albertainnovates.ca

1

2017-18TRANSITIONALBUSINESSPLANJUNE2017

albertainnovates.ca

albertainnovates.ca

2

TableofContents

ExecutiveSummary 3

I.Mandate 4

II.OperatingContext 6

III.LegacyAreas,OutcomesandPerformanceIndicators 12

IV.TransitionalCorporateGoals 14

V.Budget 20

VI.Risks 22

albertainnovates.ca

3

ExecutiveSummarySETTINGTHESTAGEInnovationiskeytoeconomicgrowthandjobcreationandwillbeincreasinglyimportanttoAlberta’scompetitivenessintheglobaleconomy.Withthecurrentscopeandvelocityofdisruptionandstrongcompetitivepressuresfromglobalization,Alberta’sfutureprosperitywillincreasinglycomefromnotonlyourabundantnaturalresources,butalsothetalentandentrepreneurshipofourpeople.Thecontinuationoftheoften-coinedphrase“TheAlbertaAdvantageisatrisk,”withtheprovincefacingtremendouschallenges:

• $10billionprovincialroyaltygap

• Globalinnovationandskillsrace

• TheneedtodemonstrateClimateLeadership

• $20billionandgrowingannualexpenditureforAlbertahealthcare.

Theprovince’sresearchandinnovationsystemhasacriticalroletoplayinaddressingthesechallenges.AlbertaInnovates(AI)viewschallengesasopportunitiesandwillembracetheseopportunitiestocreateaneweraofprosperityforAlberta.

Itwasinresponsetothischanginglandscape,thatthefourAlbertaInnovatesCorporations–BioSolutions,EnergyandtheEnvironment,HealthSolutions,andTechnologyFutures–wereconsolidatedonNovember1,2016.Thisconsolidationoffersanopportunitytoenablegreaterefficienciesandeffectiveness–notmerelyincostsavingsbutalsoincreasesthepotentialtotransferknowledgefromonesectortoanotherandstreamlinesupportservicesbyprovidingasinglepointofentrytoinnovators.

AlbertaInnovates’RoleTobegloballycompetitiveandtocreateanAlbertaeconomythatisbuilttolast,AI–astheprovince’slargestresearchandinnovationagency–mustbethecatalystofanenvironmentwhereinvention,innovationandindustrythrive.Fortheprovincetosucceed,thebuildingblocksofinnovation–academia,industry,entrepreneurs,andgovernment–mustworkinlockstepwitheachother.OnlythroughacoordinatedapproachcanAlbertameettheurgencyofthechallengesitfacestoday.AI’sdisciplined,market-orientedapproachandlong-standingrelationshipswitheachofthesepartners,enablestheCorporationtoplayapivotalroleintheProvince’sresearchandinnovationsystem;ensuringAlbertaachieveseconomic,healthandsocialbenefitsfromthegovernment’sinvestmentinresearchandinnovation.

LookingAheadThisfirstfiscalyearisayearoftransitionforournewlyformedCorporation–ayearwherewemustfocusonbuildingastrongfoundation.Withnearly600employeesintenlocationsfromthefourlegacycorporations–eachwithauniqueculture,historicaloperatingmodelandmandate–integrationwillbeneithersimplenorstraightforward,butiscriticaltooperatingasasingle,homogenousentity.

albertainnovates.ca

4

Apriorityareaistoimproveourexternalcommunicationswithourstakeholders.First,wewillworkwithourpartnerstobuildAI’slong-termstrategicplan.Thiscollectiveapproachtostrategicplanningisfoundedonthebeliefthatbyfocusingonmutuallydesiredoutcomes,Albertawillachieveitsdesiredoutcomeswithgreaterspeedandsuccess.Second,AIwillfostergreaterawarenessofthesuccessesandoutcomesachievedbyAIanditspartners.AIrealizestheonusisontheCorporationtodemonstratevaluetoourstakeholders,andworkisunderwaytobettertrackandcommunicateoutcomes.

Whilethiscriticalworkisunderway,wewillactivelyadvanceourchangejourneybysettingdownfivedistinctcorporategoals:

1. Nimbleandresponsive

2. Resourceallocationtiedtooutcomes

3. Innovationculture

4. Coordinatedsingleentity

5. CoalitionBuilding

Theprocessofoperationalizingthesegoalswillbetransparent,clearandrealistic–andwillinvolveallAIemployees.Regularmonitoringandreportingtooursoleshareholder–theGovernmentofAlberta–demonstratesAI’scommitmenttotransparencyandaccountability.

Theincreasingpaceofinnovationandtheimpactofdisruptivetechnologiesandprocessesonsustainablesuccessisclear:itisnolongerenoughtosimplykeepup.Togetherthefoundationwelaytodaywillpayoffmanytimesover,inyearstocome.

I.MandateIntroductionOneofthekeyachievementsofthenewAIandtheMinistryofEconomicDevelopmentandTrade(EDT)isthedevelopmentofanewCorporateVision,mandateandvaluesforthesingleconsolidatedentity.Thesewereestablishedcollaborativelytoreflectacommonunderstandingoftherespectiveroles,responsibilitiesandaccountabilitiesbetweenEDTandtheCorporation.Theyalsorespondtotheneedforanewapproachtosupportandenhanceinnovationcapacityandopportunitiesintheprovince,andreflectthepartnershipmindsetAIwillpursuegoingforward.

CorporationVisionThevisionofAlbertaInnovatesistobeindisputablyrecognizedasaleader–provincially,nationallyandinternationally–incatalyzingresearchandinnovationinAlberta.

MandateTheobjectiveoftheCorporationistosupportresearchandinnovationactivitiesalignedwithGovernmentofAlbertaprioritiesintheareassuchasagriculture,forestry,energy,health,environmentandothers.Inaddition,fosteringthedevelopmentandgrowthofnewandexistingindustriesthroughresearchandinnovationisanothermajorobjectiveoftheCorporation.

albertainnovates.ca

5

ThemandateoftheCorporationis:

• OutcomesOriented:accelerateprogressinresearchandinnovationwithafocusoncommercialization,whichisparticularlyalignedwithAlberta’sworld-classstrengths,contributingtotangibleoutcomesthatoffervaluetoAlbertans,suchasamorediversifiedeconomy,enhancedenvironmentalperformanceandahealthierpopulation.

• User-DrivenandResponsive:takearesponsive,market/user-drivenapproachthatenablesAlberta’sinnovatorsacrosscurrentandemergingsectorsbyprovidingasingle-entrypointtomeetarangeofneedssuchas:

o Network/partnersacrosstheresearchandinnovationcontinuum;

o Funders;

o Business/technicalexpertiseandappliedresearchservicestode-riskandaccelerateresearchandinnovationtothenextlevelforimpactfulapplication;and

o BuildingcapacityofAlberta’snextgenerationofinnovators.

• Collaborative:catalyzecoordinatedapproachestodriveoutcomesthroughpartnershipsacrossallordersofgovernment,theprivatesector(particularlyentrepreneurs),academiaandotherresearchandinnovationstakeholders.

• Strategic:advisetheGovernmentofAlbertaonitspolicydevelopment,bringinginnovationleadership,foresightandexpertisetotheGovernmentofAlberta’soverarchingsystemstrategyforresearchandinnovationandprograms,andleveragestheCorporation’sstrategicpartnershipsacrossstakeholdersandmultipleGovernmentofAlbertaministries.

• TransparentandAccountable:demonstrateandcommunicatethetangiblevalueofpublicinvestmentininnovationtoAlbertans,viasuccessstoriesandperformancemeasures.

