The effort to jumpstart the growth of Ontario’s advanced manufacturing sector, such that even cookie factories and printing shops could soon be using robots and self-driving vehicles, started in earnest around December 2016.
That’s when consulting firm McKinsey & Co. produced a short report that concluded “the Toronto-Waterloo region has the potential to become one of the world’s top innovation ecosystems,” on par with Silicon Valley. That got people talking.
“It was the first report of its kind,” said Jan Da Silva, chief executive of the Toronto Region Board of Trade, who began hosting a series of formal and informal discussions with executives from the manufacturing and technology sectors in southern Ontario.
About six months later in May 2017, the federal Liberal government announced its intention to invest hundreds of millions of dollars in “innovation superclusters,” essentially densely concentrated business sectors that could possibly evolve into larger economic engines with a little more investment.
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Da Silva said many local executives felt Ontario’s budding tech sector and its longstanding manufacturing sector could both benefit from greater collaboration. There is a symmetry to their challenges: Manufacturing companies need the latest technology to increase productivity and keep pace with competitors, while the small companies building some of that technology need local customers that can help them test and expand their products.
But the idea that investing several hundred million dollars will be enough to transform any sector into an economic powerhouse and a hotbed of innovation has been critiqued as both too small to make a difference and just a large corporate giveaway.
Nonetheless, fast-forward two years, and the Liberal government has signed on to the idea, entrusting $230 million to a non-profit in southern Ontario to build next-generation manufacturing capabilities.
Exactly how that money will be spent, and the contours of the nascent program, remains vague in nearly all respects, but participants said the basic idea is set: The Advanced Manufacturing Supercluster (AMS) program would like to see robotic arms, self-driving vehicles and other new technologies widely distributed, from the low-margin warehouses in drab industrial corridors to the factory floors at the largest automotive plants.
“Sometimes people look at the technology and think that it’s impenetrable, but the amount of progress on this over the last few decades has really made it just like buying another computer,” said Ryan Gariepy, chief technology officer of Clearpath Robotics Inc. in Waterloo, and an AMS board member.
Gariepy’s businesses, which include Clearpath and its Otto Motors subsidiary, manufacture self-driving vehicles and robotic arms for factories, warehouses and all manner of offices. They already count large multinationals such as Toyota Motor Corp. as customers, he said, and are looking for smaller to medium-sized local businesses to expand their customer base and test new products.
Gariepy said he would love for supercluster funding to make it possible for small manufacturing businesses to quickly and easily learn about technologies that could make their operations more productive.
Cristina Amon, dean of faculty of applied science and engineering at University of Toronto, and another AMS board member, said she is excited about the prospect of greater collaboration between industries and students.
“Providing incentives for industry to partner with universities, or the reverse, is extremely effective to translate the knowledge being generated at the university,” she said.
Officially, the Liberal government is setting more concrete bars to measure the success of the AMS. It has said its $230-million investment will add $13.5 billion in gross domestic product and 13,500 jobs to the economy over 10 years.
“Think of a made-in-Canada Silicon Valley,” Navdeep Bains, Minister of Innovation, Science and Economic Development, said last February in Hamilton about the program’s goals.
McKinsey pegged the equity value of tech companies in the Toronto-Waterloo corridor, which comprises the so-called cluster, at $14 billion — a tiny fraction of the $411-billion value of Silicon Valley’s tech cluster.
“The Toronto-Waterloo Innovation Corridor … has the potential to deliver a $50 billion increase in direct equity value, $17.5 billion in direct annual GDP, and more than 170,000 high-quality jobs by 2025,” according to McKinsey.
The consultant also noted that there are already 15,000 tech companies in Toronto, Hamilton, Guelph and Kitchener-Waterloo that combined produce more than $360 billion in annual GDP. Against these numbers, the government’s goals seem modest.
Of course, advanced manufacturing is just one of five industries the government selected as part of its $950-million Innovation Supercluster Initiative unveiled in 2018.
