Canadian companies may be failing because they are too focused on technology, says a new study called Growing R&D Intensive Firms in Canada.

According to the study, it seems that CEOs realize that innovation will drive economic growth, but they are failing to achieve the ideal balance between the technology side - research and development (R&D) - and the market side - customers, marketing and sales.

Survey authors, Dr. H. Douglas Barber founder and former CEO of Gennum Corporation and Dr. Jeffrey Crelinsten, President of The Impact Group, interviewed 30 CEO's of "greenhouse" firms - early stage (spending 3-50% of revenue and less than $3 million annually on R&D) and start-up (spending more than 50% of revenue on R&D) and looked at their growth and R&D spending patterns.

They found that:

• Our science and technology education and technical skills are among the finest in the world.
• From 1994 - 2001, a time of signficant economic prosperity, only 14 of 6,000 "greenhouse" companies moved into the more stable "R&D leaders" group (spending between 3-50% of revenue and $3 million or more on R&D).
• Of the CEOs interviewed, about half their firms failed or nearly failed.
• The primary reason for business failure was an overemphasis on technology and not enough focus on customers, marketing and sales.

The survey authors conclude that we do a poor job of training Canadians how to nurture our R&D intensive companies through their early stages of development and that this gap between our technology and commerce skills is a significant impediment to Canada's future prosperity in the global knowledge economy.

"Canadians are not the only ones struggling to create a greater focus on the commercial side at R&D intensive firms. While the United States excels at attracting entrepreneurs who grow successful companies, smaller countries like Finland, Sweden, Korea and Singapore are also able to foster a healthy blend of technical skills and business savvy", says Doug Barber. "If our customer service, marketing, sales and management skills equaled our abilities in the areas of science and technology, Canada could be an unbeatable powerhouse"

The study identified several challenges facing Canadian companies involved in R&D:

• The skills of CEOs were concentrated around technology rather than business.
• There was a shortage of people with management, marketing and sales skills.
• Those with strong technology skills may have a societal distrust and suspicion towards commerce.

The study also revealed these important issues:

• CEO's of many R&D intensive firms lack the necessary knowledge and experience in commerce. Most of these firms do not finance their operations from sales relying instead on investors and lenders.
• Few companies expect to remain in Canada. Many are planning to sell or be bought out. Venture capital firms financing many of these technology companies encourage early sale for a "quick exit".
• While Government programs support R&D, they do little to help in the areas of marketing and other business development areas at home or abroad. Working with regulatory agencies also poses a challenge compared to other countries.
• Post-secondary institutions are highly successful at passing on the required technical and scientific knowledge, but do not see it in their mandate to prepare graduates for the human relationship challenges in the marketing, sales and management.

"The belief that commerce starts with ideas in the knowledge economy is a deeply held belief that permeates our entire culture", says Jeffrey Crelinsten. "It influences educational practices and industrial policies. The notion that firms must tap ideas from our postsecondary institutions to create a technology or product through R&D and then commercialize it, must give way to a more customer-focused model that values broadly educated people with technical and human skills. Canada needs people who do commerce to win in the knowledge economy."

For companies that find themselves facing these challenges, the National Research Council's (NRC) Industrial Research Assistance Program is worth investigating. One sub-set of the program is a pre-commercialization component that will help R&D firms get their products to market.

Resource: Growing R&D Intensive Firms in Canada

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