CorporateValues

albertainnovates.ca

6

II.OperatingContextAchievingValuethroughConsolidationTheNovember1,2016consolidationofthefourpredecessorAIcorporations–BioSolutions,EnergyandtheEnvironmentSolutions,HealthSolutions,andTechnologyFutures–wasdrivenbytheneedtobringfocusandimprovedemonstrableoutcomesfromtheprovinces’investmentininnovation.Theconsolidationofferstheopportunitytoleveragecross-sectoralexpertise,formerlyembeddedineachcorporation,andtoachievesharedoutcomesmoreefficiently.ThisbenefitstheCorporationandourpartnersbybetterleveragingresearchandinnovationcapacityandovertimewillstreamlineaccesstofundingandothersupportservicesbyprovidingasinglepointofentrytoinnovators.

CorporatemergersoftenfallshortofexpectationsandAI’suniquecomplexitiescontributetothechallenge.Withnearly600employeesin10locationsacrossfourcities–aswellastwosubsidiariesprovidingappliedresearchservicestoindustry,legacycultures,operatingmodelsandmandates–integrationactivities,andculturaltransformationwillbeachallengingtask.Thisbusinessplanwasdevelopedwiththepragmaticunderstandingthatfullintegrationofthefourlegacycorporationswilltakeconsiderableeffortandfocus.

Whiletheconsolidationprogresses,programsandserviceswillcontinuetosupportourstakeholders.AIleadershipwillworkwithkeypartnerstodevelopastrategicplantoofferlongertermguidanceonpriorityareas.TheBoardandseniormanagementwillalsoensureourpeople,processesandtechnologiessupporttheefficientexecutionofAlbertaInnovates’mandate.

RenewedFocusonPartnershipsInnovationcannothappeninisolation.ThisisanareawheretheprovincialinnovationsystemwillneedtoimproveforrealprogressinthediversificationandelevationofAlberta’seconomytooccur.Theurgencyofourchallengesrequirethatthebuildingblocksofinnovation–academia,industry,entrepreneurs,andgovernment–workinlockstepwitheachothertodevelopuser-pull,market-orientedsolutions.

Elementshavebeenidentifiedtosupportthisrevitalizeddirection.AIwillseektounderstandtheneedsandobjectivesofourclients,clarifyingrolesofthevariousplayersinAlberta’sinnovationecosystem,andsetclearinvestmentobjectivesandtargets.

TheCorporation’sabilitytocombineseedfundingfornewinitiativesandsustainedfundingforthoseprogramsshowingresults,withbusinessandtechnicalexpertiseandaccesstocollaborativeopportunities,isacriticaldifferentiatingfactorforAI.Thelong-standingrelationshipswehavewithourpartnersisakeystrengththatenhancesthevaluewedelivertoourclients.ToincreasetheamountofinvestmentintoAlberta,AIregularlyleveragesitsseedfundingprogramswithourrelationshipsinthepublicandprivatesector.Forexample,ourEntrepreneurialInvestmentsdivisionfocusesonprovidingmentorship,linkagesanddirectfundingtoAlbertaentrepreneurs.Onesuchlinkageisconnectingentrepreneurswithourfederalcounterpart,theNationalResearchCouncilanditsIndustrialResearchAssistanceProgram(IRAP).Overatwo-yeartimeframe,AIandNRCfunded35projectsintheprovince,whereAIcontributedapproximately$4MandIRAPcontributedapproximately$5.5Mtohighpotentialentrepreneursintheprovince.

albertainnovates.ca

7

Throughthissamedivision,EntrepreneurialInvestments,forevery$1fundedbytheCorporation,Albertaentrepreneursraised$9.50ofadditionalfollow-onfunding,81percentofwhichcamefromtheprivatesector.

Inadditiontoindividualpartnerships,multidisciplinarycoalitionsinvolvingindustry,government,post-secondaryinstitutions,andserviceprovidersareincreasinglyimportanttosuccessfulinnovation.ThesecoalitionsprovideAIwithaccesstomorediverseandrobustresearchcapacity,significantlyenhancingitsabilitytoachievetheambitiousgoalsofitsmandate.

AI’spartnershipsarefoundedontheprinciplethatourpartners’successisoursuccess.Helpingourpartnersachievethatsuccess.Thisbeginswithunderstandingtheirstrategicgoalsandaligningoureffortstothoseneeds.Byfocusingonmutually-desiredoutcomes,weachievethestrategicobjectivesofbothourpartnersandtheprovince.TheserelationshipsareakeycomponentofAI’sstrategytocreateamoreresilientanddiversifiedeconomy.AI’suniquemixofexpertise,seedfundingandabilitytobuildlinkagesandconnectionsacrossdiversestakeholdergroupsisAI’svaluepropositiontoourpartners.

Keepingpaceinthe21stCenturyIncreasingly,innovationisaglobalracewherethelandscapeandopportunitiesarechangingatanexponentialpace.AnewgenerationofICTtechnologiesinareassuchasbigdata,quantumcomputing,awaveofinventionsinadvancedmaterials,health,aswellasnewbusinessmodels,arelayingthefoundationforprofoundtransformations.Thereisanurgencytoadjusttothesenewrealities.Theprovincehasreachedaninflectionpointwhereweeitherbecomegloballeadersininnovationorriskgettingoutpacedbyourpeers.Astheprovincefaceschallenges,suchasthe$10Bprovincialroyaltygapandtheneedtomateriallyreduceitscarbonintensity,Albertacannotleadthisracebyrelyingsolelyonournaturalresources.Theprovincemustutilizethefullpotentialofthetalentandentrepreneurshipofitspeopleandinstitutions.

albertainnovates.ca

8

ThenewAlbertaInnovateshasinheritedaproudhistoryofachievement,butmustevolvetomeetcurrentchallengesandopportunities:10yearsago,thefivemostvaluablecompaniesontheStandardandPoor(S&P)500wereExxonMobil,GeneralElectric,Microsoft,AT&T,andProctor&Gamble.TodaytheseareApple,Alphabet(Google),Amazon,Microsoft,andFacebook.In1960,theaveragelifespanofanS&P500companywasaround56years;by2014,itwas15years.Ithasbeensuggestedthat,injust10years,40percentoftoday’sFortune500companieswillnolongerexist.1Theincreasingpaceofinnovationandtheimpactofdisruptivetechnologiesandprocessesonsustainablesuccessisclear:itisnolongerenoughtosimplykeepup.

Albertamustpivotfrombeingaresourcecentriceconomytoonewhichisdynamic,resilientandrelevantintoday’sglobalmarketplace–leveragingitsexistingstrengthstobecomeahightechresourceeconomywhilealsodevelopingneweconomicsectorsintheprovince.Albertaneedstoestablishaglobally-recognizedinnovationbrand.StepssuchasthecreationofasingleministryresponsibleforeconomicdevelopmentandtheconsolidationofthefourAlbertaInnovatesCorporationswilladvancethisworkwithprioritiesofeconomicdiversification,exportgrowth,jobcreation,environmentalsustainabilityandimprovedhealth.TheCorporationwillbeginthepreliminaryworktobuildacommonunderstandingofAlberta’sGlobalInnovationbrandinthecomingyear.ProgressmadeinrecentyearstolaythegroundworkforAlbertatobeknownforitsglobalcarbonleadershipandhealthinnovationwillbeessentialinsupportingthedevelopmentofthisbrand.