“Clustering is a well-known and real economic effect,” said Richard Florizone, outgoing president of Dalhousie University in Halifax, which is heavily involved with the Oceans Supercluster.
But Florizone also points out that although clusters can be identified — California’s wine industry, for instance — no one knows exactly how to create or nurture one.
“The question just becomes how do you create that?” he said. “Let’s be honest, regions around the world are wrestling with this, everyone’s trying to create the next Silicon Valley.”
Florizone noted that direct government investment is controversial if only because attitudes toward public-sector failures are complicated: People accept that the country has to take risks to succeed, but don’t always accept that those risks include failure.
The other issue is the government is wading into a politically fraught issue since opinions vary about the number of jobs that automation will create, and whether companies can or will replace repetitious line jobs with better-paying, more skilled positions.
“I guess the key change this initiative is trying to promote is more collaboration,” said Cory Mulvihill, lead executive for Policy and Public Affairs at MaRS Discovery District in Toronto.
MaRS, a decades-old organization operating to grow Toronto’s tech sector, was involved early on in the effort to get funding for an Advanced Manufacturing Supercluster.
“The federal government’s piece of this is they put a little money on the table to incent that collaboration,” Mulvihill said.
In Ontario, a newly formed non-profit called Next Generation Manufacturing Canada (NGen) will control the government’s $230-million investment in the AMS. NGen hasn’t yet disclosed any of the projects it plans to pursue with the money — which began being transferred late last year – but it has said it will begin making announcements by March.
Jayson Myers, chief executive of NGen, said his organization is also talking to private companies about raising money so that it can continue after government funding runs out in several years.
He said one of NGen’s goals is to connect technology companies and manufacturers. To this end, it will help coordinate site visits so that small manufacturers can see other businesses that are already using new technology, and it will also run training programs and build a database that lists what technologies are available.
“We’re going to run a program to showcase technology at companies across Canada,” he said.
Myers acknowledged the company will have to be careful not to become an agent that advocates for any particular company’s products, but said he thought it was possible to take sponsorships to run such programs while maintaining neutrality.
He also said the majority of the government funding, about $190 million, will be doled out on as reimbursements. That is, after NGen approves projects for funding, the companies involved must put down the cash to pay for the project but will be partially reimbursed by NGen. Short descriptions of the projects that receive funding will eventually be posted.
Myers said NGen also plans to invest at least $25 million over four years to help small companies adopt new technologies, or help them scale up or de-risk some of their investment in new technologies.
Gariepy, Clearpath’s chief technology officer, said some people look at the government’s investment and wonder why it’s even necessary.
“I know there have been concerns … that these companies should just stand up on their own,” he said. “That would be a reasonable position to take if that’s the way other countries were operating, but other countries are not operating that way.”
Instead, Gariepy said other countries, such as Japan and China, are investing billions of dollars to ensure their manufacturing sectors are rapidly transformed by new technologies such as robots.
The result, he added, is that Canada’s manufacturing sector will only fall further behind if it doesn’t invest now.
Gariepy said smaller manufacturing companies are already struggling to compete in an era when a few large companies use automation, scale and efficiencies to make next-day delivery of products — often customized — a standard customer expectation.
“Most people look at self-driving vehicles and advanced robotics as something that only the big companies can adopt,” he said. “They don’t look at it as technology that a small or family-owned business can adopt.”
But Gariepy said the point of the AMS is to make sure that technology is widely and evenly spread throughout Ontario’s factories and warehouses, so that smaller businesses can compete.
He acknowledged that getting such technologies into smaller businesses is an important next step for his company, and likely others, but also argued it’s important for the overall economy.
Is $230 million over five years enough? Probably not, but it’s a necessary start, Gariepy said.
“There’s a bit of an assumption in many places that to meet the goals of the Advanced Manufacturing Supercluster fundamentally new technology needs to be invented,” he said. “I would like to be at the point where a company that has a productivity challenge … can quickly and easily find local experts to understand if this problem is solvable and, if it is, how to solve it.”
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