ICT/Life Sciences Converging Technologies Cluster Study: Executive Summary

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ICT/Life Sciences Converging Technologies Cluster Study:

A Comparative Study of the Information and Communications, Life Sciences, and Converging Next Generation Technology Clusters in Vancouver, Toronto, Montreal and Ottawa

Prepared for:
ICT and Life Sciences Branches of Industry Canada and the National Research Council

Prepared by:
Graytek Management Inc. in Association with
Dr. Roger Voyer, Dr. Jorge Niosi, Franco Materazzi and Neelam Makhija

November 25, 2004

PROJECT OVERVIEW

A qualitative analysis of the information and communications technologies (ICT), life sciences and their converging next-generation technology clusters in Vancouver, Toronto, Montreal and Ottawa.

KEY OBJECTIVES

• Improved policy development. To provide the federal government and other stakeholders with relevant information to improve policy decisions and the design of new initiatives intended to accelerate cluster development and growth.
• Improved communications. To help break down silos between the ICT and LS sectors by presenting the study findings to sector leaders and stakeholders in each of the four cities and facilitating a discussion around implementation of the study recommendations. Results will also be presented to senior managers and officers involved with these sectors at the federal level in Ottawa.

METHODOLOGY

The study used a previously-validated analytical framework to build an understanding of current cluster capacity and operational dynamics and included:

• Conducting extensive literature review
• Mapping approximately 200-500 key ICT and 100-200 life sciences companies per city
• Interviewing approximately 10 key stakeholders per city
• • Obtain top of mind perspective
  • Review success factors using preliminary spider diagrams
  • Ask what they would like to see from government

• Assessing cluster dynamics and performance
• Comparing results across sectors and cities (Note: U.S. comparisons for biotech are based on indicators for research and commercialization developed by the Brookings Institute).

OVERVIEW OF CLUSTER CAPACITY

Vancouver

• ICT Cluster
• • ∼1,000 companies, ∼30,000 people
  • Telus is largest employer by far (∼10,000 in 2003)
  • Few large companies, many small service providers
  • Key strength in wireless and new media areas
  • Largely focused on emerging markets

• Life Sciences Cluster
• • ∼90 companies, >1,900 people with another 1,400 in public institutions
  • Dominated by small and medium-size enterprises (SMEs) in health area
  • Growing base of non-health biotechnology companies
  • Small number of local medical device companies

• Converging Technologies
• • Key strength in bioinformatics, but few companies

Toronto

• ICT Cluster
• • ∼9,000 companies (∼4,000 core), ∼200,000 people
  • Dominated by multinational enterprises (MNEs)
  • Little manufacturing, except local assembly
  • Many small service providers
  • Really 3 clusters (Downtown, Markham, Mississauga)

• Life Sciences Cluster
• • ∼400 companies, >30,000 people
  • Pharma dominated by MNEs
  • MNE Manufacturing increasingly going off-shore
  • R&D focused on emerging biotech (health) activities, mostly SMEs
  • Diverse and unfocused medical device activities, mostly SMEs

• Converging Technologies
• • Some activities in all converging technology areas but largely unfocused

Montreal

• ICT Cluster
• • >2,500 companies, ∼110,000 people
  • Many MNEs and large companies mainly in the services area
  • Traditional manufacturing area restructuring, services stable, software and new media strong
  • Emphasis shifting to emerging markets

• Life Sciences Cluster
• • ∼275 companies, ∼21,000 people
  • Dominated by MNEs in health area
  • Key strengths in pharmaceuticals and biotechnology
  • Substantial number of medical device companies

• Converging Technologies
• • Some focus on bioinformatics and biomaterials

Ottawa

• ICT Cluster
• • ∼1,500 companies, ∼64,000 people
  • Nortel still the largest player (∼6,000 people), many MNEs (∼70)
  • Services accounts for ∼60% of cluster companies and government is major customer
  • Key strengths in wireless and photonics, shifting focus to emerging markets

• Life Sciences Cluster
• • ∼100 companies, ∼4,200 people (Ottawa-Gatineau)
  • Mostly early stage companies
  • One large firm, MDS Nordion (∼750 employees)
  • Large research base (∼45 institutions)
  • Focus on health, bioproducts, converging technologies (including medical devices), and life sciences services

• Converging Technologies
• • A focus on biophotonics, but few companies

CROSS CLUSTER COMPARISONS

Canadian Comparisons

• All four metropolitan areas have substantial capabilities in their clusters overall
• ICT clusters are larger than Life Sciences clusters by about an order of magnitude
• Relative critical mass
• • ICT - Toronto strongest, followed by Montreal, Ottawa and then Vancouver
  • Life Sciences - Montreal and Toronto are comparable & complementary
  • Life Sciences - Vancouver is stronger than Ottawa but both are fragile

• Few converging technology firms and lack of focus
• • Greatest diversity appears to be in Toronto