FullScopeInvestmentStrategyInnovationcanhavesignificantimpactonacountry’seconomicstatusandglobalcompetitiveness.WhilecurrenteconomicconditionsrestraintheGovernmentofAlberta'sabilitytorampupinvestment,AIisdedicatedtoensuringthateverydollarinvestedcreatesmeaningfulreturns.Thiswillbeaccomplishedthroughfocusedinvestment,clearlydefinedoutcomesandactiveperformancemonitoring.

Asastrategicpartnerandadvisortogovernment,AIwantstochangethediscussionaroundpublicfundingforresearchanddevelopment.Thecorporationbelievesthattheprovinces’investmentintoAlbertaInnovatesshouldbeviewedasseedfundingforkeystoneinitiativeswiththegreatestpotentialbenefittotheprovince.However,onitsown,thisfundingwillbeinsufficienttocreatethetransformationalchangesneededtoacceleratetechnologyadoptionandapplicationintheprovince.Alintendstoaccelerateitsworkwithgovernmenttoimplementnewapproaches,partnerships,andculturaladoptionofinnovation,andtoincreaseaccesstoinvestmentcapitalwiththegoalofenhancingAlberta’seconomicprosperity.

Fosteringone-on-onepartnershipsanddevelopingmulti-partycoalitionsarecriticaltoAI’sapproachtoexecutingafullscopeinvestmentstrategy–onethatusesallavailableresources,includingnewapproaches,toaccomplishitsobjectives.Throughcombiningtheexpertise,passion,knowledgeandresourcesofmultipleparties,frombothwithinandoutsidetheprovince,asmalljurisdictionlikeAlbertacan“punchaboveitsweight”.

Onepriorityareaoffocusisthefederalgovernment.BasedonStatisticsCanadadatafrom2013,Albertareceivesjust$1.11fromthefederalgovernmentforeveryprovincialdollarinvested.

1https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/insights-and-issues/ca-en-insights-issues-future-of-productivity-2015.pdf

albertainnovates.ca

9

Thenationalaverageis$3.29federalinvestmentperprovincialdollar2,withBritishColumbiaandOntarioat$5.07and$6.13respectively.PurposefulcollaborationwiththefederalgovernmentcouldopensignificantopportunitiesforAlbertaandgreatlyacceleratetheinvestmentavailablefortechnologydevelopmentandapplicationintheprovince.Someofthisworkisalreadywellunderway.

Anotherareaoffocusistoconveneourpartners,anddeveloptargeted“TeamAlberta”coalitionstotacklecomplexandsystemicbarrierstoachievingthenew21stcenturyversionoftheAlbertaAdvantage.OneofAlberta’sgreateststrengthsisitsentrepreneurialspirit.Asopportunitiespresentthemselves,AIwillbringtogetherdiversegroupsfromacademia,industryandgovernmenttoworkonissueslargerthantheabilityofonesingleentitytosolve.

Someissueswillrequireevenbroadercoalitionstobeformed,aswellascross-ministerialsupportfromtheGovernmentofAlberta.Anexampleofonesuchissueiseducationandtraining.Albertansknowthatwhenitcomestothehigh-techjobsofthe21stcentury,wearecompetinginaglobalmarketplace.Acrosstheworld,countriesarefocusingoneducation,withauniqueemphasisonthemath,engineeringandscienceskillsrequiredfortheindustriesoftomorrow,andwemustensurethatoureducationsystem,industryandschoolsarekeepingpace.ThesecomplexissuesrequiremultiplepartiestocometogetheranddesigntheroadmapnecessaryforAlbertatomaintainandincreasethequalityoflifeavailabletoitscitizens.

UniqueAppliedResearchExpertiseandFacilitiesAsapubliclyfundedinnovationagency,AIisuniqueamongitscounterpartswithtwowhollyownedsubsidiariesfocusedonprovidingindustryandgovernmentclientswithappliedresearchservices.ThesetwoAIassets–InnoTechAlbertaandC-FERTechnologies–offeruniqueprogramsandservicesthatenableacceleratedoutcomesandreducedriskforinnovatorslookingtoexpandrevenuestreamsand/orenternewmarkets.OnesuchserviceiscontractresearchforthecriticalindustrialsectorsthatarethebackboneofAlberta’seconomytoday–Energy,AgricultureandForestry–helpingthesesectorstoacceleratetechnologyadoptionandpursuenewmarketopportunities.AnotheristohelptheGovernmentofAlbertadeliveronitscriticalprioritiessuchasmonitoringthebiodiversityandenvironmentalqualityintheprovince.

ThroughInnoTechAlberta,Alalsobringstogetherdiversegroups–largeindustry,smallbusinessandgovernment–intotargetedconsortiumsfocusedonhelpingthesepartiestocollaborativelyde-riskinnovationandexplorenewmarketopportunitiesaswelltoworkonindividualclientneeds.InnoTechclientsvarybysize,locationandsectoraswellasthescopeofservicestheyutilize.Whenreviewingthesizeofclientsserved,thedatashowsthatofallclientsservedin2016-17:

• LargeIndustryaccountedfor32%:firmswithmorethan200employeesoperationalinlimitedregions

• Smallenterpriseaccountedfor31%:firmswithlessthan100employees

• Multi-NationalEnterpriseaccountedfor11%:firmswithglobaloperations,marketsandinvestments

• MediumEnterpriseaccountedfor6%:firmswith99to199employees

• Otherwas20%andcomprisedofGovernment,Post-Secondary,Not-for-Profit,ResearchOrganizations,andMunicipalities.

2http://www.statcan.gc.ca/pub/88-221-x/2015001/t065-eng.htm

albertainnovates.ca

10

OneofAI’scorevaluesismarketorientation.AstrongrelationshipwithourcontractresearchclientsandadeepunderstandingofthegeographyandprofileoftheprovinceiskeytoAI’sabilitytoremainnimbleandresponsivetoemergingindustryneeds.Thisfeedsdirectlyintotheefficacyofourprograms,whichisborneoutthroughclientfeedback.

In2016,AIsurveyedInnoTech’sTop100clientsandapproximately90percentofclientsweresatisfiedwiththeworkthatwasperformed.WhenaskedtorankwhytheychosetheappliedresearchservicesofAI,thetopthreereasonswere:

• Technicalexcellence

• Relationshipwithstaff

• Qualityresults.

Furthermore,whensurveyclientswereaskedwhatvaluewasgained,thetopthreeresponseswere:

• Compliancewithregulatoryrequirements

• Increasedcompetitiveness

• Growthinrevenues.

Theseresultsconfirmthatthetechnicalexpertiseofthestaffandconsistencyindeliveringresultscreatesameaningfulcompetitiveadvantageandvalue-addforclients.Lookingahead,thereisanopportunityforAItoexploretheroleitsappliedresearchfunctionplaysrelativetoourpost-secondarypartners,includinguniversitiesandpolytechnics,inareasidentifiedashighpriorityandwhereresultscanbemeasured.

AchievingTransformationalChangeCanadaisaleaderinknowledgecreation,asdemonstratedbyoverallperformancerankingsfromboththeGlobalInnovationIndex(GII),wherewerank15thoutof128,andtheGlobalCompetitivenessReport(GCR),wherewerank15thoutof138.However,theGII’smeasureofInnovationEfficiency,whichcomparesacountry’soutputagainstitsinput,placesCanadaas57th.Similarly,theGCRranksCanadaas25thforinnovationandbusinesssophistication.Thesestatisticshighlightalong-standingconcernthatCanadaisunderperformingandnotsuccessfullyconvertingitsknowledgeandinfrastructurestrengthsintotransformativeproductsandservices.

