Pierre Beaudoin: Why we need to open up to innovation

A speech from the president and chief executive officer of Bombardier Inc.

Pierre Beaudoin
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Bombardier president and CEO Pierre Beaudoin

Bombardier president and CEO Pierre Beaudoin

This is the text of a speech delivered to business leaders in Toronto by Bombardier Inc. president Pierre Beaudoin on Wednesday, Nov. 13, as part of the Maclean’s Thought Leadership series.

Good afternoon ladies and gentlemen. It’s an honour to take part in Maclean’s thought leadership series, and to explore a topic with you that’s more critical than ever to Canada’s future prosperity. I’m talking about innovation and its rapidly changing face around the world.

There’s a significant wave of change under way in terms of how the most innovative people and organizations are innovating. As a country and as leaders, we need to get on board with this new paradigm without delay, or else run the risk of being swept away.

The traditional means of innovating are morphing into new approaches that are more collaborative, inclusive and horizontal. And while it’s more important than ever to ‘out-innovate’ the competition, to achieve this, we now increasingly have to innovate with the competition, as well as a broad range of other stakeholders.

Today’s emerging innovation models go by many names—open innovation, crowdsourcing and co-creation. These approaches are born directly out of the new economy that we’re all competing in—a global economy that’s more digital, urban, intangible and networked.

Why all this fuss about innovation?

Many international think-tanks are pointing to the growing innovation divide between countries. Some are calling it an innovation emergency. We need to make sure that Canada is on the right side of this divide.

But why all this fuss about innovation? Why is it so important? Because transformational ideas and their commercialization fuel sustainable growth. Innovative products, processes and services are a must for any high-performing economy. They increase productivity, income per capita and the quality of social programs. They also enhance our competitiveness and enable us to engage in higher value-added activities.

The World Economic Forum believes innovation is becoming so crucial to competitiveness that soon it will be more pertinent to distinguish countries based on whether they’re innovation rich or poor as opposed to developed or developing.

What hasn’t changed

Before we talk about what’s changed in innovation, let’s take a look at what hasn’t. If you were to survey this room, I’m pretty sure that we could all come up with many of the elements needed to foster innovation. Our list would likely include:

  • an entrepreneurial environment and an appetite for risk,
  • sufficient investment in R&D especially by the private sector. In our case, we invested
  • $1.9 billion in R&D last year.
  • high quality scientific research centres,
  • extensive collaboration between universities and industry,
  • high levels of competition,
  • access to capital and financing,
  • and, last but not least, the need to be persistent and tenacious.

To this list, I would add a labour force equipped with the right skills for the new economy. And by this, I don’t necessarily mean skills derived from a university education. In fact, I would caution us against adhering to the all-too prevalent and, in my opinion, mistaken view that a trade diploma opens fewer doors today than a university degree. The truth is Canada needs both types of workers. Many European countries have grasped this, which is why they’ve created such excellent trade programs and company-based apprenticeships.

Not long ago, we asked a group of production employees in Quebec to help us figure out how to accelerate our learning curve in aircraft production. We knew that they possessed a gold mine of knowledge about the on-the-ground challenges of building new planes.

They jumped at the opportunity to come up with an innovative approach to simulating new aircraft assembly. Their insights and fresh thinking inspired them to build a life-sized CSeries airframe out of wood surrounded by a three-storey staging platform. This meant that, for the first time, we were able to validate, optimize and stabilize our assembly processes, platform and parts flow on a life-sized model, as opposed to on our first test aircraft.

The learnings and efficiencies we’ve gained have been tremendous. Thanks to this novel approach, we’re doing things differently, faster and better in the CSeries program.

This is just one example of how our trades help drive innovation at Bombardier and why I believe that we need to actively promote the value and importance of skilled trade workers in Canada.

