CONFIDENTIAL

Enabling Innovation at the Saskatchewan Research Council Laurier L. Schramm

Presented at: 2nd I-CAN Innovation School Charlottetown, PEI October 18-19, 2011

CONFIDENTIAL

“There are many inputs to innovation. Creativity, intellectual property, entrepreneurship, research, business skills. Those are all inputs. Innovation is the creation and delivery of new customer value in the marketplace with sufficient value for those who are producing it ... It has to be new customer value or it’s not an innovation … The tricky phrase in there is customer value.”

Curt Carlson, CEO, SRI International Co-author of "Innovation" (2006) Quoted in Innovation America, Aug./Sept., 2010

Innovation is the conversion of ideas and knowledge into commercially successful products and services.

What is Innovation?

CONFIDENTIAL

What Do We Know About Innovation?

Source: Fagerberg, 2005 Oxford Handbook of Innovation

The function of innovation is to introduce novelty into the economic sphere. Without it the economy stagnates. Innovation is needed for long-term economic growth

Industries that innovate tend to grow more rapidly. The capacity to undertake change (absorptive capacity) is essential to creating and benefitting from innovation

Those that innovate tend to prosper at the expense of their less able competitors. This applies to companies, regions, and countries

Companies do not innovate in isolation; they depend on extensive interactions with others

CONFIDENTIAL

We are helping the people of Saskatchewan and Canada: develop a viable economy with quality jobs and a secure

environment.

How? WE ENABLE INNOVATION We take industry’s identified challenges and do the applied

research, development, design, scale-up, demonstration, testing, and commercialization of smart science solutions

Innovation is when we’ve helped industry convert new ideas and knowledge into commercially successful products and services

SRC: An Innovation Enabler

CONFIDENTIAL

through smart science solutions™

64 years of making good things happen …

here,

Since 1947

CONFIDENTIAL

1947 – 1956 1956 – 1972 1973 – 1984 1985 - 2000 2001 – 2010 2011 - 2020

• Shareholder-needs driven – granting agency

• Shareholder-needs driven

– added fully-funded research

• Becoming client-needs driven – increasing contract work; diversified

• Client and contracts driven

– but not owner-needs driven

• Balanced client- and owner-needs driven, – innovation continuum diversification – increasingly entrepreneurial – increased visibility and profile

• Balanced drivers, broader engagement,

– continued diversification – national/international visibility and profile

SRC History 1947-2011

We are …

Saskatchewan’s lead provider of applied R&D and technology commercialization

Uniquely positioned in the innovation cycle

Building partnerships with government departments, agencies, business, industry, and communities

A key resource contributing to Saskatchewan’s economic growth

CONFIDENTIAL

COMMERCIAL

INNOVATION

INNOVATION CYCLE

CONCEPTS/ FUNDAMENTAL

FEASIBILITY/ DEVELOPMENT

PILOTING/ DEMONSTRATIONS

TEC

HN

OLO

GY

MAT

UR

ITY

Uniquely positioned

Building partnerships

The Innovation Continuum

CONFIDENTIAL

DEPLOY DISCOVER DEVELOP, DESIGN and DEMONSTRATE

Commercialization Gap

Where Canada Needs More Focus

Source: Innoventures Canada Inc.

CONFIDENTIAL

Venture Capital Funds

Government Programs & Angels

Corporate Investment

Government Labs & Universities

“Backyard” Inventors & Industry

Entrepreneurs & Industry

Risk

Valley of Death

Low

High

High

Low

Very High

RD&D and Risk

Deployment

Continuous Improvement

Basic Research

Applied Research

Feasibility/Development

Pilot/Demonstration

1st /2nd Customers No $$

CONFIDENTIAL

Wealth, Health, Safety, and Sustainability

Developing natural resources Increasing productivity Creating new products Creating/maintaining jobs Improving sustainability Safeguarding air, water & soil Protecting the environment

from problems … to solutions … to practices

SRC-Enabled Innovations

CONFIDENTIAL

SRC’s Rapid Growth

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1940 1950 1960 1970 1980 1990 2000 2010 2020

Out

side

Rev

enue

($ '0

00s)

1947 – 1956 1956 – 1972

1985 – 2000

1973 – 1984

Estimate

CONFIDENTIAL

Revenue Sources ($ millions)

Outside revenue for 2010/11: $64 million Not shown is ~$0.7 M in interest and other

Provincial Investment, 16.6

SK Gov't, 13.3

SK Business, 12.6Cdn Gov't, 4.4

Cdn Business, 15.2

International, 0.7

Forecast revenue for 2011/12: >$83 million

Confidential and Copyright © SRC 2011

CONFIDENTIAL

2009/10 Global Client Distribution ~2,000 clients

Smart Global Solutions™

0 50

100 150 200 250 300 350 400 450 500 # of employees on payroll

Projected

~ 420

We are …

~420 scientists, engineers, technologists, technicians and other professionals of many kinds

Copyright © SRC 2011 Copyright © SRC 2011 CONFIDENTIAL Regina

Pipe Flow Technology Centre

Biofuels Test Centre

Uranium Mine Remediation

The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again.