Astheprovince’slargestagencyfocusedonresearchandinnovation,AIisreadytotaketheboldstepsnecessarytotransformoureconomicfuture.WithanewCEOandBoardofDirectors,theconsolidatedCorporationismovingaheadwithaunifiedandclearlydefinedmandateandrole.Thisessentialfirststepmustbematchedbyaculturethatisnimble,open-minded,readyandwillingtoengageinnewendeavorsandtakeadvantageofchangingmarketneedsandtrends.

albertainnovates.ca

11

Lookingahead,AIwillbetakingahardlookatexistingprogramstoidentifythosethatdeliverthegreatestoutcomes.Inanenvironmentoffiscalrestraint,AlbertaInnovatesmustmakeeverydollarcount.Investmentsgeneratingthegreatestreturnswillbeprioritizedwhileotherswillpivottoareascapableofgeneratingbetteroutcomes.Thisislikelytoresultinthealterationordiscontinuationofsomeexistingprograms,whichwillultimatelyresultinbetteroutcomesfortheprovinceanditspeople.Thiswillbebalancedwitheffortstogreaterleveragecontributionsfromacademia,industry,theprovincialandfederalgovernments,andinternationalpartners.

ItwillalsobeimportanttoidentifygapsandchallengesinthewaytheGovernmentofAlbertamanagesitsinvestmentinresearchandinnovationprovince-wide.AIwillworkwiththegovernmenttoreviewsystemicissueswithintheprovince’sinnovationsystemthat,ifleftunaddressed,willlimittheabilitytoachieveourgoals.AIisnottheonlysupportingagencyinthisecosystem,anditisimportantthatwetakeaholisticviewofprogrammingwithintheprovince.Assuch,AImustensureitsprogramscomplementandsupporttheprogramsofferedbyotherpartnersintheinnovationsystemandthatthereisalignmentfortheachievementofmutuallybeneficialoutcomes.

TheCorporationwillimprovethewayinwhichitmeasuresandreportsonitsinvestmentsbothquantitatively,suchasjobandrevenuecreation,aswellasqualitatively,suchasapplicationofinnovativetechnologiesandapproachesinthepublicandprivatesector.However,measuringtheutilityofaninnovationinvestmentportfolioiscomplicated,aslong-termprojectsmaynotproducemeasurableresultsformanyyears.AIrealizestheonusisontheCorporationtodemonstratevaluetoourstakeholders,andworkisunderwaytobettertrackandcommunicatetheseoutcomes.

ThegoalssetbeforeAIareaspirational,whichcannotbeachievedwithoutmakingharddecisionsandtakingboldsteps.UndertheleadershipofthenewCEOandBoard,AIwillbalanceafocusonitslong-termgoalswithappropriateflexibilityintheshorttermtoensureAlbertansarereceivingthebestvaluefortheirinvestment.

albertainnovates.ca

12

III.LegacyAreas,OutcomesandPerformanceIndicatorsIntheupcomingyear,legacyprogramsfromthefourpredecessorcorporationswillbeoperatedbytheCorporation.Currently,AIinvestsinthreebroadindustrysectors–CleanEnergy,BioandHealthinnovation.AfourthfocusareaoftheCorporation–Cross-SectoralInnovation–supportsthebuildingblocksoftheinnovationecosystem–industry,entrepreneurs,researchersandpost-secondaryinstitutions.ThechartbelowhighlightsthefourbusinesslinesinheritedbytheCorporation,andthedesiredoutcomesfromthesebusinesslines.ThesebusinesslinesmaychangeoncethedeliverablespresentedundertheTransitionalGoalsoutlinedinSectionIVofthisbusinessplanareachieved,andAIdevelopsanewlongtermstrategicplan.

BUSINESSLINE–CROSSSECTORALINNOVATION

AlbertaContextAImakesinvestmentsinCross-Sectoralenablerstofacilitateinnovation.Byofferingresearchcapacity,entrepreneurialknow-howandbusinessdevelopmentinfrastructure,researchers,entrepreneurs,SMEsandindustryareabletoadvancetheirideasintoapplication.

DesiredOutcomes1. Creationofresearchcapacityinareaswhichcutacross

multiplenew&existingindustrialsectors2. De-riskandincreaseadoptionoftechnologybyexisting

CompaniesthroughAI’stwoAppliedResearchsubsidiaries3. Providedirectcoaching,connectionsandfundingtohigh

potentialAlbertaEntrepreneurstoincreasetheeconomicbaseintheprovince

4. AIwillactasaconduitandestablishcross-sectorengagementwithSME's,LargeScaleBusinessesandAI.ThecollaborationofthesesectorswithAIwilldeliveractionableandcommerciallyviableproducts.Mostimportantly,theoutcomeofthepartnershipswillhaveasitskeygoalafirstcustomerfor

theinnovation.

BUSINESSLINE–HEALTHINNOVATION

AlbertaContextAIleveragesAlberta’sexcellenceinhealthresearch,agrowinghealthtechnologysector,andunique,unifiedhealthdeliverysystemstrengths.Thesequalitiesprovideanopportunityforleadershipinthescaleandspreadofhealthinnovation,drivingtobetterpatientoutcomesforAlbertansandgrowthinthehealthtechnologyeconomicsector.

DesiredOutcomes1. Increasingthedevelopmentandadoption(withinand

beyondtheProvince)ofnovelserviceconfigurationsandtechnologiestoimproveoutcomesandefficiencyofhealthcare

2. CatalyzingthestrengthsofAlberta’sresearchandinnovationsystem,entrepreneursandunifiedProvincialhealthsystemtoacceleratethegrowthofthelifesciencesandotherhealth-relatedtechnologyindustrysectorsinAlberta

3. Mobilizinghealthdatatoimprovepatientcareandenableoutcomeslistedabove

albertainnovates.ca

13

BUSINESSLINE–CLEANENERGY

AlbertaContextResearchandinnovationbuildsonAlberta’snaturaladvantagesandexperiencestoleadthedevelopmentofinnovativeenergyandenvironmentaltechnologiesbuildingonournaturaladvantagestoachieveasociallyresponsible,environmentallysustainableenergysectorthatsupportsadiversifiedandprosperouseconomy.

DesiredOutcomes1. AlbertaInnovateswillcontributetoAlberta’s:

• Globallycompetitive,lowemissionandvalue-addedeconomyfromitsenergyresources

• CleanTechSector• Environmentalsustainabilityandclimatechangeadaptability.

BUSINESSLINE–BIOSECTOR

AlbertaContextAImakesresearchandinnovationinvestmentswhichleveragesAlberta’sfood,fibre,forestrysectors,expertiseandnaturalresourcesforagrowingglobalpopulationinacarbonconstrainedenvironment.

DesiredOutcomes1. AlbertaInnovateswillcontributeto:• Growthanddiversificationoftheprovince’sagricultureandfoodsector

• Strongstewardshipoftheprovince’senvironmentandnaturalresources

• Developmentofnewusesforforestfibreandcropresidueleadingtobio-industrialsectorgrowth.

Acriticalprioritythisyearistocompleteacomprehensivereviewandassessmentofitsexistinglinesofbusiness,andtheprogramsandservicesofferedwithinthem,whileinparallelalsodevelopingalongtermstrategicplanwithkeystakeholdersintheInnovationSystem.Changestolegacybusinesslines,asaresultofboththisreview,andthesettingofanewstrategicdirectionforAImaybeneeded.Inaddition,AIwillneedtodeveloparobustandconsistentperformancemeasurementframeworkwhichfacilitates:

• strongandtimelymanagementoversightovertheperformanceofAI’sinvestmentportfolio,

• trackingofprogresstowardsitsnewlong-termstrategicplan,and

• CommunicationofthevalueandoutcomesgeneratedbytheGovernmentofAlberta’sinvestmentintoAI,whichareeasilyunderstoodbybothstakeholdersintheInnovationSystemandAlbertans.

ThedevelopmentofarobustperformancemeasurementframeworkwillbeachallengingtaskasmanagementmustrelyontheexistingreportingsystemsofthefourlegacyCorporations,whichdifferedintheirapproachesandmaturitylevels.AImustgainaconsolidatedviewastotheavailabledatawithineachofthelegacycorporationsandwillneedtoaddresscurrentgapsindata,processesandsystemstoreportonmeaningfulandrelevantperformanceindicatorsalignedtothenewdirectionofasingleconsolidatedAlbertaInnovates.

TheillustrationonthenextpagehighlightssomeoftheperformanceindicatorstrackedbythefourlegacyCorporations.AIwillcontinuetoreportontheseperformanceindicatorswhiledevelopingitsnewPerformanceMeasurementframework,assessingcurrentbusinesslinesandprograms,andcomprehensivelong-termstrategicplan.

albertainnovates.ca

14

LegacyPerformanceIndicators

IV.TransitionalCorporateGoalsLayingastrongfoundationinatransitionalyearAlbertaInnovateshasaproudhistoryofachievementarisingfromitsfourpredecessorcorporations.However,aswemoveforwardasaconsolidatedorganizationmorewillbedemandedofAlbertaInnovatestosupportAlberta’sascenttoagloballycompetitiveinnovationjurisdiction.AstheCorporationdevelopsitslong-termstrategicplanwithitspartners,effortstobuildastrongfoundationwillbeunderway.

Fivebroadcorporategoalswithactionabledeliverablesandmilestoneshavebeendeveloped.ThesewillallowAItomeasureprogressonourjourneytowardtransformationalchange,andfacilitatetransparencyandaccountabilitytoourshareholder–theGovernmentofAlberta.

Inaddition,thesegoalswillmobilizeourstaff,whocomefromfourdistinctentitiesandcultures,tocollectivelybuildastrongfoundationforfuturesuccess.Asanewlyconsolidatedentity,thisyearisayearoftransition,andassuchthefirstfourcorporategoalsfocusonAIgettingitshouseinorder,thefifthgoalmovesAIforwardonitsnewroleofbringingtogethera“TeamAlberta”approachtochallengeswhereAIworkstoconvenetherightpartnerstoachievetransformativechange.

albertainnovates.ca

15

BackgroundInthepast,AIhasnotbeenviewedasanimbleandagileorganization,responsivetoboththeneedsofstakeholdersandchangingmarketconditions.TheCorporationviewsthisasafundamentalimperativetosuccessfullydeliveronitsmandate.

Whilemuchworkisnowunderway,reachingthedesiredstateisnotaone-yearjourney.AImanagesacomplexinnovationportfoliotouchingallaspectsofAlberta’sbroaderinnovationecosystemineachofAlberta’skeyindustrialsectors.Thecorporationmustaddressexistingprocesses,commitments,andculturalfactorsasittransitionstoanimble,responsive,anddynamic21stcenturyinnovationagency.

CorporateGoalStatementThenewAlbertaInnovateswillmakeiteasierforresearchers,smallandmediumenterprises,CampusAlbertaandindustrypartnerstocollaborateandturnchallengesintoopportunitiesby:

(i) MakingiteasiertoengageandpartnerwithAlbertaInnovates;and,

(ii) Continuouslyassessingitsinnovationinvestmentportfolioandresourceallocationdecisionstoensuretheyremainrelevantinlightofcurrentmarketconditionsandthecontributionsofotherstakeholders.

Deliverablesa. Reviewlegacygrantprocessesand

developanactionplantoimprovethequalityandspeedofclientservicebyQ4.

b. Assesslong-termprograms(definedasbeinginoperationfor5ormoreyears)forcurrentmarketrelevancebyQ4.

c. Implementago-forwardmechanismforcompletingperiodicindepthreviewsofprograms,alignedwithEDTandapplicablestakeholders.Thiswillallowallprogramareastobeactivelyreviewedandrefreshedevery3years.MechanismandapproachtobeconfirmedbyQ3.

d. EstablishanEmergingTechnologiesactionplan,alignedwithEDTpriorities,toallowAlbertatocapitalizeonnewandhighpotentialtechnologyareasbyQ4.

e. Allnewfundingpartnershipagreementsgreaterthan$250,000annuallywillexplicitlyconsidertheInnovationlandscape(i.e.,otherstakeholders)andmarketneedspriortoapprovalstartinginQ2.

f. Reviewthelegacyallocationofinternalresources,suchasstaffandcapital,tothefutureneedsoftheorganization;identifygapsandchangesneededtoensureAIisnimbleandresponsivetothecurrentneedsoftheprovincebyQ3.

albertainnovates.ca

16

BackgroundAlbertaInnovateswillactivelymanagetheallocationofitsexpertiseandseedfundingprogramstopost-secondaryinstitutions,smallbusinessandentrepreneurs,industryandotherpartners.InvestmentsmadebytheCorporation,willbemarketorientedwithaclearlydefineduser-needattheonset.Sufficientshort-termandintermediateoutcomeswillbenecessaryforongoingsupportandfunding.Whereoutcomesarenotdeemedtobesufficient,stepswillbetakentomakereal-timeadjustmentsand,whereappropriate,toreallocateresourcestohigherpotentialinitiatives.

CorporateGoalStatementAlbertaInnovatesmanagesalimitedpoolofresourcestoachieveoutcomeswithitspartnersthroughprovidingexpertise,facilitatingcollaborativeopportunitiesandaccess,andprovidingseedfundingtopartnerswhereappropriate.Toenabletheallocationofresourcesbasedonresultsandalignmenttogovernmentpriorities,theCorporationwillbuildanenterpriseviewofallinvestments,theircurrentperformanceandassessmentofmarketorientation

Deliverablesa. Buildconsolidatedinventory

ofAIsexistingprogramsbyQ1,articulatingtheexpectedoutcomesandhowprogressistrackedcurrently.

b. StartinginQ3,allnewfundingpartnershipagreementswillidentifyclearprojectmilestonesandperformancemetricsthatarticulatetheoutcomessought,userandhowperformancewillbeassessed.

c. Completeacurrentstateassessmentofexistinginvestmentapproval/governanceprocesses,includingthecriteriausedtoevaluate,selectandapproveinvestments.IdentifyclearrecommendationsforapprovalbyQ3.

d. Buildanenterprise-wideviewofAIscurrentinvestmentportfolio,assesstheoutcomesbeinggeneratedanddevelopaconsistentprocesstotrackmulti-yearfinancialcommitmentsbyQ4.

e. InconcertwiththedevelopmentofAI’sLong-TermStrategicPlan,theCorporationwillarticulatetheresultsAIistryingtoachieveoncorporate-widebasisfortheProvinceintermseasilyunderstoodbythegeneralpublicbyQ4.

albertainnovates.ca

17

BackgroundCultureisnotcreatedovernight.Thisisamulti-yearjourneyinanysizeorganizationandwillbeespeciallychallengingforAIduetothesize,complexityofoperationsandvelocityofchangealreadyexperiencedbytheemployeesofthefourpredecessorcorporations.

