HESA

Higher Education Strategy Associates

Tag Archives: Business

March 27

Losing Count

Stop me if you’ve heard this story before: Canada is not sufficiently innovative, and part of the reason is that we don’t spend enough on research.  It’s not that we don’t spend enough on *public* research; adjusted for GDP, we actually do above-average on that.  What pulls us down is in international comparisons corporate R & D.  Our narrow-minded, short-sighted, resource-obsessed business class spends far less on R&D than its equivalents in most other country, and that is what gives us such a low overall R&D spend.

Familiar?  It should be; it’s been standard cant in Canada for a couple of decades at least.  And it gets used to argue for two very specific things.  There’s the argument which basically says “look, if private R&D is terrible, we’ll just have to make it up on the public side, won’t we?”, and where else to spend but on university research?  (Universities Canada used to make this argument quite a bit, but not so much lately AFAIK).  Then there’s the argument that says: well, since under the linear model of innovation in which public “R” leads to private “D”, the problem must be that public “R” is too theoretical on insufficiently focussed on areas of national industrial strength – and what we really need to do is make research more applied/translational/whatever.

But what if that story is wrong?

Last year, the Impact Centre at the University of Toronto put out a little-noticed paper called Losing Count. It noted a major problem related to the collection and reporting of R&D.  Starting in 1997, Statistics Canada adopted a definition of Research and Development which aligned with Canada’s tax laws.  This makes perfect sense from a reporting point of view, because it reduces the reporting burden on big corporations (they can use the same data twice).  But from a measuring Canada against other countries perspective, it’s not so good, because it means the Canadian statistics are different from those in the rest of the world.

Specifically, Canada since 1997 has under-reported Business R&D in two ways.  First, it does not report any R&D in the social sciences and humanities.  All those other OECD countries are reporting research in business, financial management, psychology, information science, etc., but we are not.  Second, work that develops or improves materials, products and processes, but that draws on existing knowledge rather than new scientific or new technological advances is not counted as Research & Development in Canada but is counted elsewhere.

How big a problem is this?  Well, one problem is that literally every time the Canada Revenue Agency tightens eligibility for tax credits, reported business R&D falls.  As this has happened a number of times over the past two decades, it may well be that our declining business R&D figures are actually a function of stricter tax laws than they are of changing business activity.  As for the difference in absolute amount being measured, it’s impossible to say.  The authors of the study took a sample of ten companies (which they recognize as not being scientific in any way) and determined that if the broader, more OECD-consistent definition were used, spending on R&D salaries would rise by a factor of three.  If that were true across the board (it probably isn’t) it would shift Canada from being one of the world’s weakest business R&D performers to one of the best.

Still, even if this particular result is not generalizable, the study remains valuable for two reasons.  First, it underlines how tough it is for statistical agencies to capture data on something as fluid and amorphous as research and development in a sensible, simple way.  And second, precisely because data is so hard to collect, international comparisons are extremely hard to make.  National data can be off by a very wide factor simply because statistical agencies make slightly different decisions about to collect data efficiently.

The takeaway is this:  the next time someone tells a story about how innovation is being throttled by lack of business spending on research (compared to say, the US or Sweden), ask them if they’ve read Losing Ground.  Because while this study isn’t the last word on the subject, it poses questions that no one even vaguely serious about playing in the Innovation space should be able to ignore.

October 14

Universities and National Competitiveness

Ever since von Humboldt sold the Prussian Government on the idea that research universities were a tool with which to increase national power, they’ve been publicly funded to pursue precisely those ends.  The definition of “national power”, and the role universities are asked to play in developing it, has of course varied over time and by region.  Nowadays, we talk of power in terms of “national competitiveness”, and universities are supposed to play a role in ensuring that.  But even though competitiveness has been the watchword for going on two decades now, universities still struggle to determine how to fit into that agenda.

So what should they be doing?  To start, it’s important to think about what we mean when we say “national competitiveness”.  It’s not a straightforward concept because nations do not literally compete with one another.  When most people say this, they are really asking: “is our economy growing faster than others?” Or more narrowly, “are we attracting more foreign investment than others?”  And those things depend, effectively, on what happens inside firms.  If firms are financially healthy, then they are hiring, investing, and doing all the sorts of things that make economies hum.  So the big overarching question is: what can universities do to make firms financially healthier?