Innovation also requires the free flow of knowledge and talent across borders. It continues to need public-private sector partnerships that ensure regulations are innovation friendly and support financing for long-lead research. We have an excellent R&D tax credit system in Canada; however, these programs do little to alleviate the problem faced by many cash- strapped SMEs who have few options for securing the early-stage funding needed to advance their innovative ideas. This financing challenge often stops innovation dead in its tracks. To address the issue, the taxable income and capital thresholds to qualify for the small business refundable Scientific Research and Experimental Development (SR&ED) tax credit of 35% should be raised to alleviate some of the pressure faced by pioneering SMEs.

Another constant when it comes to innovation is that investing in R&D has always necessitated equally healthy doses of faith, tenacity and courage. Bombardier’s CSeries commercial aircraft program is a perfect example.

A decade ago, we identified a niche poorly addressed by Boeing and Airbus—the 100- to 149-seat market. We then spent $150 million and four years conducting studies to assess the viability of building a clean-sheet or brand-new commercial jet to address this market. We were very disciplined in establishing our success factors in terms of market conditions and technology.

Having done our due diligence, we were very excited when we finally launched the CSeries program. Then, one year after the launch, we had to face the fact that we lacked key pieces of technology to deliver on our ambitions for our first mainline jet.

As a result, we were forced to wait for the right technology to emerge, in this case, for us, to gain the capability to design a composite wing and for Pratt & Whitney, to finish the development of the next-generation PurePower engine. Even when you know what it will take to succeed, the stars don’t always align right away.

Innovation takes time and incredible patience. You need a tireless entrepreneurial spirit that compels you to set and believe that you can achieve bold targets. You also need to stay connected with what’s being done in different markets around the world and to know that, when push comes to shove, you have what it takes to compete with the best globally.

And with global competition being so very fierce, one can’t afford to be second best in terms of products and services. I know that we certainly can’t at Bombardier.

Now here’s a look at what has changed in innovation.

What’s new in innovation

In its report “The New Face of Innovation,” international management consulting firm Arthur D. Little writes: “In future decades we will look back and realize that we are today with open innovation where we were with new product development and stage-gate processes in the late 1980s.” Forbes predicts that this realization won’t take decades because “…an acceptance of all forms of inclusive innovation is moving across the innovation community landscape with tsunami speed and power.”

To address issues that are increasingly complex and horizontal, the most innovative innovators are breaking down hierarchies and silos. They’re bringing together stakeholders with different perspectives into innovation labs and incubators to co-create user-centred solutions that can be adopted faster.

These purpose-driven think and do tanks, as Policy Horizons Canada calls them, are popping up around the world. They’re populated by the next generation of employees who have a completely different attitude about risk. Individuals who are skilled at reframing challenges as well as incorporating stakeholder feedback into rough prototypes to quickly test ideas.

Over the past four decades, our Aerospace site in Belfast, Northern Ireland has become a world leader in designing and manufacturing advanced composite components. Given this global leadership, our decision to actively support Northern Ireland’s new Advanced Composites and Engineering Centre was a natural fit and in keeping with our commitment to driving what’s next in composites.

This cross-sectoral technology hub is industry led and university hosted.

It includes partners, suppliers, graduate students and 50 of our aerospace engineers who are focused on developing world-class technology solutions for a broad range of manufacturing applications, from transport to energy.

This center is another example of how bringing universities and industry together promotes the development of skills and rapid knowledge transfer to ensure the emergence of innovative new product and manufacturing technologies.

We have much to learn from these technology hubs and innovation incubators. In fact, more of us need to be actively fostering a corporate culture where innovation is encouraged, enabled, measured and rewarded across the value chain. Where everyone becomes an innovator who is constantly thinking about how to do things differently and better.

This requires courageous and risk-tolerant leaders who are passionate about cultivating these cultures.

Embracing inclusive innovation

In my experience, innovation is ultimately about enabling solution-focused conversations between diverse people who ultimately want to improve lives in some way.

At Bombardier, we’re having more and more of these conversations with employees, customers, suppliers, partners, end-users and even competitors. The results are nothing short of spectacular.

We’re starting to leverage the crowds and communities in our ecosystem to bolster and speed up the inspiration-to-realization cycle.

