Hint: don’t look in the dictionary. As developers in Canada know, it is quite a nebulous thing. And in fact, the question seems to come with increasing frequency as one goes through an SR&ED audit. The more explanation that takes place, the greater is the struggle to understand it. The process of trying to understand it deteriorates into a process of explaining what one thinks it may be, followed by the question “Is this it?”
Well, why don’t we just scrap the whole phrase “technological advancement”? Advances in technology today are all about how we combine existing technologies in new ways. There are many real advancements occurring in this way. As Geoff Colvin describes in his recent Fortune column titled “Welcome to the era of Lego innovation”, breakthrough products are being created without creating new underlying technology.
Technology builds technology. But we are at a stage where there are so many “lego” pieces, that the opportunity and challenge clearly is in exploring how the different “lego” pieces can be fit together. We don’t necessarily need new lego pieces, to achieve advancements. We have so much of it. Hardware. Software. Sensors. It really is about how it can be combined and harnessed to better solve problems or introduce benefits that just could not previously be economically created.
Advancements largely do not occur in quantum steps. Rather they are mostly incremental. This shouldn’t be surprising to anyone who has searched through prior art. That exercise sheds light on the true nature of advancement; i.e. many incremental advances building a previous knowledge.
So what does it all mean? Clearly, we are in an age of progress where advancements are tied to the ability to be both imaginative and creative in the combination existing technologies. And certainly there will be some uncertainty that innovators must work through. All of this will be bring new economic growth and further advancement of both skills and knowledge.
Now for the uninitiated, they may believe that this all sounds like SR&ED. Unfortunately, that is not the case. The SR&ED process in Canada is continuing to get more difficult in establishing successful claims, for many projects that are making real advances and delivering on all those economic benefits that we cannot live without. The SR&ED administrators are gravitating to a purest state, where their orientation seems to be much better aligned with the university experiment, as opposed to real experimental development. As I see some great advancements that are belittled and claims that are drastically slashed, I can’t help but worry about the effect. Entrepreneurs who have made huge personal sacrifices feel that they are being crushed by the SR&ED program, rather than supported.
It really does signal that we are at a point in time where the SR&ED criteria should be changed to capture the true gains that we are trying to achieve. But don’t hold your breath. The outcome of the last major review in 2011 has not resulted in any improvements.
So where does that leave all the great potential claims? For starters, you cannot afford to have an over-zealous conviction that your work will qualify for SR&ED. It may not. You must learn about the process that the SR&ED auditor will follow in reviewing your claim, and how you need to present it. You need to really understand what you are getting into, before you invest considerable time and effort in all the prep work. Just as there are uncertainties in the development cycle, there are many interpretation uncertainties in administering the SR&ED criteria. If there were not, the SR&ED auditor would not have to conclude the audit with the phrase “In my opinion”.