Monday, February 14, 2011

Innovation and Canada's Commercial Space Sector

The Canadian Space Agency (CSA) has finally released the 2009 State of the Canadian Space Sector Report. The document, which tracks Canadian private sector space activities is normally released the following November after the data is collected, but this years report seems to have been held up until last week.
CSA President Steve MacLean.
According to the February 10th, 2011 SpaceRef Canada article "CSA Releases 2009 State of the Canadian Space Sector Report - Revenues & Jobs Up" the key points in the report are that revenues increased by 8% over 2008 to $3.025 billion, surpassing the $3 billion mark for the first time and with workforce growth continuing strong.

Considering that the report covers 2009, the first full year of the great recession, and the growth of the overall Canadian economy for that year was essentially zero (at least according to the Statistics Canada data collected on the Trading Economics website), the strength of our commercial space industry seems impressive.

It's only when you start comparing the Canadian growth rate with the larger international space market, previous years reports and with a year old comparison of the rates of innovation among industrial nations from the Conference Board of Canada, that the picture grows less rosy.

According to the Space Foundation 2010 Space Report, the international space industry also substantially outperformed the overall economy during the same period and by almost as much as the Canadians:
While the global economic crisis grabbed the headlines daily in 2009, the global space industry experienced steady growth throughout the year. Estimated space industry revenue and government budgets increased by 7%, to $261.61 billion. This amounts to 40% growth during the previous five years for the global space economy.
So the Canadian space industry has grown only a little faster than average over the last year (7% internationally as opposed to 8% in Canada) when compared to the space industries of other countries.

But we're still quite a bit further behind when it comes to the longer term.

Conference Board head Anne Golden.
Over the last five years, Canadian growth has only been around 25% and most of that occurred in 2008 (which recorded a 17.8% increase over 2007).

Before 2008, there were three years of lackluster or negative growth that's not mentioned in the current report but is included with the earlier reports. For example:
The annual growth rate also compares poorly with the international growth rate of 40% for the same period. In essence, Canada right now is performing about average for the industry (after several years of below average performance) and still has a ways to go in order to excel.

Which brings us to a year old report from the Conference Board of Canada. This private, not for profit organization (seemingly able to write reports far faster than the CSA) tracked 17 industrialized nations on the ability to turn knowledge into money-making products and services during this same period.

According to the February 2nd, 2010 Financial Post article "Canada gets D for innovation: Conference Board:"
Canada gets a D in innovation, according to a report card issued Tuesday, ranking the country 14th among 17 industrialized nations for its ability to turn knowledge into money-making products and services.

In a report from the Conference Board of Canada, this country ranked ahead only of Australia, Italy and Norway for innovation. Switzerland, Ireland and the United States topped the list.
The report, titled simply "Innovation," is available on the Conference Board's website and highlights a number of key messages:
The Canadian economy remains a below-average performer on its capacity to innovate.

Relative to its peers, Canada has improved only on the export market share of its aerospace industry and the number of scientific articles published. On the new indicator that measures trademarks by population, Canada ranks second to last and scores another “D.”

Countries with the highest overall scores not only spend more on science and technology but also have policies that drive innovation supply and demand.
Does Canada's low ranking in this survey matter? According to the conference board it does:
Innovation is essential to a high-performing economy. It is also critical to environmental protection, a high-performing education system, a well-functioning system of health promotion and health care, and an inclusive society. Without innovation, all these systems stagnate and Canada's performance deteriorates relative to that of its peers.

Canada has been slow to adopt leading-edge technologies. This is problematic, since innovative products have increasingly short cycles. Often within a couple of years of introduction, products are upgraded or must be replaced. In these circumstances, slow adopters never catch up; they are always at least one generation behind the advancing frontier of possibilities that new technology represents. That is not a winning formula, and Canada seems to be playing catch-up on too many technologies.

The problem shows itself in Canada’s relatively low productivity level. As other countries develop and adopt more innovation-related business methods, their companies are gaining in productivity more rapidly than Canadian companies. With new key players in the global economy such as China, India, and Brazil, Canadian businesses must move up the value chain and specialize in knowledge-intensive, high-value-added goods and services. Although Canada has some leading companies that compete handily against global peers, its economy is not as innovative as its size would otherwise suggest.
It's also worth noting that the 2008 State of the Canadian Space Sector reports manufacturing revenues down from $696 million in 2008 to $605 million in 2009 so maybe the Conference Board is right and Canadians are having a difficult time turning knowledge into innovative money making products and services.

In our defense, the Conference Board does seems to consider Canadian aerospace and space focused industries as the best of a seemingly bad lot. But we're essentially still only average, even with our CanadArms and robot lunar rover programs.

We should be getting better.

Previous years editions of the Canadian Space Sector Report (going back to 1996) are available on the State of the Canadian Space Sector website. They're worth a read.

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