(Before anyone has conniptions, I’m not saying that this is the only thing universities are for.  I’m saying that if one wants to argue for universities on the basis of increasing national competitiveness, this is the logical conclusion of that argument.)

To simplify things a bit, consider that universities have two sets of outputs: graduates and ideas.  The way graduates help firms is by being more productive.  What that means in practice varies by industry, but in most white-collar jobs it means some combination of: i) being a fast learner, ii) being a good communicator, iii) being able to deal with ambiguity, iv) being able to make decisions without bothering the boss every few minutes (note: public sector employers like this stuff too).  If you’re running a university, or a faculty, or a department, you need to ask yourself: how do our teachers and our curriculum work towards giving students those skills?

The ideas part of this is a bit trickier.  What governments tend to focus on are ideas that lead to patents and licences: notions that are excludable, and can be given or sold to business in ways that allow them to make new products and develop new lines of business.  But the problem is that firm-strengthening ideas pass between academia and firms in a variety of ways.  Silicon Valley, for instance, would never have become what it did if Stanford had focussed on patents and licenses.  Rather, it arose because Stanford embraced the sharing of equipment and ideas, and of professors and entrepreneurs working with each other.

So if you’re running a university the question really should be, “what am I doing to make sure that ideas are flowing between universities and firms faster and more freely?”  That’s not an exercise in increasing publication counts, it’s an exercise in getting people to collaborate with those outside academia.

Where things get even trickier is with the fact that, in some cases, the conduit for sending ideas back and forth between universities and firms is students and graduates themselves.  This is most obviously true in the case of co-op students (which former Waterloo President Jim Downey calls the “human bridge” between universities and firms); but it’s also true in many professions, and even in business, where ideas taught in the classroom eventually seep into everyday practice, as graduates who’ve learned new ways of doing things flood the labour force.

(One area where more of this is desperately needed is in business.  Canadian business on the whole is simply not attuned enough to international markets, which is why there is always pressure to maintain a low dollar so we can pursue the lazy strategy of selling to the Americans.  A greater focus on developing markets in Canadian business schools has to be part of any national competitiveness agenda.)

Again, I’m not arguing that this is a university’s sole purpose.  Arts, culture, and the spirit of free inquiry are all central to university identities.  But if universities want to claim a significant share of public monies (equal to 1% of GDP, last I checked, and that’s not including any research money) on the basis of making the country (or the province) more competitive, these are the kinds of agendas that need to be in play.

January 30

The Case of Southwestern Ontario

Yesterday I talked about ways universities can generate economic growth, and I promised to offer an example from Southwestern Ontario.

Southwestern Ontario has been in the news a lot recently due to its deteriorating economy, not least through the efforts of Western professor Mike Moffatt.  More recently, the Globe’s Adam Radwanski penned a feature article on what southwestern Ontario can learn from such economic revivals as has happened in the US rust belt.

Radwanski’s argument is a long one, but the bit relevant to post-secondary education just cites the examples of Pittsburgh and Akron, and says that universities should work more closely with industry to create new hi-tech centres of production.  Right off the bat, I think we can discard the Pittsburgh example.  For one thing, the city is in fact continuing to hemorrhage manufacturing jobs (3,000 last year alone), and for a second, the two institutions that have done the most to power the local economy are Carnegie Mellon (private) and Pittsburgh (semi-private), with a combined endowment of $5.6 billion.  Last I checked, the combined total for Western and Windsor was around $700 million.

Endowments matter because they allow institutions to take risks.  It’s probably not a coincidence that if you look at major US tech and innovation hubs where universities have served as a catalyst (e.g. Silicon Valley, Route 150 in Boston), the institutions at the heart are all private, and hence not worried about legislative scrutiny.  The only exception to this rule – UT Austin – just happens to be the world’s second-best endowed public university ($6 billion in assets, behind Michigan at $8 billion).

Ah, you say – but what about Akron?  That’s a public university, and it had a big role in helping the local rubber industry transition into a centre of excellence for polymers.  And yes, Akron is actually an excellent example, because it has a very close Ontario counterpart; namely, the University of Waterloo.

These days, people associate Waterloo with co-op, engineering, and integration with the local hi-tech economy.  But it’s worth remembering that when Waterloo started out in the late 1950s, the hi-tech economy didn’t exist.  Back then, Waterloo’s main industry – like Akron’s – was tires, and for the first decade or so of its existence, Waterloo was all about working with the tire industry.