Saskatoon

Prince Albert

Uranium City

Copyright © SRC 2011 Copyright © SRC 2011 CONFIDENTIAL

Mining & Minerals

Energy

Agriculture/Biotechnology

Alternative Energy

Manufacturing

Environment

Forestry

Strategic Sectors

CONFIDENTIAL

Core Values / Core Competencies

Core Values (Draft for Strategy 2020): Integrity Respect Quality One Team

Core Competencies: Independence and Objectivity Integrity Technical Excellence Confidentiality Delivery

Core Values in Strategy 2020

Mission Values Vision

Our 20/20 Vision

Driven by our passion for a better world, we will break boundaries to become the most internationally recognized and valued science solutions company in North America, by 2020.

Our Core Values

Integrity Respect Quality One Team

Our Mission

We proudly deliver smart science solutions, with unparalleled service to clients and colleagues, that grow and strengthen our economy.

We embrace our safe, creative, and diverse work environment, which enables us to excel, personally and professionally.

We live by our core values to build a better world.

CONFIDENTIAL

Client Satisfaction in 2010/11

We understand and deliver quality results that our clients value

Client satisfaction (annual) survey results:

2010/11

Clients that would return to SRC 100% Clients that would refer SRC to others 100% Satisfaction with overall quality 97%

CONFIDENTIAL

Success means having positive economic and other beneficial impacts

SRC Impacts

CONFIDENTIAL

Lag Time in Impacts of R&D

Time

Yearly Cumulative

Cas

h fl

ow

-

+

Source: John W. Kramers, 1999

Copyright © SRC 2011 Copyright © SRC 2011 CONFIDENTIAL

smart science impacts™

Impact Audit Report

CONFIDENTIAL

Energy

0

1000

2000

3000

4000

5000

6000

7000

8000

Jan-

54

Jan-

58

Jan-

62

Jan-

66

Jan-

70

Jan-

74

Jan-

78

Jan-

82

Jan-

86

Jan-

90

Jan-

94

Jan-

98

Jan-

02

Jan-

06

Jan-

10

Jan-

14

Jan-

18

Jan-

22

Jan-

26

Jan-

30

(m3/

day)

Base Waterflood Infill verticals Horizontals CO2EOR

Additional oil recovery enabled by SRC’s work: 120 million bbl

“Without the work SRC did we could not have gone to the field. We needed the … data to justify the capital

expenditures of a commercial stage oil field operation.”

Andrew Graham, Weyburn Oil Field EnCana Resources

Oil Production Additional value enabled by SRC’s work: $10 billion

CONFIDENTIAL

Impacts in 2010/11

Economic: Economic impact in Saskatchewan: > $527 million Mandate effectiveness: > 32

Social, Environmental, and Sustainability:

Assisted ~1,340 Saskatchewan clients (total ~1,900) Job creation/savings: >1,200 Environmental impact projects: >$31 million Societal impact projects: > $29 million Energy savings: > 23 million kWh/yr GHG emission reduction/prevention: > 9,000 tonnes/yr … and many others

Saskatchewan Economic Impact

0

100

200

300

400

500

600

Jobs ImpactEconomic Impact

∑ = $3.7 billion over the past eight years

CONFIDENTIAL

We are helping industry to compete globally and thrive

We take industry’s identified challenges, do the R&D and develop and transfer smart science solutions

When we’ve helped industry convert new ideas and knowledge into commercially successful products and services – that’s innovation !

We’re successful when our work has helped clients and increased economic activity,

We’re doubly successful when our work has ALSO helped create/save jobs, and provided environmental and/or social benefits

Conclusion

Copyright © SRC 2010

CONFIDENTIAL

Driven by our passion for a better world, we will break boundaries to become the most internationally recognized and valued science solutions company in North America by 2020.