BuildingontheexistingstrengthsandachievementsoftheCorporation’sfourpredecessorcorporations,AIwillengagethesupportofitsemployeestodefineanewandcommoncultureandarticulatethepathtogetthere.ThisincludestheexplicitconsiderationofexecutingonthenewneedsoftheCorporation,suchascatalyzingconnectionsbetweenindustry,entrepreneurs,researchersandendusers.AndaddressingthegapsinAI’scommunicationsbothinternallyandexternally.

CorporateGoalStatementSuccessstartswithculture.Toexecuteonitsambitiousmandate,Albertainnovatesmustharnessthepassion,persistenceandexcellenceofitsstaffthroughmeaningfulengagementanddevelopacommonAIcultureoutoffouruniqueandwellestablishedcultures.

Thecorporationwillfosteranaction-orientedculturethatisnimble,forward-looking,readytoengageandparticipateinnewendeavors,withthewillingnessandimperativetotakeadvantageofchangingmarketneedsandtrends.ThedevelopmentofthenewAIculturewillinvolvetheemployeesoftheorganizationaswellasourpartners.

AIwilldevelopitsemployeecommunicationstoensureaccurateandtimelyinformationisreceivedconsistentlybyemployees.ExternallyAIwillbuilditstoolsettomoreefficientlycommunicateandengageitspartners.

Deliverablesa. Launchanemployeeengagementsurvey,

conductedbyanindependentthirdparty,andhaveAI’snewCEOvisitallAlbertaInnovatesofficestoengageemployees,gatherfeedbackandleveragetheirpassion,persistenceandprofessionalismtosetanewculturaldirectionforAIbyQ2.

b. IdentifyapreliminaryinternationalidentityorbrandforAlberta’sinnovationssystem.DefinewhatAlbertashouldbeknownforgloballyoverthecomingyearsbyQ3.

c. DesignandarticulatetheMasterbrandapproachforallAIprograms,subsidiariesandservicesbyQ2.

d. Developanintegratedmarketingandbrandingstrategy–tofosterawarenessanddemonstratesuccessbyQ3.Thisstrategywillinclude,butisnotlimitedto,theuseofmediumssuchasAI’swebsiteandsocialmediaplatformstoinformandengageemployeesandpartnersbyQ4.

e. EngageemployeestodefineAI’snewcultureandcompleteanassessmentofcurrentstrengthsandgapsbyQ3.

f. LaunchaninterimperformancemanagementprocesstofacilitateemployeelineofsighttoAI’sBusinessPlanandenableallemployeestostriveforexcellenceandachievetheirprofessionalgoals.ApprovalofacommonperformancemanagementprogrambyQ4tofacilitateachievementofAI’sdesiredcultureandstrategicoutcomes.

g. ByQ4,gainapprovalofanewconsolidatedHRStrategyandInternalCommunicationsStrategythatoperationalizesthecreationofAI’sdesiredcultureandprioritizestheinvestmentsneededtoconsolidatethefourpredecessorCorporation’sHRpractices.

albertainnovates.ca

18

BackgroundTheconsolidationofthefourlegacycorporationsallowsforsingle-dooraccesstothemanypartnersofAlbertaInnovates.

Whilethepotentialforaconsolidatedsingleentityisgreat,theCorporationrecognizesmanymergersfallshortofexpectationsandthatmuchworkisrequiredtotakefulladvantageoftheconsolidationgiventhecomplexitiesofitshistoryandoperatingenvironment.

CorporateGoalStatementTheconsolidationwasacriticalfirststeptoimprovetheoutcomesgeneratedbytheProvince’sinvestmentintoresearchandinnovation.However,AlbertaInnovatesmustnowaddressthecomplextaskofintegratingtheoperationsoffourcorporations,todeliveronthefullpotentialofasinglecoordinatedcorporationfocusedonacommonmandateanddirection.

Deliverablesa. AIExecutivetosponsorandoverseean

IntegrationProjecttoprioritizetheintegrationofback-officefunctions,suchasITservices,andaddressthechangemanagementneedsandcapacityoftheorganization.QuarterlyupdateswillbeprovidedtotheMinisterandBoardtofacilitatetransparencyonanyrisksorissuesnoted.

b. Simplifyandconsolidatemultiplefundingprocessescarriedoverfromthefourpredecessorcorporations’partnershipswithAlberta’spost-secondaryinstitutionsbyQ4.Withover50%offundinggoingtopost-secondaryinstitutions,thiswillenablegreaterefficiency,effectivenessandclarityfortheresearchcommunity.

c. DeterminehowtointegratethetechnicalexpertisewithinAI’sappliedresearchsubsidiariesandsectorofficesintoAI’sinvestmentduediligenceprocessbyQ3.

d. Reviewandcoordinatemultipletraineeprogramscarriedforwardfromthefourpredecessorcorporationstoachievebetteroutcomesandenablegreaterclarityforbothstudentsandourpost-secondarypartnersbyQ4.ThesetraineeprogramsarefocusedonnurturingtheProvince’sknowledgecapacityandarenecessaryfortheprovincetobeagloballycompetitiveinnovationjurisdiction.

e. AImanagesmanymulti-yearagreementswithitspartners,whilereceivingfundingonanannualbasisfromtheGovernmentofAlberta.Tomanagecash-flowriskandtoenabletimelyandinformedinvestmentdecisions,AIwillrefineitscash-flowmodelling/forecastingcapabilitybyQ3.

f. DevelopaplantoleverageandcoordinatetheexpertisewithinexistingChairProgramsfundedwithinpost-secondaryinstitutionswithotherinvestmentsandexpertisewithinAI.Identify3actionableopportunityareastoaccelerateoutcomesbyQ4.

albertainnovates.ca

19

BackgroundAlbertahassignificantstrengththroughourexcellentpost-secondarysystem,ambitiousentrepreneurs,andforwardlookingindustry.OnlybycoordinatingtheeffortsofallofthesepartieswithinthelargerecosystemwillwebeabletosuccessfullytransformAlberta’seconomicfuture.AsakeymemberofAlberta’sinnovationecosystem,AIwillworkmorecloselywithindustry,entrepreneurs,academiaandothergovernmententitiessuchasAlbertaHealthServices,EmissionsReductionAlbertaandSustainableDevelopmentTechnology.AIwillactasaconvenertoensurethegreateststrengthsofallpartiesareleveragedtomaximizetheoutcomesofinvestmentsintheseareas.

CorporateGoalStatementAlbertaInnovateswillworkcollaborativelywithindustry,federalandprovincialpartners,andpost-secondaryinstitutionstobuildgreatercoalitionsandinitiativestoachievedesiredinnovationoutcomes.ThisongoingworkwillbesupportedbyexplicitengagementofourpartnersinthedevelopmentofAI’snewlong-termstrategicplan.

Deliverablesa. Developalong-termstrategicplan,in

collaborationwithkeystakeholderswithintheAlbertainnovationsystem,byQ3.ThisplanwillarticulateAI’sprioritiesandtheportfolioshiftnecessarytodelivertangibleoutcomesfromtheProvince’sinvestmentintoAlbertaInnovatesandidentifythehigh-levelchangemanagementneededtoexecute.

b. WherethereareopportunitiestopartneratthatnationalandprovinciallevelonfurtheringAlberta’sinnovationpriorities,AIwillstrivetofulfilltheroleofaconvenerandbringitspartnerstogethertoachievemutuallybeneficialoutcomes.QuarterlyprogressreportswillbeprovidedtotheBoardandGovernmentofAlberta.

c. EngageAI’spartnerstoreviewexisting“platformtechnology”strengthswithintheprovinceanddevelopadeliberateapproachtoleveragethesestrengthsformultiplesectorsandaccelerateoutcomesbyQ3.

d. SupportthecreationandmaintenanceofstrongindustryclustersintheProvinceandidentifyspecificplatformtechnologiestoacceleratetheirgrowthbyQ4.QuarterlyprogressreportswillbeprovidedtotheBoardandGovernmentofAlberta.

e. SupportGovernmentofAlbertadepartmentsbyprovidingaccesstoAI’stechnicalexpertisebyQ1.Trackandreportonservicehoursprovidedonaquarterlybasis.

albertainnovates.ca

20

V.ConsolidatedBudgetBackgroundThisconsolidatedstatementofoperationsreflectstheconsolidationofAlbertaInnovatesandincludesrestatementsforthe2015-2016actualresultsand2016-2017budget.

