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John McDougall, president of the National Research Council, is an Alberta-bred engineer and businessman who took over the NRC in 2010 with a mandate to shake up the venerable institution.Sean Kilpatrick/The Canadian Press

A good war might be just what the country needs to revive its sputtering innovation performance.

The Second World War, after all, spawned a golden age of innovation in Canada, producing key advances in nuclear energy, aerospace and communications.

It's time to bring the same sense of national purpose to the major economic challenges of 2016 – from creating smarter factories to curbing greenhouse gas emissions and containing rising health care costs, according to John McDougall, president of the National Research Council and its network of labs and scientists.

"We're not fighting a military war, but we're actually trying to position Canada in the same way, in an economic competition," explained Mr. McDougall, an Alberta-bred engineer and businessman who took over the NRC in 2010 with a mandate to shake up the venerable institution. "We spread ourselves into so many different areas that we never addressed anything head on. That's fundamentally what we're trying to do here: Do a couple of dozen things really well, hit them out of the park and then move to the next thing."

Victory won't be quick or easy, given that Canada has been moving in the wrong direction for years. Total spending on research and development as a percentage of gross domestic product dropped for a fifth consecutive year in 2015, leaving Canada well behind most other leading developed countries, according to the Organization for Economic Co-operation and Development. R&D spending by businesses is similarly falling behind, weighed down by the retreat of big spenders such as Nortel and BlackBerry, and more recently, by the weak economy.

The NRC, which turns 100 years old this year, is still struggling to be re-establish its leadership role in innovation. After false starts and delays, including a devastating 2014 cyberattack, the federal labs are only now poised to show results from a long effort to refocus on fewer large-scale, more business-centric projects. And the institution is doing it with a smaller work force (down roughly 500 to 3,800 in the past five years) and a relatively modest annual budget of $1.1-billion.

The infiltration of its computer networks, an attack Ottawa has blamed on state-sponsored Chinese hackers, forced the NRC back into the tech dark ages of manual data entry and paralyzed much of its research work for months.

"It's been a bigger problem than we would have hoped," Mr. McDougall acknowledged. "We are really just getting back to being fully operable from a productivity sense, and the legacy will go on for another couple of years."

The NRC is now hiring again at a time when the private sector is cutting R&D budgets. By doing more, the NRC can share the risk and help companies "stay in the game" in the midst of the challenging economic environment, Mr. McDougall explained.

And after years of talking about making the NRC more relevant, Mr. McDougall is finally preparing to unveil some of his pet projects. The most high profile is an NRC-developed process designed to turn carbon dioxide and other airborne industrial pollutants into biomass. The technology is slated to be hooked up in the next few months at a St. Marys Cement Co. plant in St. Marys, Ont. The plan is to test the process for a year to 18 months and then apply it on a full commercial basis, most likely at an oil sands plant in Alberta.

"We need to change the perception that [Canada is] a big emitter of greenhouse gases," he said. "We are optimistic that we'll be able to show that this is not a science problem, it's an engineering problem, and that we can do it at scale."

The NRC has fashioned what it calls the "factory of the future" by retooling labs in London, Ont., and Boucherville, Que., and building a new one in Winnipeg. Private companies will have access to the NRC facilities, modelled on Germany's Industry 4.0 project. Among other things, the labs will help companies find ways to do custom manufacturing at assembly line speeds.

Mr. McDougall also want to launch what he cryptically calls "game-changer" R&D projects by creating a civilian version of the U.S. Defense Advanced Research Projects Agency, or DARPA, best known for developing an early version of the Internet. Part of the plan is to convert the National Institute of Nanotechnology – a joint venture between the NRC, University of Alberta and the Alberta government – into a sort of incubator for big ideas by unleashing teams of crack scientists and engineers on key disruptive challenges.

The big question is whether the NRC has enough clout, resources and private sector buy-in to make a dent in the innovation deficit.

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