Could Waterloo have worked harder to “save” the local tire industry, as UAkron did in Ohio?  Possibly.  But one big thing Akron had going for it was the fact that Goodyear had its corporate headquarters there.  Companies tend to do R&D close to home.  Even if Waterloo had tried some of the stuff Akron did, there’s no guarantee it would have had the same results because at the end of the day, Waterloo was a branch plant economy.  That matters.

Instead, of course, Waterloo did something better: it invented a new local industry essentially from scratch.  This did not occur by “working with industry” as we traditionally think about it.  It happened by giving a lot of people advanced training in a particular area, letting them create and spin-out companies, and then wait for the local economy to develop the deep pool of managerial skills and venture capital sources required to take products from concept to market.

(The importance of this last bit is insufficiently appreciated.  Take UBC, one of the country’s leaders in technology transfer: its life sciences spin-offs had a miserable time in the 80s and 90s because back then the only thing the local VCs and entrepreneurs understood was how to cut down trees and dig stuff out of the ground.  There’s a domestic life-sciences business ecology in Vancouver now, but it took 20 years to develop the required knowledge and skills.)

So, could Western University play a role like U Akron or U Waterloo?  Yes.  But it would have to bet on an industry or two (and it’s not clear which ones would make most sense).  And for the moment it is unclear that they have the desire, the cash, or the political backing to do so.  And even if they did, results would likely take a decade or more to show.  It’s a fix, but not a quick one.

October 23

Where the Questions Are

I had planned to continue on today with my series about operating budgets by taking a look at some scenarios for Central Canada, but I’ve been on the east coast for work the past couple days, and so that post will have to wait.  We’ll get back to it shortly, I promise.  But for now, let me turn to something I’ve been thinking about lately.

One of the maddening things about many discussions that concern higher education and business is the crudeness of many popular views on their relationship.  Mostly, we hear about how business’ role is to “contribute” to higher education, either via taxes, or philanthropy, or both (depending on where you are on the political spectrum).  Often times, the role of business is to hire “our” graduates (and if that’s not happening then let the agonized introspection begin).

And while those things are all true, what these analyses actually miss is the true role of business, particularly with respect to science: it’s a huge, incomparable reservoir of questions to be answered, and problems to be solved.  Of course, people get this at the level of applied research – by definition, when companies engage with higher education on applied research, it’s to solve specific problems – but they have trouble understanding when it comes to “pure” research.  Partly, that’s due to rhetorical confusion – the wording of “pure” research (a rhetorical device of Vannevar Bush designed to keep money flowing to universities after World War II) implies that interaction between scientists and pretty much anyone else will “contaminate” research.

But a quick history of 20th century science will show you that this is nonsense.  Much of Einstein’s early work was hugely influenced by being immersed in commercial technology at the Swiss patent office.  Quantum physics was an accidental discovery made by German scientists who were trying to design more accurate instruments to measure very small weights.  The Manhattan Project wasn’t about meeting commercial needs, but as research goes, it’s about as applied as it gets.  Etc., etc.

The point here is that there are parts of commercial science that are up banging against the frontiers of the unknown just as much as university science is: just think of what was discovered at Bell Labs, or what Craig Ventner has accomplished.  It’s where the rubber hits the road: where the most advanced academic science gets put into practice and tested in real-world conditions.  Under commercial pressure, commercial science looks for every little advantage when learning how to cure disease, design better buildings, and develop new technology.

Even Vannevar Bush didn’t believe “pure” research happened in a vacuum.  Indeed, the justification for “pure” research is always that someone, somewhere, will find an application for it.  If you don’t have an inkling of where your “pure” research findings might actually be applied someday, you probably aren’t conducting your “pure” research in a way that’s very effective, because you’re not asking the right questions.

And this is the real reason universities need to engage with industry: it’s where the best questions are.  And you’re not going to get top-notch research without top-notch questions.

December 04

Hard Thinking about Soft Skills

So, as I predicted a few days back, Canadian Council of Chief Executives’ CEO, John Manley, gave a speech to the Canadian Club (available here) in which he challenged the conventional wisdom about skills crises – which is presumably why it got zero press coverage.  He began by making the following points, based on a survey conducted of 100 major Canadian employers:

  • Skills shoratges are a problem, but only 11% of employers said it was a big problem (see graph below);
  • The shortages are in IT, Engineering, and skilled trades.  Scientists and researchers are the easiest positions to hire;
  • When evaluating hires, industry-specific knowledge is only the 6th-most important consideration, behind people skills, communication skills, problem-solving skills, analytical abilities, and leadership skills.