Revenueisexpectedtobeatsimilarlevelsto2016-2017.Grantrevenueassociatedwithendowmentswillberestrictedtothepredetermineduseofthoseendowments.

Forthistransitionyear,expenseswereidentifiedasrelatingtoaspecificsector(Bio,Energy,Health),cross-sectoraloradministrative.Sectorcostsincludebothgrant/programinvestmentsaswellasprogramoperationscoststhataredirectlyrelatedthosebusinessunits.Theexpenditureheadersincludethefollowingactivities:

CrossSectoralInnovation–theformercrosssectoralactivitiesrelatedtoappliedresearch,basicresearchandcommercializationwithintheformerAlbertaInnovatesTechnologyFutures.

HealthInnovation–investmentsinhighlyskilledpeople,provincialplatformsandpartneredactivitiesformerlyincludedinAlbertaInnovatesHealthSolutions

CleanEnergy–fundingrelatedtoadvancedhydrocarbons,cleantech,waterandtailingsresearchandwaterandlandprogramsfromtheformerAlbertaInnovatesEnergyandEnvironment.

BioSector–includesthePrioninstitute,sustainableproduction,bio-industrialinnovation,ecosystemservicesandbiologicalGHGmanagementprogramfromtheformerBioSolutions.

BudgetedexpendituresreflectprimarilyexistingcontractualobligationsfromtheformerAIcorporations.AsofDecember31,2016,AlbertaInnovateshadalmost$200millionofcontractualobligationsongrantsandagreements.

Budgetamountsfor2018-2019and2019-2020areestimatesbasedonexistingcontractualobligationsandaverageannualspending.Anysignificantreductionsoradjustmentsreflecttheendingofexistingprograms(eg.HealthInnovationhasasignificantprogramendingin2020).Futureyearfundingwhichisuncommittedor

availablefornewopportunitiesisincludedinthecross-sectorallineassectorspecificopportunitieshavenotyetbeendetermined

Administrativecostsincludeallcorporateservicessuchasfinance,informationservices,facilities,legal,humanresources,purchasing,corporateplanningandreportingandperformancemanagementandevaluation.Prioryearshavebeenrestatedtoreflecttheconsolidatedapproachtoadministration.

Althoughanaccumulatedsurplusexists,atotalexpensetargethasbeenassignedtoAlbertaInnovatethroughthegovernmentbudgetprocesswhichlimitstotalexpensesandtheuseofthesurplus.

contractual obligations and commitments

(in thousands of dollars)

2017–18 116,550

2018–19 59,174

2019–20 12,397

2020–21 5,210

2021–22 2,564

thereafter 582

total 196,477

albertainnovates.ca

21

Anannualdeficitof$17Misbudgetedfor2017-2018whichreducestheaccumulatedsurplusto$65.5M.Theaccumulatedsurpluswasgeneratedfromtimingdifferencesonexpendituresoverthelastfewyears.Theaccumulatedsurplusisexpectedtocontinuetobedrawndownoverthenextthreeyears.

AlbertaInnovatesConsolidatedStatementofOperationsfortheyearendedMarch31,2018(dollarsinthousands)

consolidated total

2015-16Actual

2016-17Budget

2017-18Budget

2018-19Budget

2019-20Budget

revenues

Government of Alberta Transfers

Funding from ED&T

Base Grant $160,547 $158,749 $160,849 $160,249 $141,999

Deferred from Prior Years 6,867 13,051 14,072 20,407 19,407

Other Grants 28,228 31,307 28,499 28,499 23,499

Deferred Capital Contribution - - 1,000 1,400 2,000

Funding from Other GOA – Other Grants 15,115 12,753 3,240 3,240 3,240

Funding from Other Government Sources 4,913 5,144 4,479 4,479 4,479

External Revenue and Industry Funding 59,238 46,998 55,024 59,689 59,689

Investment Income 1,581 1,196 1,086 1,086 1,086

Other Revenue 4,086 4,104 768 768 768

total revenue 280,575 273,302 269,017 279,817 256,167

expenses

Cross Sectoral Innovation Enablers 139,531 137,971 135,461 135,000 150,965

Health Innovation 97,227 85,449 74,013 78,601 60,351

Clean Energy 17,031 25,827 25,645 21,895 22,071

Bio Sector 18,459 24,189 19,758 21,300 23,409

Administration 31,437 29,537 31,113 31,400 31,400

total expenses 303,685 302,973 285,990 288,196 288,196

annual deficit $(23,110) $(29,671) $(16,973) $(8,379) $(32,029)

accumulated surplus, beginning of year 136,195 112,182 82,511 65,538 57,159

accumulated surplus, end of year $113,085 $82,511 $65,538 $57,159 $25,130

adjustments to deferred revenue accounts

Revenue Recognized During the Period 100,635 105,255 14,072 20,407 19,407

Funding Received 94,037 90,000 - - -

change in total deferred revenue

Total Deferred Revenue, Beginning of Year 116,451 109,853 94,598 80,526 60,119

Total Deferred Revenue, End of Year 109,853 94,598 80,526 60,119 40,712

decrease in total deferred revenue $(6,598) $(15,255) $(14,072) $(20,407) $(19,407)

albertainnovates.ca

22

AlbertaInnovates2017–18KeyOutcomes(dollarsinthousands)

VI.RisksAspartofAI’sEnterpriseRiskManagementprocess,managementactivelymanagestheriskswhichcouldadverselyimpacttheabilitytodeliverontheorganization’sbusinessplan.Thefollowingsignificantriskswereidentifiedbyseniormanagement:

1.Impactonoutcomesfromdecliningrevenuestreams.AIfundsitsmandatefortheProvinceofAlbertathroughtworevenuestreams–fundingfromtheGovernmentofAlberta(approximately80percent)andcontractresearchforcommercialenterprisesandgovernmentclients(approximately20percent).TheredecreasedrevenuecandirectlyaffectAI’sabilitytomeetfuturefundingneedsofcertainpartners,withthepotentialforcurrentprogramstobecanceledoroverhauled.Desiredoutcomesofpartnerinitiativesmaynotbeachieved,whichcouldaddalayerofreputationalriskfortheCorporation.TheCorporation’scontractresearchrevenueisconcentratedwitharelativelysmallpoolofclients.Duetotherecenteconomicdownturn,contractresearchrevenueshavecontinuedtodeclineyear-over-year.Whilethereisincreasingpressureonbothrevenuestreams,thelong-termnatureofresearchandinnovationrequiresAItosustaincriticalhumanandinfrastructureassetsinplace.Thisisfurtherimpactedbytherelativelyfixedcoststructureoftheorganization,duetofactorssuchassignificantportionofunionizedandlongserviceemployeesandmulti-yearfundingagreements.Thelongerthecurrenteconomicpressurespersist,thegreaterthestrainontheorganization.

albertainnovates.ca

23

Potentialimpact:medium-highlikelihoodofoccurrence:high

MITIGATIONSTRATEGY:AI’sbusinessplanandbudgethasbeendevelopedprudently,balancingshort-termfiscalpressureswiththelong-termdemandsofresearchanddevelopment.BudgeteddiscretionaryexpenseswillbereducedandadditionalcontrolswillbeputinplacetomonitorAI’sfinancialpositionmonth-to-month.Duringthesechallengingtimes,astrongfocusonbusinessdevelopmentandsupportofourclientswillbemaintained.Staffhasbeenencouragedtothinkofout-of-theboxsolutionsandmaintainflexibility,acknowledgingcurrentfiscalpressureswhilestillprotectinglongtermoutcomes.

