This piece was originally published in The Globe and Mail on February 6, 2017.

In recent years, there have been many op-eds and reports published on Canada’s innovation underperformance. To his credit, Innovation Minister Navdeep Bains has looked beyond these reports during his first year in office and has consulted widely with business, entrepreneurs and venture investors.

There are many factors underlying this underperformance. Among the most frequently cited are the difficulty accessing venture capital and the scarcity of specialized talent needed to successfully grow new companies. New ventures looking for customers also lament that large Canadian organizations – both public and private – are skittish about buying solutions from new companies. These issues all need to be addressed.

But there is also a deeper, more fundamental issue: a failure in the market for business judgment. Most of what is between an invention and a successful company is business judgment. But judgment is not for sale – a new venture cannot simply go downtown and purchase a unit of business judgment.

Particularly for technology-based ventures, the founders are typically PhDs and graduate students in engineering, math, computer science and other sciences. They are smart, driven, and have deep technical expertise, but they have little business background and typically no experience starting and scaling a new company. Add to this that entrepreneurship remains more art than science, and there is no easy way to quickly acquire the requisite business judgment.

If new ventures don’t have business judgment, then why not buy it? Here is where the market fails. Although there is significant demand for judgment, the supply side is thin, matching ventures in specialized technologies to experienced entrepreneurial talent is hard, and young companies have no way of paying for business judgment other than offering a stake in their risky asset. And without judgment on business imperatives, ventures squander valuable time, scale too slowly and miss their window to secure a place in the global marketplace.

The market for judgment functions better in Silicon Valley than anywhere else in the world. The concentration of technology experts, experienced entrepreneurs, global tech behemoths and venture capitalists maximizes the opportunities for matches between demand (first-time entrepreneurs) and supply (experienced entrepreneurs). As the recent Tech North Report highlighted, the returns are non-linear – the total cluster value of Silicon Valley is more than six times the next-largest cluster.

The University of Toronto’s Rotman School of Management has put this hypothesis to the test in its Creative Destruction Lab (CDL). The CDL is a seed-stage program for massively scalable technology-based ventures. The Lab provides no space or capital – it supplies access to the very best entrepreneurial business judgment to promising technology-based ventures. New ventures are mentored by highly accomplished entrepreneurs and angel investors through a structured, objectives-based program with a very clear success metric – equity-value creation. Companies that perform and achieve their objectives instill confidence and attract capital and customers.

The results have been impressive. When the Lab was launched in 2012, the goal was for the ventures going through the program to create $50-million in equity value within five years. Four and a half years in, the equity value created exceeds $950-million. The Lab has expanded from one cohort taking 25 technology-based ventures a year, to three cohorts, one with 25 general technology-based companies and the other two with a combined 50 artificial-intelligence-enabled companies.

To our knowledge, this is the greatest concentration of AI-enabled companies in any program on Earth. Over 300 technology-based ventures applied to the CDL program from across Canada, as well as the United States, Israel and Europe.

To accelerate commercialization, we need to address this market failure at research-intensive universities across the country. Towards this end, the Rotman School partnered with the Sauder School of Business at the University of British Columbia to launch the Creative Destruction Lab West (CDL-West). The first 25 science-based companies recently entered the program and will be coached by highly successful entrepreneurs and angel investors from Canada’s West Coast and Silicon Valley. As with any lab experiment, success is not guaranteed, but if the results at the Rotman CDL can be replicated, the impact on the commercialization of science from Canada’s west coast will be profound.

Access to risk capital and specialized skills, as well as encouraging Canadian companies and governments to view procurement as a source of strategic innovation are all important to accelerating commercialization and closing Canada’s innovation gap. But increasing the supply of the scarcest input – business judgment – to our most promising technology-based ventures is critical to reaping the economic benefits of science and technology in Canada. To take on the world, Canada’s research-intensive universities must work together.

Written by Dean Tiff Macklem (Rotman School of Management, UofT) & Dean Robert Helsley (Sauder School of Business, UBC)

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