SRC’s 20/20 Vision

CONFIDENTIAL

Internationally Recognized and Valued

Galileo images: NASA, 1990

World’s Best: Pipe Flow Technology Centre Uranium Geoanalytical Labs Diamond Geoanalytical Labs Heavy Oil Solvent (SVX) Lab Potash Geoanalytical Labs

Emerging internationally: Waste biomass → ethanol Hydrogen Dual-Fuel™ Flax GMO testing DNA wheat testing DNA animal traits

CONFIDENTIAL

“SRC is like the MIT of Canada”

Mark Coles, Rentech Inc. (USA) Summary provided to Minister Norris December, 2010

Internationally Recognized and Valued

Within the Sectors

Each Division manages an “S-curve” for their sector(s) Includes:

Dedicated business development Interface to basic research Applied research, development,

proof of concept, prototypes Value-added processing Scale-up, pilots, demonstrations Testing, analysis, & certification Commercialization & transfer

Business Development & Business Intelligence Corporate Business Development Central business development support Aboriginal business development

support Business Intelligence Technology needs forecasting Market intelligence; best practices Information services

Government Liaison Marketing to government Program development, sales to

government Business Planning Services Business plans Training and support

CONFIDENTIAL

Agriculture/Biotechnology

Genserve™ Labs Animal genetics for parentage

verification, trait improvement, and meat traceability

Plant genetics for variety identification, crop enhancement, and GMO detection

Wheat DNA Lab Identification and verification of

wheat varieties for Canada’s grain exporters

BioManufacturing Vaccines and innoculants Fermentation process development

and contract manufacturing

“The People at SRC know their stuff and they have the equipment and facilities required to support their intellectual abilities.” Greg Holloway Philom Bios

CONFIDENTIAL

Forestry

Agroforestry and Afforestation Alternative crop/biomass options;

growth dynamics; variety identification Integrated municipal water treatment Climate change impacts and adaptation

Forest Bioenergy Energy crop/biomass options; carbon

contents; variety identification Integrated energy and fuel production

CONFIDENTIAL

Energy

“SRC is one of our most important R&D providers. We are convinced we are getting a multiple benefit-to-cost ratio by sponsoring research at SRC.” Rich Kerr, Chief Engineer Nexen Inc.

Enhanced Oil Recovery (EOR) Technologies and Field Development Improved conventional light and heavy oil

recovery processes Improved oil sand and oil shale processes Design, scale-up, demonstration, and field-

testing of enhanced recovery technologies Production and Processing Value-added process technologies spanning

fossil, biomass, and bioproduct processing Pipe Flow Technology Centre Heavy oils, bituminous froths, flammable fluids Tailings transport/management

CONFIDENTIAL

Alternative Energy

Alternative Energy Development Alternative energy generation,

distribution, storage and energy conversion systems

Renewable/alternative building energy systems

Building air quality testing and systems Bioprocessing Biomass to bioenergy, biofuels, and vlaue-

added bioproducts

CONFIDENTIAL

Minerals

“SRC’s Geoanalytical Laboratories is our lab of choice for producing quality, independent results.” Peter Williamson DeBeers Canada

Geoanalytical Laboratories Geochemical and mineral analysis services

supporting the mineral exploration industry Minerals Exploration technologies for uranium,

diamonds, gold, base metals, potash, … Advanced mining and mineral processing

technologies SRC Advanced Microanalysis Centre™ Pipe Flow Technology Centre Mineral slurry hydrotransport Tailings transport/management

CONFIDENTIAL

Environment

Air and Climate Air emissions, plume dispersion, air quality Climatic monitoring Environmental health impacts Ecosystems Environmental monitoring and

sustainability Environmental health impacts in water and

soils Climate change impacts and adaptation Environmental Analytical Labs Analytical services in air, food, water,

tissue, and soil SRC Biofuels Test Centre™

“We believe that by aligning our community with SRC we not only can preserve our water source, but our community in its entirety, for future generations.” Chief Daryl Watson Mistawasis First Nation

CONFIDENTIAL

Mine Remediation Industrial mine-site remediation Project CLEANS: cleanup of orphaned and

abandoned uranium mine and mill sites

Environmental Remediation

CONFIDENTIAL

Manufacturing

Advanced Manufacturing Engineering design & product development Instrumentation and control system design &

implementation Electronic and intelligent system products Small- and Medium-Sized Enterprise Support Rapid prototyping Material Testing & Certification Testing, certification & standards Materials and emissions

“SRC is a valuable resource. They took us from concept through to product development, and helped us through the whole process.” John Grimes, President Acutec Systems Ltd.