AsustainedcommitmenttobetterarticulatetheoutcomesgeneratedbytheProvinces’investmentintoAIwillalsohelpmitigatereductionsinfundingfromtheGovernmentofAlberta.Goal2–ResourceAllocationtiedtoResults–aswellasAI’sfuturecommunications,willlaythegroundworktobothreportonandcommunicatethevalueoftheProvince’sinvestment.

2.TalentcapacityTheCorporationneedstherightmixoftalentandcapacitytodeliveronitsambitiousmandateandlong-termstrategy.Withtherecentconsolidation,thereisalackofvisibilityintotheexistingskillsandcompetenciesoftheorganization.Inaddition,theCorporationwillneednewskillsandexpertisetofulfillitsrefreshedmandateandrole.

SomestaffatAIhavehighly-specializedskillsandexperiencenoteasilyreproducedorreplaced.Asaresult,hiringdecisionsmustbestrategicandcandidatesmustmeettherequirementsofaknowledge-basedworkenvironment.Nationally,attheuniversitylevelSTEM(ScienceTechnologyEngineeringMath)fieldsrepresentjust24.5percentofallfieldsofstudy,53.5percentofearneddoctorates(PhDs)and25.8percentamongmaster’sdegreesin20161.ThesestatisticsdemonstratethelimitedtalentpoolAIcompetesforwithprivateindustryandothergovernmentbodiesandagencies.Whilethecurrentdownturnandlayoffshasincreasedthepoolofcandidates,itiscriticaltonotethathighly-skilledprofessionalsarealsohighlymobile.IfuncertaintyishighinAlberta,andopportunitiesareconsideredmoreplentifulinotherregionsofCanadaorothercountries,talentcaneasilymigrate.

Potentialimpact:mediumLikelihoodofoccurrence:mediumMITIGATIONSTRATEGY:ManagementwillactivelyidentifythekeypositionsandindividualswhoselosswouldposethegreatestrisktoAI.AreviewofthecurrentskillsandexpertisewithintheorganizationwillbecomparedtothefutureneedsofAI.Wherepossible,staffwillbetransferredfromareasofthebusinessthatarenotatfullcapacitytoareaswheretheCorporationisunderserved.TrainingandrecruitmentstrategieswillbedrivenbytheneedtomeetthecurrenttalentneedsoftheCorporation.Afocusonsuccessionplanningforkeyroleswillhelptomitigatetheriskoflossofkeypersonnel.

albertainnovates.ca

24

3.Integrationofthefourlegacycorporations.Thereareinherentchallengeswithanymergerofdistinctentities,letalone,amergeroffourentitieseachwithitsownuniqueculture,historicaloperatingmodelandlegacymandates.Therecanberoomformiscalculationsonthescale,scopeandtheassociatedchangemanagementimplicationsoftheintegrationandthelevelofassimilationrequiredbetweenalllayersofthenewCorporation.Assuch,thereistheriskthatpoorexecutionofkeyorganizationaltransitionswillleadto:strainandengagementofstaff,lossofkeyknowledgeandexpertise,damagetokeyrelationships,insufficientmanagementinformationsystemsanddisruptioninday-to-daybusiness.

Potentialimpact:mediumLikelihoodofoccurrence:mediumMITIGATIONSTRATEGY:Thistransitionalbusinessplanformspartoftheapproachtoensuretheback-officefunctionsareconsolidated,andthereisafocusonprovidingcleardirectiontoallemployeesontheneedsofAI.Fivecorporategoalshavebeendeveloped,withthegoalofensuringthatthereistransparencyintheoverallprocesstohavebuy-infromthenearly600employeeswithinAI.Therewillberegularmonitoringofthesegoalsastheconsolidationprogressesfurther,toensurethatthereisaccountabilityandtheabilitytocorrectcourseasunforeseenitemsarise.

4.CoordinationofactivitiesandsupportfrompartnersinAlberta’sinnovationsystem.Inthelastfiveyears,theresearchandinnovationlandscapehaschangedsignificantly,andincreasinglyAlbertaneedstotakeanintegrated,cross-sectoralapproachtorespondtocomplexchallengessuchasclimatechangeandstructuralshiftsinourenergysector.Increasedcoordinationamongstsystemplayersisneededtodrivetheoutcomesrequiredoftheinnovationsystem.InsufficientsupportfromourpartnerstoacceptandadapttoAI’srefreshedmandate,roleandoperatingmodelwillimpacttheexecutionofAI’sdesiredoutcomes.

Potentialimpact:mediumLikelihoodofoccurrence:mediumMITIGATIONSTRATEGY:ThenewlyformedAIisfocusedonimprovingcoordinationandcollaborationwithinAlberta’sinnovationsystem,withtherecognitionthatfortheprovincetosucceed,thebuildingblocksofinnovation–academia,industry,entrepreneurs,andgovernment–mustworkinlockstepwitheachother.AsAIdevelopsitslong-termstrategicplan,thiswillbedoneinconcertwiththeseessentialpartners.Inaddition,theCorporationwillfocusonensuringitsgrantingagreements,communicationsstrategyandday-to-dayinteractionswithpartnersareclear,consistentandsupportthenewdirectionoftheorganizationtobeoutcomefocused,marketoriented,responsiveandaccountabletotheGovernmentofAlberta.

albertainnovates.ca

25

5.Culture.Thelatebusinessmanagementguru,PeterDrucker,famouslysaid“Cultureeatsstrategyforlunch”.Thisstatementstillholdstruetoday–bothinternallywithintheCorporationandforthebroaderinnovationsystem.CulturewithintheAlbertaresearchandinnovationecosystemandAIinfluencesthesystem’sabilitytocreatethetransformativechangesnecessaryforAlbertatobecomeagloballycompetitiveandresilienteconomy.Thevalues,normsandbeliefsoforganizationswithinthesystemplayanimportantroleaspartnersengageandinteract.ThiscaneithersupportorinhibittheachievementoftheGovernmentofAlberta’sinnovationgoals.

Potentialimpact:highLikelihoodofoccurrence:mediumMITIGATIONSTRATEGY:Culturalshifttakestimeandsignificanteffort,howeverintheupcomingyearAIisfocusedonbuildingthestrongfoundationnecessarytodoso.CorporateGoal3hasbeencreatedtoaddressthispressingneed,andisfocusedonengagingstaffinternallytocreatetheculturalshiftnecessary.CorporateGoal5–CoalitionBuilding–isfocusedonaddressingthebroadersystemculturalshift.AlbertaInnovateswillfosteracultureofinnovationacrossthesystembymodellingcollaborativepartnershipsrelationshipsandestablishmutuallyreinforcinggoalsamongstsystemplayerstoachieveimpact.AlbertaInnovateswillformthenecessarypartnershipsandconvenecoalitionstoensuretheAlbertaresearchandinnovationlandscapeispositionedas"innovationready.”