How to maximize R&D budgets and de-risk innovation

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Brasseurs de la Mauricie, an upstart Quebec brewer (now called L’Hermite), had a problem that threatened to take the fizz out of its ambitious business plan. The four-year-old firm had acquired a used brewing line as part of its expansion strategy, but the owners soon discovered the equipment’s limitations: the gear could only fill one bottle size, and couldn’t be adapted for tall-boy cans, which are popular among beer consumers. What’s more, the used equipment sucked energy, which increased unit costs and generated unwanted greenhouse gas emissions.

The upshot was that Brasseurs had no potential to expand the line.

The solution came from Mitacs, when we partnered the brewer with a small team of mechanical engineering students at the Université du Québec à Trois Rivières. Working on an R&D-focused internship with the company, the students adjusted the equipment so it could work with cans of different sizes. More importantly, they devised a way to route parts of the line outside of the building, allowing ambient temperatures to naturally cool the beer as it moved through the production process, which produced substantial energy savings.

Such university-business partnerships form an increasingly critical link in R&D, especially for the owners of SMEs, who are often pressed to find the time and resources to embark on research initiatives within their own firms. With top-of-mind focus on operational issues such as cash flow, staffing and equipment, SMEs naturally put concerns that aren’t mission critical on the backburner.

Mitacs, a not-for-profit organization that fosters growth and innovation in Canada for business and academia, understands this challenge. We work with companies to create an innovation road map and then help them find the right research counterparts to drive development. The day-to-day transfer of knowledge between our interns and the businesses they support is the major power behind the success of the program. The partnerships allow companies to share R&D costs and significantly de-risk that innovation proposition.

The payback can be game-changing, as the backstory of Element AI, one of Canada’s hottest artificial intelligence start-ups, shows. The company has its roots in the merger of two start-ups that thrived thanks in large part to funding by Mitacs.

Twenty years ago, our organization funded three Université de Montréal grad students and their PhD supervisor in developing AI technologies to improve insurance risk modelling and financial portfolio management. They commercialized their research with the launch of a company in 2001. At about the same time, another Mitacs-funded project at Université de Montréal yielded a second AI start-up. The principals of the two firms collaborated closely on the use of AI, and in 2016, that association matured into Element AI. The company, which now counts about 500 employees in five cities across three continents, raised a record-breaking $135 million in a Series A financing in 2017.

Variations of the Element AI story have played—and continue to play—out with other Mitacs partnerships across the country. Another success story was when we supported software engineering R&D with a budding start-up that would eventually become Pro Studio Masters, one of three firms that deliver high bandwidth streaming of recording session masters to major record labels. The interns working on the project had both coding skills and extensive knowledge of various music genres.

To date, Mitacs has supported hundreds of collaborations between SMEs and university researchers that have successfully advanced pre-commercialized research and provided businesses with the boost they need to get to the next level of innovation.

It’s a telling detail—one that reveals how SMEs are recognizing that actively investing in innovation isn’t one more time-consuming task on a CEO’s to-do list, but rather the key to future success and profitability.

 

MitacsAlejandro Adem is CEO and Scientific Director of Mitacs, a not-for-profit organization that fosters growth and innovation in Canada. As CEO of Mitacs, Adem has overseen an unprecedented expansion of its programs, with the goal of delivering 10,000 research-based internships annually across Canada and abroad by 2020.              

 

 

 

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