Figure 1. From the Standpoint of Your Company, How Much of a Problem are Skills Shortages?

 

 

 

 

 

 

 

 

 

 

 

 

At this point, however, Manley’s speech took a very weird turn.  Having laid out the case for soft skills being the crux of the skills shortage for many companies, he veered into a discussion of Canada’s increasingly mediocre results on PISA/PIAAC literacy and numeracy tests, and why Canada needs to improve.  Though it’s hard to disagree with the call for better skills in reading and math, it’s also not immediately obvious how either has a whole lot to do with, say, leadership or people skills.

(Canada seems to suffer from a strange inability to effectively link problems to solutions in education.  Need soft skills?  More math classes!  Need a few more pipefitters in Alberta?  Canada Jobs Grant!  It’s almost like a form of policy Tourette’s or something – when presented with a skill-related problem, we blurt out whatever’s already on our mind, rather than work out some kind of reasoned response.)

Anyways, all of this aside – it occurred to me that there’s an enormous branding opportunity for an institution that actually decided to put “soft skills” at the core of its curriculum.  Pretty much all of them, save leadership, can be taught through something not a million miles from an existing curricula – and even that could be incorporated without too much difficulty.

Certainly, to be credible you’d need to make a full-scale curriculum revamp, which would be neither simple nor quick; but think of the upside for a university or college: a school that put leadership and communication at the core of its curriculum would be offering something that is both in line with the traditional liberal arts (rhetoric was one of the seven liberal arts, after all) but that is also fundamentally in line with what today’s employers want.  It would give a school an interesting sales pitch both to employers and students.

I’m not sure every school would want to do it, but for small-to-medium size schools with enrolment challenges (e.g. Trent, Acadia, St. Thomas), “Soft Skills U” would be an interesting niche to try to occupy – if it were done seriously, and not simply slapping a label on what the institution already does.

November 25

Can Business Speak Up, Please?

This Thursday, the Canadian Council of Chief Executives (CCCE) CEO, John Manley, is speaking at the Canadian Club in Toronto on the subject of “Strengthening Canada’s Human Capital Advantage”.  Now, you may roll your eyes at this and think, “oh God, not another welders vs. BAs talk”.  But it’s possible that this is going to be a useful, serious event.  Although “everybody knows” that the business community believes there’s a critical skills gap, I don’t think business as yet has actually spoken very much on the subject.

Oh sure, there’s no shortage of people making a case on behalf of business: Jason Kenney, CIBC’s Benjamin Tal, the Conference Board’s Michael Bloom – all of whom, in one way or another, are saying, “more welders, fewer BAs”.  But none of these are actual business people.  We used to have something in Canada called the Corporate Higher Education Forum (CHEF), which served an interlocutor function on education policy, but it died of apathy almost 15 years ago.  Nowadays, you’re a lot more likely to hear policy entrepreneurs like Bloom talking than you are actual business leaders.  And that’s less helpful.

I have no doubt that resource-extraction industries in Western Canada are in dire need of people with a few very specific technical skills, like welding.  But they’re a tiny fraction of business in this country – 2 or 3 per cent at most.  What about small business?  What about manufacturing and services?  Heck, what about government itself?  What skills do they all want, and in what quantities? We have no idea.

We have a pretty good system in Canada for getting employer feedback to individual college and university programs, but no way of co-ordinating that feedback at a provincial or national level so that governments can understand the aggregate needs of the economy as a whole.  At the moment it seems to be that the squeakiest wheel gets the grease, which is a terrible way to develop policy.  So, the fact that CCCE is getting involved in the skills field is almost certainly a good thing, because its members’ human resource needs are broader than the trades, and thus they’re likelier to provide a more balanced picture.

My guess is that if you ask business leaders the right question, they’ll say that the issue isn’t the number of skilled tradespeople, but about skills levels right across the board of all new graduates.  Such an answer, if it is ever forthcoming, would move the conversation from one of welders vs. BAs  to one of learning outcomes in every post-secondary program.  In some ways, it is a more difficult debate.  But it’s far preferable to the infantile discussion we’re having now.