CONFIDENTIAL

Emerging:

Help Saskatchewan build an industry in value-added uranium products and small-reactor nuclear energy

Builds on SRC’s 30 year track-record as a safe operator of the province’s only nuclear reactor

Radiochemical analytical services Expanded use of the SLOWPOKE II nuclear

reactor to educational and industrial research areas, including radioisotopes for research studies.

Value-Added Uranium

Copyright © SRC 2011 Copyright © SRC 2011 CONFIDENTIAL

Header Here

www.src.ca

CONFIDENTIAL

smart science impacts™ Economic Impact Audit Tool

“The voice of the customer” is used to provide inputs An audit selection of past projects is made each year Data is collected directly from clients through face-to-face interviews on if

and how SRC’s work has helped their company: sales and other revenues, increased productivity, cost savings, margin increases, job creations and/or savings, etc.

Impact Audit Reports are developed for each client describing the work, the benefits to the client, and the economic results A senior executive/manager from the client organization authenticates

and signs-off on the reports The results are aggregated and scaled-up to provide conservative estimates

of R&D ROI

SRC Act (1947, revised 2000):

– take under consideration matters pertaining to research, development, design, consultation, innovation, and investigation in,

– and commercialization of, – the natural and management sciences, pure and applied, – as they affect the welfare of the province …

SRC Mandate

CONFIDENTIAL

1. Shareholder Value: Strengthen the Saskatchewan economy with quality jobs and a secure environment through the responsible application of science and technology

2. Financial Management: Provide a positive financial return, utilize provincial investment (PI) appropriately, and purchase appropriate capital assets each year

3. Client: Understand and deliver quality results that our clients value

4. Growth: Grow SRC’s revenue base in order to achieve and maintain critical mass in each business area, to be able to expand our service offerings, and to be able to deliver additional impacts

5. People: Develop, inspire, motivate (and engage) SRC’s employees.

6. Corporate Social Responsibility: Conduct business in a socially and environmentally responsible manner.

7. Operational Excellence: Achieve and maintain excellence in operational processes.

Key Performance Indicators KPIs: quantifiable measurements that reflect critical success factors for the organization

CONFIDENTIAL

Profits

SRC is incorporated under its own Act of the Provincial Legislature. SRC provides public-good programs and services but sells them to the public. SRC strives to make sufficient net income (profit) to be able to invest in upgrading and expanding our capacity and capabilities. SRC does not pay dividends to its owner. Not-for-Profit organizations generally provide programs and services

that are of public interest without being profits-driven. They can earn a net income (profit), but such earnings are retained by the organization for its future provision of programs and services and are not owned by, nor distributed to owners or stake-holders.

For-Profit organizations are organized for commercial purposes and try to make money by selling goods or services to the public. They strive to make profits, which are owned by the shareholders, and some of which are generally paid to shareholders in the form of taxable dividends.

CONFIDENTIAL

Organization: Divisions

Research & Technology Divisions: Customer/Sector Grouping Keeps focus on the markets & market changes Keeps focus on the clients & clients’ view of quality Promotes customer/sector visibility Promotes cross-function communication Multidisciplinary teams, good for problem solving Promotes “Market Pull”

Corporate Service Divisions: Common Purpose Grouping

Manage the SRC brand Manage what needs to be centralized, including aspects of governance,

risk, safety, facilities and resources, effectiveness Identify and remove barriers to growth Provide enabling support to the R&T Divisions

CONFIDENTIAL

Business Unit Evolution

Competitive Position

High Low

Business/ Market

Growth Rate

High

Low

Problem Children

Dogs

Stars

Cash Cows

CONFIDENTIAL

Partnerships

Collaborative work: with clients, including in multi-client consortia, with governments, With communities, with private sector labs and consultants, with industry advisory boards, with universities and colleges,

in Saskatchewan and around the world

CONFIDENTIAL

Competition

SRC invests in and sustains capabilities, facilities and services where there is a demonstrated need:

absent or periodic commercial availability,

need to sustain SRC RD&D programs, demonstrated client preference

Where possible SRC partners with private enterprise in Saskatchewan.

