Vanguard Magazine

www.vanguardcanada.com OCTOBER/NOVEMBER 2018 35 DeFenCe innoVaTion The survey found that more than 660 firms generated sales revenue exceeding $10 billion for defence goods and services in 2016, up 9 per cent from 2014. These firms contributed $6.2 billion in annual gross domestic product (GDP), and some 60,000 jobs to the Canadian economy. Those numbers are impressive enough, yet it's the quality of that business activity that is perhaps the most important finding. Historically, most sectors of Canada's economy have fared poorly relative to peer countries in terms of in-house investment in R&D, a crucial measure of innovation. In a report commissioned by the Canadian gov- ernment in 2009 titled Innovation Canada: A Call to Action, a panel of experts sounded an alarm that business R&D had been fall- ing in Canada since the 2000s. That trou- bling trend is still seen today. The defence industry, however, is a bright spot in this landscape, with R&D intensi- ty — as measured by the ratio of in-house R&D expenditures to GDP — of 14 per cent. That's 4.5 times that of Canada's manufacturing sector as a whole. Understanding that R&D has a direct correlation to a sector's ability to inno- vate, it is encouraging that $400 million in R&D spending took place in the defence industry in 2016. The majority of this money came from companies rather than government, which is noteworthy since industry-funded R&D is more likely to be commercialized into products and services for the marketplace. Governments are, however, certainly tak- ing notice of the sector's enormous R&D potential. Defence-sector companies are involved in three of Ottawa's five winning innova- tion "superclusters." And this summer, the federal government and the government of Quebec announced they would partner with Montreal-based CAE to develop a new gen- eration of flight simulators and training ser- vices for the aviation, defence and healthcare sectors. With close to $200 million in public funding, this $1billion project is expected to generate 400 new jobs across Canada. A collaborative approach State of Canada's Defence Industry also shows that defence firms are actively en- gaged in collaborative R&D with a variety of partners, again not something that is common in Canada's private sector. Firms representing close to 60 per cent of the defence industry's sales worked with sup- pliers, academia and government on R&D. SSE's new Innovation for Defence Ex- cellence and Security (IDEaS) Program is a welcome example of this type of collabo- ration. It will allocate $1.6 billion over 20 years to innovative solutions that address Canada's defence and security challenges. Sixteen initial challenges have been identi- fied and start-ups, small- and medium-sized enterprises, corporations and academics have been invited to apply. More than 600 have submitted proposals, and the first con- tracts were awarded in August. Another important barometer of an in- dustry's innovative nature is the degree to which it employs people in science, tech- nology, engineering and mathematics (the so-called "STEM" occupations). The de- fence industry is rich in STEM, with some 34 per cent of employees working in these fields — three times the overall manufactur- ing sector. The labour composition of the industry and its growth potential presents a significant opportunity for future STEM graduates. Innovation coming from an industry that is robust in R&D and STEM, not sur- prisingly, leads to export competitiveness. Canada's defence industry derives about 60 per cent of its revenue from exports. This performance is even more impres- sive considering that Canada has one of the most stringent defence export con- trol regimes in the world, and that many countries protect their domestic defence markets from foreign competition. Main- taining predictability in Canadian defence exports will undoubtedly be a critical fac- tor for the sector's future success. At CANSEC 2018, Dominic Barton, Global Managing Partner at McKinsey & Company, and Chair of the Minister of Finance's Advisory Council on Eco- nomic Growth, spoke about defence and the Canadian growth agenda. He pointed to the State of Canada's Defence Industry statistics on employment, GDP, R&D in- tensity, STEM talent and exports as strong evidence that the sector can play an im- portant role in jolting economic growth in Canada. Barton recognized nine innovation op- portunities for the sector — from cyber security to hypersonics —and noted that collaboration throughout the innovation ecosystem, between traditional and new non-traditional players, will be essential to realizing the sector's growth potential. In addition to the IDEaS program, Bar- ton highlighted Innovation Solutions Can- ada, which has committed $100 million across 20 federal departments to support innovation through strategic procurement. The people driving change In sum, the State of Canada's Defence In- dustry confirms what many in the industry have known intuitively for years: that Cana- da boasts a richly innovative defence sector that contributes to economic growth. But beyond the hard data, there are plenty of personal stories of innovation and ideas that bring these numbers to life. As an industry association, CADSI hears these stories all the time. In fact, they inspired our My North, My Home campaign. I want to briefly introduce two people showcased in the campaign to drive home the point that powerful innovation is hap- pening across the country and across spe- cializations. In Richmond, B.C., Alan Thompson, MDA's Chief Systems Engineer for Space Missions, is working with his team to bring the RADARSAT Constellation Mission (RCM) into orbit to capture wide-area im- agery of Earth. Government and defence organizations rely on this information to better predict natural disasters and monitor climate change, among other applications. In Kitchener, ON, Sam Macdonald, President of Deep Trekker, is building un- derwater remotely operated vehicles for use in commercial salvage, underwater dis- covery, submerged infrastructure monitor- ing and aquaculture. The Canadian Forces also use this technology to combat under- water warfare. Thompson and Macdonald are just two of the 60,000 people in Canada's defence industry developing new, high-tech solu- tions with wide-reaching benefits, particu- larly in Canada's Arctic. In the final analysis, the tens of billions of dollars that will be spent on the recapitaliza- tion of the Canadian Armed Forces over the next decade present a once-in-a-generation opportunity to grow one of the most in- novative industries in Canada. The linkage SSE makes between military recapitaliza- tion and the government's broader inno- vation agenda signals that the government understands this opportunity, and we are already seeing exciting developments that are cause for optimism. Christyn Cianfarani is the President of the Canadian Association of Defence and Secu- rity Industries.

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