US Comparisons (Biotechnology)

• Significantly below top 9 US clusters, compare favourably to next 42 US clusters
• Toronto & Montreal are strongest contenders, Vancouver is performing above its size, Ottawa is a distant fourth
• Commercialization performance is better than research performance (Canadian clusters do more with less)
• • Commercialization is strong in new company creation but weak in company growth

KEY FINDINGS AND RECOMMENDATIONS

Cluster Development Overall

• The importance of cluster diversity. All four metropolitan areas have attained a considerable level of diversity. This has helped to make the clusters more resilient during the technology downturn.
• • The transferability of technical skills has helped mitigate the impact of the downturn in one technology area by providing new opportunities in other areas;
  • The breadth of knowledge and skills is enabling the development of emerging markets and converging technology opportunities.

• It is important that policy makers encourage cluster diversity as an important element of cluster sustainability rather than focusing on specific industries.

• The need for coordinated and sustained leadership and support. Leadership and support vary considerably across the clusters and is for the most part fragmented and not sustained. In order to compete globally, it is necessary to mobilize and coordinate resources around common goals and objectives. Leadership must come from within the cluster and be supported at the provincial level. The federal government can mobilize coordinated action around significant projects sustained by long-term funding commitments.

• The need to grow larger companies - the commercialization dimension. Growing companies (SMEs) that already exist is more important than spinning off more companies. This requires:
• Developing the right skills mix. To grow companies an increase in management, marketing and commercialization skills is required.
• Ensuring availability of substantive and sustained financing. Securing adequate financing is clearly a major challenge facing virtually all technology companies across the entire commercialization spectrum.
• Development of early market credibility. Finding early customers is an important aspect of developing a technology company, particularly when addressing emerging market opportunities where revenue potential is typically less well defined.

With Respect to ICT

• Dealing with ICT as a mature sector. ICT is a mature sector dominated by a small number of large global companies surrounded by an array of smaller niche players and component suppliers. In Canada, the large companies are increasingly foreign multinational enterprises and they are dominant players in all of the clusters studied except Vancouver. The multinational enterprises need to be encouraged to develop stronger local roots, particularly in the R&D and commercialization/production areas to ensure that they remain in the cluster. The multinational enterprises are also in a position to assist local companies by developing supplier relationships, something that is generally not evident at present.

• Exploiting ICT's role as an enabler. The importance of ICT as an enabler of broad economic development has surpassed that of ICT as an economic sector in its own right. Much of the ICT R&D taking place in the clusters studied is in the area of emerging market opportunities, particularly those related to provision of infrastructure, content and applications targeting enabled sectors. Many of the spin-offs and start-ups, as well as some of the medium-sized companies, are targeting ICT-enabled, emerging market opportunities. This makes it increasingly difficult to view ICT as a coherent sector and future success will require much stronger linkages between the ICT sector and other sectors of the economy. In this regard, it is important to facilitate ICT technology development and lever ICT skills capacity at the interface between the ICT sector and other sectors of the economy.

With Respect to Life Sciences

• Integrating the three components. The three main components of the Life Sciences clusters (i.e., pharmaceuticals, medical devices and biotechnology) operate largely in silos with very few linkages among them.

• Focusing on Top Tier Clusters. According to this analysis, Montreal and Toronto's biotechnology clusters currently have the critical mass to compete and/or collaborate most effectively with the nine leading US biotechnology clusters. The depth of their research capabilities and their related industrial diversity give Montreal and Toronto more staying power. Vancouver is a robust challenger with considerable commercialization capacity; Ottawa has a strong research base but needs to build its commercialization capacity.

• Stimulating Alliances between Pharmaceutical Firms and Biotechnology Firms. Canadian biotechnology firms are small and, because financing difficulties, often sell their intellectual property rather than exploiting it themselves.

• Consolidating Biotechnology Firms. It is difficult to grow the many small biotechnology firms in Canada due to their small size.

• Developing a Local Supplier Base in Vancouver and Ottawa. As a cluster grows there is an opportunity to create a strong local supplier base so that fewer goods and services have to come from the outside.

With Respect to Converging Technologies

• The need to focus resources. To compete with converging technology clusters in other countries, this study concludes that it is necessary to focus on Canada's top tier Life Sciences and ICT clusters rather than spreading support more broadly for emerging clusters.

• The need to consider converging technologies more broadly. The study considered nanotechnology as an ICT and Life Sciences converging technology but found that converging technology activities are also taking place in the area of biomaterials (another Materials Science technology).

• The need for policy coordination. Industry support is typically organized along sector lines (e.g., ICT, Life Sciences, etc.) and converging technology issues tend to be dealt with from a sector perspective. With convergence rapidly becoming a reality in a variety of technology areas, it is important to begin the transition towards addressing issues related to converging technologies per se. At the federal level, this could start with a secretariat within Industry Canada and later broaden out to include other departments and levels of government.