Fostering innovation in Canada

By Andrew Maxwell

“The goal of innovation is positive change, to make someone or something better … and is … important topic in the study of economics, business, entrepreneurship, design, technology, sociology, and engineering”(Wikipedia).

Unfortunately, most people restrict the definition of innovation to technology innovation, which limits the impact of innovation on wealth creation. New technology innovations can offer enormous societal and economic benefits, but only when users adopt them and wealth is created for these users and the technology producers, and consequently for regional economies. A country emulating a comprehensive innovation agenda must look at the broader role of innovation, both in terms of enabling technological innovation and improving or sustaining our standard of living.

Researchers often assume that simply developing novel technology will lead to rapid adoption and dissemination of the technology, but there is little evidence to support this assumption, or research to investigate how adoption and dissemination can be enhanced. Given that most (95%) technologies fail to reach market, and that most (90%) new ventures created from university research employ less than 10 people, existing assumptions about regional wealth creation need to be challenged.

The transfer of innovation to the broader community involves an understanding of society, and how trends and demographics will affect the demand for innovations. It requires an understanding of both the psychology of individuals deciding whether to adopt an innovation, and a comprehension of the economics of marketplace efficiencies.

To be successful, innovators need to understand how legal systems work, specifically how IP can first be protected and then shared. They also need to understand how institutions function, the role of trade policies and the nature of trade barriers.  For innovations taken to market through the creation of a new venture, a better understanding of entrepreneurship is required, as well as the traditional business skills of marketing and finance. Further, the successful development of high growth companies (rather than just start-ups) requires a profound understanding of how people assess risk, manage processes, and build and develop personal networks.

Reducing barriers to innovation success requires a better understanding of people, their values, their skills, their relationships and their decision-making processes. Developing this understanding is at the heart of a strong innovation agenda. An understanding of how society and individuals will adopt innovations is critical; the alternate technology push model will consistently fail.

In reviewing the current issues that may limit innovation adoption rates this month, we note: globalization (G20), pollution (BP), privacy (Facebook), moral hazard (bank bailout) and demographics (health care costs). These are people issues. Technology does not drive innovation; people drive innovation.

If Canada is truly to become and innovation nation, we need to address critical challenges that combine both technology innovation and an understanding of the social issues around each. Technology development in a vacuum will not achieve the required results.

Bringing research into law, government policy, economics, management, psychology, finance, sociology and history can contribute to Canada’s innovation agenda. Improved understanding of each of these disciplines is not an adjunct to innovation, or simply a catalyzer of technology innovation. These disciplines help us to define the process of innovation, measure innovation outcomes and identify opportunities for improvement.

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.

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Qualifying for SR&ED

By Fred Hausmann

PART 2

Yesterday, I talked about why you should care about making a  SR&ED claim as a business owner. A qualifying project is eligible to receive from the government about 68 cents on every dollar spent.

SR&ED or the Scientific Research and Experimental Development tax program is one of the most lucrative funding programs for businesses offered by the Canadian government.

Here are a few examples of things that have successfully qualified for the SR&ED tax credit that you might not have thought of:
•    Printing companies that acquire new printing equipment where they try to push the equipment beyond its intended use.
•    Manufacturers that purchase machinery where they have to a modify that equipment in a non-standard way
•    Having a product work with another product where those two products were not designed to do this.
•    Using a new version of a program or tool where problems arise that you try to work around.
•    Software development where you are building something new or you are using a new tool set for the development.
•    You are building a web site where there are some new and cool features being developed that are not commonly available.

Once again, even the above examples are not clear cut and depend on the specific circumstances and technological fact pattern in order to make a final determination on eligibility. To make a determination you really need to work with someone who specializes in helping companies with their SR&ED claims. In addition, working with someone is the best way to ensure you are maximizing the dollar you are getting in your claim.

Fred Hausmann is the founder and senior managing director at the FRED Group Inc. a business development and specialty tax service whose mandate is to source, secure and support your business through the maze of government funding options. Specialties include SR&ED and other tax refund/credit programs. Visit FRED Group’s website or contact Fred at  email fhausmann@FREDgroup.ca

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What is a SR&ED claim?

By Fred Hausmann

PART 1

Why would you care what a SR&ED claim is as a business owner? How about getting 68 cents back on every dollar spent as a cheque from the government! You got it – it’s one of the best ways to help fund your company’s growth.

One of the most lucrative funding programs for businesses offered by the Canadian government is the Scientific Research and Experimental Development (SR&ED) tax program. More than $4 billion dollars is ear marked each year for the program.

