Innovation and Commercialization in the Canadian Auto Parts Industry

On October 20^th, 2014 the APRC and the Automotive Parts Manufacturers’ Association (APMA) co-hosted a workshop titled “Innovation and Commercialization in the Automotive Parts Sector: What is the Role of Public Policy?” The event was held at Toyota Motor Manufacturing Canada’s headquarters in Cambridge, Ontario, and was attended by over 40 representatives of industry and government, as well as a number of affiliated academics and graduate students.

Following opening remarks by Toyota Motor Manufacturing Canada General Manager Greig Mordue, a panel was convened by APRC Principal Investigator Dr. Charlotte Yates. The panel included presentations by Joe Loparco of AGS Automotive Systems, Dr. Peter Warrian of McMaster University, Dr. John Holmes of Queen’s University, and outgoing APMA President Steve Rodgers.

Joe Loparco focused on the three ‘not-so-secret’ ingredients to the successful commercialization of innovation in automotive parts manufacturing: money, ideas, and the business environment. He described the challenges that cost- and production-driven manufacturers face when attempting to commercialize innovations. According to him, Canada’s automotive parts manufacturers have exceptional project management skills, but the pressures on producers impede the ability to let their ideas ‘breathe’ and reach a point where they can be successfully commercialized. In order to overcome these challenges, he suggested a public policy environment that takes a more systemic and disciplined approach to the commercialization of innovation. He also introduced some ideas for supports to improve these processes and better connect institutions with businesses in order to increase the capacity for innovation and commercialization in Canada.

Dr. Peter Warrian examined the impact of environmental regulations on the automotive industry supply chain. He argued that many of the environmental policies enacted in Europe and North America impose a greater burden for new technological developments on automotive parts suppliers rather than OEMs. In this context, he sought to determine what policies can best support innovative automotive parts suppliers in order to help them increases their technological capabilities and capacity to innovate. A copy of his presentation is available here.

Steve Rodgers provided some very interesting insight into some of the most current innovations in automotive technology, most of which focused around information technology. He described in more detail (with the help of a short video available here) the APMA’s ‘Connected Car’ project, which brought together over a dozen Ontario-based firms to develop a vehicle that showcased the next generation of automotive technology. In his opinion, such innovations are best marketed when situated in their final application. He also discussed the value of public policy that supports a more collaborative and integrated approach to innovation and commercialization, something that is particularly important for smaller businesses that seek to bring their innovations to market.

The final panelist, Dr. John Holmes, provided an overview of the automotive parts industry in Canada. A particular emphasis of his presentation was the high level of integration between Canadian automotive parts suppliers and producers in the Great Lakes region of the United States (e.g. Michigan, Ohio, Indiana, Illinois). He described how the competitive environment for Canadian producers has changed significantly in the past decade, with the relative advantage in labour costs having been eroded and the price of electricity having increased. In order to overcome these challenges, he noted that Canadian suppliers must seek opportunities to engage in innovation around disruptive technologies (e.g. power systems, lightweight materials, electrification). In collaboration with Dr. Tod Rutherford from Syracuse University, Dr. Holmes will be conducting a survey of Canadian automotive parts suppliers to gain insight into their innovative capacity and the threats and opportunities presented by new vehicle technologies. A copy of his presentation is available here.

The panel presentations were followed by a general discussion that focused on managing risks, building skills, and accessing funding for innovation. Some participants discussed how a system to manage risk jointly would be advantageous for Canadian suppliers seeking to bring their innovations to commercialization. This, as they mentioned and similar to innovation, is perceived in some European nations as an ongoing task to be shared amongst all stakeholders. Participants also discussed the continuous need to advance the skill sets of those involved in the automotive parts manufacturing industry. Some concluded that the current recovery provides an important opportunity to bring in talent from outside the industry to provide new perspectives during an period in which vehicle technology is changing rapidly.

Participants were then provided with a tour of Toyota’s manufacturing facilities and lunch. This was followed by small and large group discussions that focused on the key factors leading to the successful commercialization of innovations and the most helpful policy supports for such endeavours. Several themes emerged from these discussions. First, innovation and commercialization are separate but related processes and should be conceived of as such. Such processes require not only those with innovative and inventive capabilities, but partners with strong financial and project management skills if innovations are to be successfully brought to market. The appropriate scope of funding and support was also discussed at some length. There was some agreement that there was a certain value in smaller grants without onerous conditions for projects with a very well-defined scope, timeline and a specific problem to solve. At the same time, ongoing leading-edge academic research is also important, and is often best achieved through partnership grants between industry and university researchers.

Perhaps the most important theme from these discussions was a need to push forward and better instill an innovative and entrepreneurial culture, not just amongst business leaders, but across stakeholders, and particularly within the education system. An especially salient point was made regarding the need to ‘reorient’ our concept of entrepreneurialism. The goal of entrepreneurs and culture of entrepreneurialism, according to several participants, should be considered more than simply developing mechanisms to make money. Rather, entrepreneurialism should better integrate innovation and invention at their foundation in order to assist in the process of commercialization.