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Infrastructure of Rural Vitality:Th R l f I ti I f t tThe Role of Innovation Infrastructure
A Presentation to:A Presentation to:
“Rural Vitality – From Surviving to Thriving –
An Eastern Ontario Perspective”An Eastern Ontario Perspectiveby
Kathryn Wood President and CEOKathryn Wood, President and CEO,
Natural Capital Resources Inc.
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Role of Innovation InfrastructureRole of Innovation Infrastructure
• What is infrastructure?What is infrastructure?
• What is innovation?
• What is innovation infrastructure?What is innovation infrastructure?
• Why does it matter?
• Are there myths about rural areas that skew• Are there myths about rural areas that skew infrastructure decision‐making?
• What does innovation infrastructure look like inWhat does innovation infrastructure look like in Eastern Ontario?
• What could we do to enhance it?What could we do to enhance it?
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What Is Infrastructure?What Is Infrastructure?
Generic Definition: network of assets "where the system as a ywhole is intended to be maintained indefinitely at a specified standard of service by the continuing replacement and refurbishment of its components” [1]refurbishment of its components [1]
For economic purposes, definition can be broadened to: p p ,“structural elements of an economy which allow for production of goods and services without themselves being part of the production process” [2]part of the production process . [2]
[1] New Zealand Asset Management Steering Group
[2] Adapted from Wikipedia http://en.wikipedia.org/wiki/Infrastructure
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What Is Innovation?What Is Innovation?Definition: The process of creating new products, services,
business models processes and markets[1]business models, processes and markets[1]
• In thinking, in things, in processes or services
• Radical or incremental changes, especially recombinations ofRadical or incremental changes, especially recombinations of pre‐existing elements
• Leads to significant positive change, increase in value
• Implication: actually gets out of the “lab”/our brain and into society/economy
• Implication: innovation is rarely a solitary pursuit• Implication: innovation is rarely a solitary pursuit
[1] Adapted from Fast Innovation, by Michael George, 2005
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What Is Innovation?What Is Innovation?“The pursuit of innovation changes dramatically when the goal shifts from invention to inventivewhen the goal shifts from invention to inventive recombination, from pushing people to think outside of the box to helping them think in other boxes…. The recombinant process is behind most innovations, where existing technologies‐‐‐as combinations of people, ideas, and objects‐‐‐arecombinations of people, ideas, and objects are disassembled and reassembled in ways that spawn revolutions…”
A d H d A i t P f f T h l M tAndrew Hargadon, Associate Professor of Technology Management,University of California, Davis,
in How Breakthroughs Happen: The Surprising Truth about How Companies InnovateThe Surprising Truth about How Companies Innovate
Harvard Business School Press, 20035
What is Innovation Infrastructure?What is Innovation Infrastructure?Definition: Human and organizational elements of a society or
economy that spark or advance new ideas that lead to someeconomy that spark or advance new ideas that lead to some measure of social or economic prosperity:
• Size, diversity and skill levels of work force• Educational and research‐intensive organizations• Collaborative organizations – networks, associations for
business industries sectorsbusiness, industries, sectors• Collaborative facilities – multi‐tenant facilities, innovation
parksPl i l d l h i li• Players in related value chains – suppliers, customers
• Players in broader business environment ‐ supporting services• Pools of investment capital (private and public)Pools of investment capital (private and public)• Regulatory regimes.
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Why Does This Infrastructure Matter?Why Does This Infrastructure Matter?
• Enables critical mass of resources (human, financial, physical) to come together around an idea or opportunity– Network, cluster and other collaboration concepts require it
• Enables shared risk• Enables shared risk– Innovators don’t have to “sell the farm” to test an idea
• Allows cost reduction for early‐stage activities– Infrastructure “built” for one purpose can often be used for another
• Can accelerate speed to market– Access to experience enables innovators to avoid mistakes, overcomeAccess to experience enables innovators to avoid mistakes, overcome
hurdles and understand real value of their work
I li ti th b f i ti i f t t iImplication: the presence or absence of innovation infrastructure is often the gatekeeper for success in rural areas.
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Why Does This Infrastructure Matter?Why Does This Infrastructure Matter?
"Most communities couldn't viably exist without certain things ‐ a school, small businesses, a post office.” [1]
“Small isolated rural communities are reliant on the slowSmall, isolated rural communities are reliant on the slow building of networks and local knowledge.” [2]
"L ki t th i bilit f l iti"Looking at the viability of rural communities serves as an indicator of the broader health of society… rural communities are our canaries, you could say.” [3]
Debra Davidson, Associate Professor, Rural Economy and Renewable Resources, University of Alberta, 2006
[1] http://www expressnews ualberta ca/article cfm?id=7397[1] http://www.expressnews.ualberta.ca/article.cfm?id 7397[2] Canadian Geographic, December, 2006
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Myths That Skew Decision‐Making:Myths That Skew Decision Making:
Myths that skew infrastructure decision‐making:y s a s e as uc u e dec s o a g
1. Rural = agriculture alone
2. Rural = low tech
3. Rural = perennial drain on the rest of economy/society
4. Rural = no growth
5. Rural = not entrepreneurial
6. Looking backward is a good way to plan our collective future
7. A per capita formula is a good allocation mechanism.
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What Does It Look Like ?in Eastern Ontario?
REDDI database indicator of sector “clusters”:Location Quotient Criteria (Index of Intensity of Employment in Area Compared to Province ‐ Place of Work)
Eastern Ontario Counties
High LQ for Agriculture 11High LQ for Agriculture 11
High LQ for Accomm., Food and BeverageHigh & Medium LQ for Manufacturing
88
High LQ for Logging and Forestry 7
High LQ for Health and Social ServicesHi h LQ f Ed ti l S i
54High LQ for Educational Services
High LQ for Construction44
Low LQ for Finance and Insurance 13
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Low LQ for Finance and Insurance 13
Low LQ for Business Service Industries 13
What Does It Look Like ?in Eastern Ontario?
