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Why superclusters may be doomed to failure

The federal government's latest innovation initiative – in which $950-million is up for grabs for three to five superclusters – contains a mix of new and old thinking. The focus on sectors is new. So is the fact that these entities are to be industry-led. Unfortunately, an old paradigm is still driving it.

For decades, politicians and pundits have been decrying the relatively poor standing Canada holds among OECD countries in rankings of R&D spending as a percentage of GDP (GERD/GDP). While our higher education spending on R&D (HERD) is among the highest, our business expenditure on R&D (BERD) is among the lowest. So, the policy mantra is "Canadian business should spend more on R&D." Hundreds of programs exist to get Canadian companies to up their R&D game – and if the superclusters initiative goes down the same path, we're in big trouble.

Urging Canada's chief executives to spend more on R&D is exactly the same as telling people with lower income to buy more luxury goods to improve their station. Spending precious dollars on R&D doesn't automatically help a firm succeed – unless it has customers with a need that requires a new product or service that they would gladly buy.

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Canada's real problem is not about too little research. It's cultural. Too few of our tech entrepreneurs understand commerce. They work within a flawed paradigm: that success in the knowledge-based economy is driven by research and ideas that are commercialized into winning products or services. Call this the "commercialization paradigm." This belief is perpetuated by academic institutions, which are in the research and ideas business. They want us to keep funding them to do what they like and hope that someone else will find useful things to do with their ideas and research results. (There are, of course, exemplary exceptions.)

The reality is the exact reverse of the commercialization paradigm. Success in the knowledge-based economy is driven by identifying customer needs and finding solutions that meet those needs better than competitors can do. Call this the "commerce paradigm." Both paradigms depend on excellent research and ideas. The difference is that in the commerce paradigm, understanding customers' needs and seeking cost-effective solutions leads while research and ideas are part of what follows.

The "mind to market" mentality in Canada and the belief that research is what drives knowledge-based commerce are holding us back. The words "sales" and "customer" rarely come up in Canadian curricula or in innovation policy documents and speeches.

Canada's research-focused and commerce-averse culture affects everything. Our graduates go on to work in industry and government believing that research and ideas drive knowledge-based commerce. Our entrepreneurs focus on technology and financing and forget about customers. Canadian innovation policy tries to connect Canadian industry with academia, where supposedly all the important research and ideas come from, and encourages business to do more R&D to commercialize the academic research.

Unfortunately, the commercialization paradigm still permeates the superclusters initiative. The government talks about academic-industry collaboration, encouraging more spending on R&D and commercialization of research. Government speeches and documents mention value chains and revenue, but hardly refer to customers, solutions or sales. Universities and intermediary organizations are drafting many of the proposals and industry players are simply being asked to pledge cash and in-kind contributions. Academic institutions are looking at these entities as new funding agencies for their research.

If these new organizations are truly run by industry to develop solutions for the world in niches where Canada is strong, then this new initiative may "move the GDP needle in a positive direction," as one Finance Canada official highlighted as the program's goal. If, however, these superclusters are hi-jacked by the research community to fund what they've always done, then it will be a waste of taxpayers' hard-earned money.

Jeffrey Crelinsten is President of The Impact Group and Senior Research Fellow at the Munk School of Global Affairs

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