Communitech photo: Trish Crompton View from the ‘Loo: Kevin Lynch on what Canada can learn from Waterloo Region Anthony Reinhart June 5, 2014 Communitech, View from the ‘Loo Photo: Kevin Lynch cited Waterloo Region’s innovative culture as an example for Canada at Communitech’s Tech Leadership Conference on May 29. The higher the perch, the better the view – or is it? Throughout his career, Kevin Lynch has occupied such lofty positions as Clerk of the Privy Council (Canada’s most senior civil servant), deputy minister of Finance, deputy minister of Industry, executive director with the International Monetary Fund, and Vice-Chair of the BMO Financial Group. All of these roles have given him a high-altitude perspective on what Canada needs to do to compete in a global economy; namely, innovate. And yet, Lynch is not fully convinced that this country’s business, government and academic leaders have a clear enough view of the importance of innovation to our future. Lynch, who also chairs the University of Waterloo’s board of governors and serves on the board of the Perimeter Institute, took part in a high-level discussion at Communitech’s Tech Leadership Conference on May 29. The conversation, moderated by CTV journalist (and Communitech board member) Kevin Newman, saw Lynch join Dr. Anita Sands and Geoffrey Moore to discuss what Canada needs to do to grow more successful companies. During the talk, Lynch pointed to the prevalence of a local rather than global mindset among entrepreneurs in Canada, and how our resource-dependent economy risks obscuring the value of innovation. When Newman asked what incentives exist for Canadians to scale their mid-sized, locally focused companies into global operations, Lynch suggested “an environment that actually encourages being ambitious. I don’t think you start with pay and performance; you start with the pride of building something, achieving something, creating something . . . and I think Waterloo builds that better into the community than most places in Canada.” I sat down with Lynch immediately afterward to chat further about how Canada can ramp up innovation, and how Waterloo Region can help lead the way. Q – How do we move Canada from its resource-economy mindset to one based on innovation? A – I think it’s crucial, and I think it takes two sides. It takes the resource side, but it also takes the technology side, because the resource side kind of knows what it has and knows its customers, but it doesn’t necessarily know how to do the transformation, or what’s possible. And the technology side knows how to do that, but it needs input about where to take it. So how do we take all the skills here in the Waterloo Region, for example, and combine them with agriculture to deliver high-value-added, high-profit-margin agricultural products into China, which is going to be the world’s largest consumer of agricultural products soon? I don’t think we’ve put our technology capacity together with our resource base in an interactive way, in the way we can. We’ve done it here in the IT space, but we haven’t really done it in the resource space, and yet, that’s relatively what we have more of as an industrial base in the country. Q – So we should tie technology and natural resources together rather than treat them as separate things? A – Yes. They’re almost two solitudes right now, where the value added, the innovation, is in putting them together and finding new products. An example in Canada, in the oil and gas sector, is horizontal drilling. It actually is a Canadian invention; it came out of partnerships between the Alberta universities and the oil [sector] in the ‘80s, because our wells were losing pressure. Horizontal drilling was a technology solution to a really, really traditional resource, and we’ve been able to export it and Canadian oil services around the world. How many more things can we do like that? Q – You’ve spent time at the top of some of Canada’s largest institutions. Do you think the view from up there is what it needs to be to bring about these changes? Do people in the upper reaches of government and banking, for example, understand what needs to be done? A – I actually think innovation is the key driver of competitiveness. If we are a high-wage, high-standard-of-living, moderate-scale economy, then we can’t compete and succeed on low cost. We don’t want to, but we can’t, either. And so, the only way we can be successful is to be highly innovative – continually changing the product, or the way it’s delivered, or its characteristics, faster than competitors in lower-wage economies. Innovation to me is the primary driver in an economy like ours, and I’m not sure in our leadership – whether it’s business, whether it’s government, whether it’s even universities – that we understand how much the leadership has to be focused on innovation. I think we still think that innovation is something that others do, and serendipity is not an innovation strategy. Innovation has got to be baked into what you do, and I think Geoffrey (Moore) was taking us through a bit of that, but I think it’s almost cultural. We have to understand that competitiveness in the next couple of decades for every Canadian business is going to be about how they are innovating their product, or the market, or how they deliver that product. Q – What has made you so personally passionate about this? A – I’ve been worried about Canada’s productivity challenges for quite a period of time. Our productivity levels are 80 per cent of those in the United States. Why in the world are they 80 per cent of those in the United States? We’re as well educated; we’ve got the same technology capacity. So, it’s actually how we put those factors of production together that’s not as productive as it could be, and the costs to us are enormous. It costs us in terms of our jobs, in terms of our growth, in terms of our standard of living, in terms of our public services. It starts with that productivity gap, and if we’re going to close it, we’re going to close it not by cutting costs, but actually by innovating in products and services. So for me, innovation is the driver to make Canadian business more productive. Q – You’ve served with a number of organizations with Waterloo Region connections. What’s your favorite Waterloo story? A – My favourite Waterloo story is just how everybody here feels like they have collective accountability for the success of the community, whether you’re a retired businessperson, whether you’re a student, whether you’re a professor. There’s a degree of community involvement in success that I think is really pretty unique, and that, to me, is the magic sauce of the place. It’s the angel investors, it’s the mentorship, it’s the professors at the university, it’s the firms doing the co-op, it’s 700 people coming out for an event like this. It’s unique across the country. I don’t think it’s everywhere in the United States, as well. It’s pretty unique in the U.S. to Silicon Valley, Boston, perhaps a bit around Chicago. But we should actually look at the best in the world and ask ourselves, ‘Why can’t we be even a little bit better than that?’ Then, how do we actually use Waterloo as a little bit of an example to do it elsewhere across the country? We talk about a partnership between Waterloo and Toronto. Why don’t we actually use Waterloo as a model in Saskatoon, Calgary, Vancouver, Halifax, Sherbrooke, and actually build that ecosystem of incubators and communities? Innovation is so personal; it’s so focused that I’m not sure you’re going to get it top-down, but I think you can connect communities of interest across the country and do it. Q – Anything you’d like to add? A – To be totally honest, every time I come to a Communitech or community event in Waterloo, you feel that kind of energy, that every firm in this room thinks they can take on the world and win. I think that’s great. That’s the ambition we should have as a country. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.