CONFIDENTIAL

North of 54°

~54º

Increasing levels of northern activity are

emerging:

Mineral exploration

Environmental analytical

Environmental remediation

Alternative energy

CONFIDENTIAL

Evolution 2001 – 2012 Achieved owner satisfaction Diversified “up” the innovation continuum Increasingly entrepreneurial Increased client satisfaction and volume Achieved rapid revenue growth Rapidly increased impacts Increased visibility and profile Continuously reinventing internal processes

to ensure we can handle the growth

Did not lose client focus Did not stall or plateau Did not self-destruct

CONFIDENTIAL

Bioenergy, Biofuels & Bioproducts

• Huge, renewable waste and by-product biomass resource

• Flexible “made in Saskatchewan” technologies needed for our diverse cellulose feedstocks

• Conversion processes to produce syngas (CO + H2) or pyrolysis oil

• Conversion of syngas or pyrolysis oil into value-added products

• Fuel (ethanol) • Electricity • Heat • Value-added products

Commercialization: Wheat DNA Testing

• Commercialize an AAFC DNA/SNP method for rapid identification of Canadian wheat classes/varieties

• DNA replacement for KVD technology • Ensure quality control in the grain handling system;

and maintain Canada’s export reputation for high-quality grains

• SRC is proving out the bench science and doing the applied RD&D needed to produce tests that meet industry’s needs

• Midge Varietal Blend Verification tests developed and now offered commercially • Next: Durum wheat verification tests • Next: Canada Western Red Spring (CWRS) wheat verification tests

Alternative Fuel Vehicles

World’s First Hydrogen Dual-Fuel Vehicles • Practical • Bridging technology towards other

hydrogen vehicles • Reduced greenhouse gas and other

tailpipe emissions • Positioning for Saskatchewan

manufacturing industry

Launched Saskatchewan’s first hydrogen fuelling station

Alternative Energy

Hydrated Ethanol Single- and Dual-Fuel Vehicles

• Cheaper than “dry” ethanol • Potential for “freedom farms” • Biomass-ethanol is greenhouse gas

neutral • Reduced tailpipe emissions • Can run on ethanol + biodiesel • Positioning for Saskatchewan

manufacturing industry

Now building capacity to develop ethanol, biodiesel and other biofuels

CONFIDENTIAL

Energy Production

Energy Produced (EJ)

Energy Used (EJ)

Energy Exported (EJ)

Canada 22.4 10.7 11.6

Saskatchewan 9.7 0.5 9.2

Saskatchewan produces: 43% of Canada’s energy

71% of Canada’s energy exports

Source: National Panel of Experts Sustainable Energy S&T Strategy

CONFIDENTIAL

• SK oil sands appear to occur at depths that are too deep to mine; too shallow for conventional thermal in situ recovery methods

• Need “made in Saskatchewan” technologies to enable this “shallow in situ” resource to be developed economically

• Saskatchewan Oil Sands Industry Support (SOSIS) Team: – Thermal/solvent extraction (THX) processes – Solvent-vapour extraction (SVX) processes – Process design and scale-up

Developing Saskatchewan Oil Sands

CONFIDENTIAL

SRC’s 3D Variable Pressure/Temperature Physical Model for Oil Sands Process Development

Features: • One-of-a-kind laboratory in which a

portion of an oil sands deposit can be re-created under variable conditions of temperature and pressure

• Allows testing of bitumen recovery processes at larger than lab-bench scale; at realistic real-world conditions

• Provides data for advanced numerical simulation models

• Provides data for design of field-pilots and field-demonstrations

Building Performance

• Cost-effective energy efficiency and energy conservation technologies – Model National Energy Code – R-2000 program – National Fleet Challenge – Municipal Energy Efficiency Program – Building energy efficiency – Energy efficient housing

• Factor 9 House • Affordable Northern Housing

CONFIDENTIAL

CONFIDENTIAL

CONFIDENTIAL

Working in Partnership

Project CLEANS (Client: SK Ministry of Energy & Resources): Project manage the reclamation of 38 satellite mine and mill sites in northern

Saskatchewan, including Gunnar and Lorado (>$40M / 17 yrs) Technology areas: environmental assessment and remediation, radiochemistry, long-

term monitoring .

Partners and/or sub-contractors: Natural Resources Canada AECOM Canada Ltd. Denison Environmental Svcs. Golder Associates Ltd. Prince Albert Grand Council SRK Consulting Uranium City Contracting

Regulators: Canadian Nuclear Safety Commission Canadian Environ. Assessment Agency Fisheries and Oceans Canada Saskatchewan Ministry of Environment

Communities: Black Lake Camsell Portage Fond du Lac Hatchet Lake Stony Rapids Uranium City Uranium City Metis

CONFIDENTIAL

SRC is generating positive impacts: Helping the people of Saskatchewan develop a viable economy with

quality jobs and a secure, sustainable environment Helping Saskatchewan continue to be the best place in Canada to

live and work Helping Canada grow its economy and its global competitiveness Helping international companies and governments with some of the

best and most up-to-date technologies in the world

By enabling INNOVATION applied research, development, demonstration, and

commercialization of smart science solutions™

Conclusion