The name “Scientific Research and Experimental Development” does sound a little intimidating but it really comes down to solving problems that have a technological component to them. The government did not want to call the program “Research and Development” (R&D) as they felt R&D could also mean solving problems through the “bumble and stumble” methodology, which they did not want to pay for.

The idea here is that you need to follow a “scientific” approach to solving the problem and not just run around like a chicken with its head cut off as the means to solving the problem. Now that’s not so hard is it? The government isn’t expecting you to make your employees wear white lab coats and behave like academic researchers – you just need to show that you followed a logical process in trying to resolve the issue.

It boils down to attempting to overcome a technological uncertainty, where overcoming that technological uncertainty is not readily known.  Wow, that was unclear but that’s part of the issue in claiming SR&ED! I can’t emphasize enough that there is a BIG GREY area as to what qualifies and what does not. The absolutely subjective things that the CRA looks at include:

• “what was readily known at the time?”
• “what exactly constitutes something being a technological uncertainty?”

Consequently, a lot of it comes down to “opinion” on the part of the CRA. What that means for you is you need to make sure you present the technological uncertainties and the technological limitations and barriers in the clearest possible manner. But that is a topic for different post. Watch tomorrow for what qualifies for SR&ED.

Fred Hausmann is the founder and senior managing director at the FRED Group Inc. a business development and specialty tax service whose mandate is to source, secure and support your business through the maze of government funding options. Specialties include SR&ED and other tax refund/credit programs. Visit FRED Group’s website or contact Fred at  email fhausmann@FREDgroup.ca .

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Technology entrepreneurship 101

By Andrew Maxwell

Everything you wanted to know about technology entrepreneurship but were afraid to ask!

In a recent meeting on campus at the University of Toronto, a colleague exclaimed that my “insights” into the differences between entrepreneurial success and failure were nothing new. He mentioned several academic papers at least 20 years old that made similar observations. He questioned why entrepreneurs would not already be aware of these insights.  I suggested that very few people involved in starting a business had the time to read such papers, which were often difficult to understand because they were targeted at an academic audience.

This provided my motivation for this blog…to provide technology entrepreneurs with an improved understanding of the venture creation process and insights into the causes of success and failure based on my own research and that of others. This with the intent of providing entrepreneurs ideas they can readily apply to their businesses.

Given the number of excellent blogs on technology entrepreneurship available from practioners, this approach allows me to provide some unique insights, based on my own observations in ventures in which I have participated. This is a role, for which I am well suited – as both entrepreneur and academic (with teaching and research experience). I am currently a partner in new venture that takes innovative technology to market (www.stratebrand.com). I teach in the MBiotech program at the University of Toronto (www.mbiotech.ca) and I am completing a Ph.D. in the management of technology at the University of Waterloo (www.innovationcentre.ca).

First, let’s start with an overview of the venture creation process and describe it in terms that are familiar to academics – but may be novel for practioners.

Venture creation is seen as an evolutionary process, where the successful entrepreneur develops a venture through a number of unique stages, each stage characterized by a range of different activities, with success a consequence of the right choices being made, along the way. This is seen as an evolutionary process because only a limited number of the most promising ventures make the transition.

An entrepreneur often finds it difficult to navigate this evolutionary process, consequently, he or she, will benefit from a better understanding of the specific factors of importance at a specific stage, which can affect the likelihood of the venture progressing to subsequent stages. Improved process understanding will help the entrepreneur face a number of challenges, focus his or her attention on those that are the most critical and discourage them from becoming distracted by less critical issues or those that should be considered at later stages in the process.

I focus on the issues facing technology entrepreneurs, as they are significantly more complex than those faced by non- technology entrepreneurs, who do not have to become involved with technology development issues.

Technology entrepreneurs not only have to identify and understand an initial market opportunity and build an organization to exploit it, they also have to understand the technology development process, either to develop it, or to exploit it in a new application. The need to develop technology creates a different set of requirements for success, often related to the need to expend initial resources on the technology itself, and to expend such resources in advance of revenues. Consequently, one of the key roles of the technology entrepreneur is to attract requisite partners for success, in advance of their ability to deliver solutions for customers. This requires them to develop a clear vision of the venture and share it with potential partners (employees, suppliers, investors and customers) in order to move the venture from the idea stage, to the point at which the concept becomes a business.

In my next blog, I will provide specific insights into six of these critical factors that entrepreneurs need to address in order to convince potential partners of the viability of the proposed venture. In the meantime, should you have a specific question about a challenge you face in your venture, and you think that the answer may be of general interest, I will be happy to try and answer it. Please email me at: amaxwell@innovationcentre.ca.

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.

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