At Bombardier Transportation, we’ve created online open innovation communities to involve stakeholders in designing train interiors as well as imagining mobility in the cities of the future.

Consulting with end-users on ways to improve passengers’ mobility experience produced the world’s first tram with built-in surfboard racks for a light rapid transit system in Australia.

Soliciting end-user feedback also led to a higher quality, more ergonomic and safer interior for Singapore’s new high tech metro.

Closer value chain collaboration is the key to faster innovation. The fact is the days of 100% Canadian-made products are pretty much over. It takes many partners, both public and private, to innovate. In our CSeries program alone, we have more than 20 Tier 1 partners in nine countries providing us with raw material, major structures and integrated systems. Add to this the hundreds of other suppliers who also play a role in manufacturing and assembling our CSeries aircraft.

Everywhere, competitors are teaming up on research projects to develop innovations that they can adapt to their own specific needs. In fact, open innovation is the new norm in product development. With knowledge and connectivity at our fingertips, product development cycles are shorter than ever. Companies can no longer keep pace with technological advances on their own.

Old competitive models of knowledge protection are being replaced by cooperative ones where research is shared across borders and companies. This is transforming our current notions of intellectual property.

In 2010, we joined forces with a consortium of industrial companies, including auto manufacturer Volvo, and R&D specialists in Belgium to research the potential of inductive wireless charging for electric road vehicles.

Based on the consortium’s positive findings, we set up a team of high performers to focus exclusively on developing electric mobility solutions for a diverse range of road vehicles. This is our PRIMOVE technology team.

Backed by our global resources, this team has successfully pushed the envelope in e-mobility technology. We now have a dedicated centre of competence for PRIMOVE engineering, production, development and testing in Mannheim, Germany. Today, Solaris’ first inductively charged bus powered by our PRIMOVE technology is about to enter into passenger operation in Braunschweig, Germany. Others cities in Germany as well as in Belgium will begin operating PRIMOVE-powered buses in 2014.

Innovation at Bombardier isn’t just about new products—it’s just as much about improving processes.

At our Aerospace facility in Querétaro, Mexico, a group of production employees with only five years of experience rose to the challenge of increasing their productivity by 15% while achieving recurring multi-million-dollar savings and avoiding major capital investments. There is truly no limit to what a group of committed, motivated and creative people can accomplish when they set their minds to it.

Avoiding the temptation to press ‘pause’

As we continue to grapple with the worst economic recession since World War II, the temptation to succumb to the pressure of hitting profit targets by putting innovation on hold is undeniably strong.

We’re not immune to this pressure at Bombardier. Yet while our investment-intensive phase is slowing down as major new products are about to enter service, we know that our future depends on staying in the innovation game. If we want to deliver The Evolution of Mobility, we absolutely need to be in this game. As our mantra says: “It’s all about what’s next!”

But investing in innovation is a long-term strategy that’s not for the faint of heart. If anyone understands this, we do at Bombardier. It takes a very long time to design, build and certify a new plane or train. It took us 10 years to reach the CSeries’ first flight on September 16th. No wonder it was such an emotional and proud day for us.

As a country, we need to master the new art of innovation. We must make the strategic choice to create value through innovation, not just ride someone else’s coattails. We need to move beyond our R&D and product development departments to embrace the new innovation mindset of collaborative thinking and idea generation.

This requires government policies and programs that are innovation friendly. Industry Minister James Moore’s recent announcement of a $110 million Technology Demonstrator Program, a key recommendation of the 2012 Emerson Report on aerospace, is a very welcome step in the right direction.

But companies must also do their bit. We need to retool to foster more collaborative and innovative cultures. This means seeking out employees and even Board members with innovation-focused competencies. Also leaders who encourage, expect and reward people for challenging the status quo and risking failure to find a better product, process or service.

As leaders, let’s avoid the temptation to press ‘pause’; instead let’s press ‘play’. The innovation race is on and it’s wide open. Let’s ensure Canadians are leading the way and, in the process, are building an innovation-rich and prosperous country.

Thank you.