boost.

Some of the evaluation’s practical questions include the following:

Innovation forces: What trends should we be watching? What role does management play?

Cultures of innovation: How does organizational culture aid the innovation process and how does leadership support innovation?

New processes and tools: What new processes and tools best support innovation?

Commercialization: How do the best companies target their markets and convert innovation into profit and growth?

As a beneficial/helpful side effect, the studies are pulling Ottawa’s business community together. There is no doubt that innovation success depends on the building of community. Today, 80 per cent of all global economic activity is generated in urban areas. The top 100 communities in China have a combined economy bigger than that of France and Germany together. Almost half of the world’s technological and scientific innovation is created in cities.

Canada, fortunately, has a good chance of success, but we cannot be complacent.

Canada has won as many “Most Intelligent Community” awards as any other nation, a remarkable achievement for its population size. Cities that have won that award include Calgary, Waterloo and Toronto. Ottawa has knocked on that door several times itself.

Ottawa has many strengths. It has 1,700 high-tech companies and, equally stunning, has seen more IPOs than any other Canadian city in the past five years. Ottawa’s companies are masters of the practical art of innovation. And our city could, in fact, lead other Canadian centres to help them exploit the innovation economy.

Ottawa could be the key to Canadian success in a very different context from its usual significance in the political sphere. It could be the innovation capital of Canada.

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