Percentage of Low Income Persons
20 025.0
Percentage of Low Income Persons (After Tax ‐ % ‐ 2005)
5 010.015.020.0
0.05.0
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What Does It Look Like ?in Eastern Ontario?
Economic Dependency Ratio:
3 54.04.5
Economic Dependency Ratio: Social Assistance 2004 (%) – By CFDC Area
1.01.52.02.53.03.5
0.00.5
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What Does It Look Like ?in Eastern Ontario?
Contribution to Gross Provincial Product (Stats Can CFDC data ‐2003):
• 1200 manufacturing establishments, employing ~ 42,500 production employees (~ 6% of Ont. total)production employees ( 6% of Ont. total)
• On average, there are 35 production employees per establishment (Ont. average is 33)G t $1 7 billi i d ti ( 6% f• Generates $1.7 billion in production wages a year (~ 6% of Ont. total)
• $15.8 billion in shipments annually (~ 6% of Ont. total)• On average, a manufacturing establishment in Eastern Ontario
ships $13 million in product each year (Ont. ~ $13.5 million)• Production wages per employee: $40 184 compared to the
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• Production wages per employee: $40,184 compared to the provincial average of $42,817
What Does It Look Like ?in Eastern Ontario?
Population Growth (2001‐2006: %) Across Eastern Ontario
7.00
8.00
9.00
10.00
• All growth rates positive• Growth is slightly slowerthan Province as a whole
4.00
5.00
6.00
0 00
1.00
2.00
3.00
0.00
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Population Change (2001‐2006: %) Inc. Sep. Cities Population Change (2001‐2006: %) Excl. Sep. Cities
What Does It Look Like ?in Eastern Ontario?
Presence of SMEs f
40
50
60
as a Percentage of All Establishments
0
10
20
30
Hi h i fHigher proportion of SMEs across Eastern Ontario than for province as a whole
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What Does It Look Like ?in Eastern Ontario?
Percentage of Income from
12.0
Percentage of Income from Self Employment (2004)
4 0
6.0
8.0
10.0
0.0
2.0
4.0
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What Does It Look Like ?in Eastern Ontario?
Size, diversity and skill levels of work force:, y
• 555,000 members of experienced labour force (2006)
• ~ 8.5 per cent of provincial total
• Agriculture further down list at 25,000
Sector Number
Other Services (ex. Personal) 121,375
Business Services 87,960
Retail Services 69,245
Manufacturing 64,830
H lth d S i l S i 64 615
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Health and Social Services 64,615
Educational Services 40,585
What Does It Look Like ?in Eastern Ontario?
Size, diversity and skill levels of work force:, y
• University attendance and graduation percentages in Eastern Ontario are lower than the provincial average
• College attendance and graduation percentages in Eastern Ontario are higher than the provincial average
• Apprenticeship trades certificates/diploma percentages inApprenticeship, trades certificates/diploma percentages in Eastern Ontario are higher than the provincial average
• Tendency to “export” young people from rural areas to urban areas at time they typically pursue higher education… many don’t come back, at least until they are much older
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What Does It Look Like ?in Eastern Ontario?
• Limited university servicesLimited university services outside Ottawa; • Colleges need time to develop applied research agendas but could be fruitful
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8 Universities/9 campuses5 Colleges/13 campuses
What Does It Look Like ?in Eastern Ontario?
A multi‐modal transportation strategy to build on opportunities in H lif d M t l ldHalifax and Montreal could benefit Eastern Ontario.
•400 Series Highways and•400 Series Highways and Arterial Roads• 2 Rail lines for freight and passenger service• 5 Deep Water Ports• 4 Airports (incl. one
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international)• 4 International crossings (one by ferry)
What Does It Look Like ?in Eastern Ontario?
Type of Infrastructure Assessment
Collaborative organizations –networks, associations for business, industries, sectors
Many: 3 RINs, 15 CFDCs and EO Networks, EOWC, MUND, Ontario East, EOBC; often limited resources or constrained mandates
Collaborative facilities – multi‐tenant facilities, innovation parks
Ottawa and (soon?) KingstonSABIC Centre of Excellence in Manufacturing Innovation (Plastics)
Players in related value chains –suppliers, customers
Significant gaps – “mixed use” farming creates feedstock supply chain challenges; few primary processing facilities
Players in broader business environment ‐ supporting services
Limited product development capacity, commercialization services; targeted HR services; gaps in broadband services
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g p
Pools of investment capital (private and public)
Limited angel/VC funding in region; CFDCs have <$5M portfolios; financial “branch plants”
What Could We Do to Enhance It?What Could We Do to Enhance It?• Think regionally more often, not just locally• Empower collaborative organizations to take on innovationEmpower collaborative organizations to take on innovation
challenges in Eastern Ontario, esp. bridging urban‐rural divide• Add metrics that address contribution to GDP (as well as job
creation and direct investment)creation and direct investment)• Look for ways to link up assets in “systems” (ex. product dev.)• Reward organizations that build real partnerships (value chains
not just “marriages of convenience”)• Acknowledge and reward SMEs (ex. tend to stay in particular
community; often play a role in “bootstrapping”)community; often play a role in bootstrapping )• Remove the broadband barrier sooner than later• Look for ways to support innovation infrastructure investments
th t ill t i ti it i th i t tthat will generate economic activity in the private sector.
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