May 24

The Best Idea I’ve Seen All Year

I travel around a fair bit, and I get to see a lot of interesting stuff that’s going on at universities in Canada, and abroad.  People often ask me: what’s the best thing you’ve seen recently?  The answer this year, hands down, is UBC’s Start-up Services Voucher.

Now, UBC’s been a leader in commercialization and spin-off companies for at least twenty years.  They caught a lot of attention when they created a $10 million Seed Fund, capitalized by donations from alumni and the BC Innovation Council, which was designed to promote entrepreneurship by making early stage, pre-seed investments in start-ups founded by students or recent alumni.

But more quietly, the university has done something else which I think is much more interesting: about two years ago, it created the Start-up Services Voucher.  If you’re a UBC student, staff, or faculty member, and want to start a business, you’re eligible for up to $5000 worth of business services (though, in practice, most use far less).  And unlike virtually every other entrepreneurship system in Canadian PSE, there are no requirements whatsoever with respect to using UBC technology, nor is there any stipulation that the business be some kind of technology enterprise.  Want to open a flower shop?  This fund’s for you.

There’s no catch.  UBC certainly isn’t interested in equity, for instance.  All they want is recognition.  All companies that move through the program must display a logo declaring themselves as “UBC-affiliated companies” for a period of five years.

How brilliant is that?

First, it creates a great, dense network between an institution and small businesses in its community (which will no doubt pay off philanthropically, down the road).  Second of all, it allows the institution to get a much better handle on the post-graduation activities of its entrepreneurs, and hence allows UBC to highlight its larger role in job creation and innovation in British Columbia.  Frankly, UBC could pay for this out of the Government Relations budget, and it would make complete sense – how great will it be to be able to walk into an MLA’s office and rattle off the names of all the new, “UBC-affiliated” businesses that have started-up in his/her riding?

Students learn a lot in PSE, and not just inside the classroom.  When they start their own businesses, it’s the ultimate expression of the mix of hard, soft, and creative skills that they’ve gained at school, and are now applying in innovative ways.  It’s a huge, practical impact that universities and colleges have on their communities that no one’s ever been able to quantify or publicize.

Until now.  Bravo, UBC.  A great idea that deserves more attention – and some imitators.

February 07

Paying it Forward in Tech Transfer

An interesting item from my hometown, last week: the University of Manitoba is starting to license technology for free.

I exaggerate slightly.  What they appear to be doing is issuing technology, licensed for a percentage of the future net revenue, rather than for an up-front fee; the cost only kicks-in once the company starts making money.  U of M describes this arrangement as unique; but while this specific legal arrangement may be so, it’s actually part of a broader and under-reported trend taking hold in Tech Transfer.

When Tech Transfer offices opened at Canadian universities in the 80s and 90s, it was almost always with an American model in mind.  Following the adoption of the Bayh-Dole Act of 1980, and the astonishing success of university spin-offs like Genentech, universities everywhere started to believe that their own laboratories held untold riches, if only they could work with companies to commercialize them.

But commercializing technology is tough.  Really big companies who could go to town with some university-developed knowledge have their own development processes – it takes a discovery of exceptional magnitude to attract their attention, and to get them interested in dealing with all the hassles of patenting and licensing.  Smaller companies are easier to attract because they don’t have big R&D programs of their own, but they frequently don’t have the scientific, technical, or marketing wherewithal to get a product successfully to market.

To get big returns from a patent portfolio requires a local innovation ecosystem, with large numbers of entrepreneurs who have experience in science and technology firms, and a venture capital industry which understands S&T.  A number of US cities boast that kind of environment; in Canada, it’s a lot harder to find communities that fit the bill: outside Toronto, Waterloo, and Vancouver they’re in awfully short supply.  This is one of the main reasons Canadian attempts at commercialization over the past decade have been disappointing.

So, universities really have three choices: they can get out of the patent/licensing game, they can resign themselves to meager returns, or they can go out and create these communities themselves.  This last option is, in a sense, what places like UBC have done over the past couple of decades.  It’s a strategy that requires paying it forward (or, in newer management-speak, it means engaging in more “invisible handshakes”, as per Meyer & Kirby’s new book, Standing on the Sun, from HBR) – basically, doing whatever is necessary to create that external business community.  If that means foregoing profits in the short term, so be it; in the long run, it’s worth it.

So good-on Manitoba.  It’ll still take decades to reap the benefits, but there’s no time to start like the present.