Digital Twins can Help With Canadian FDI but Need to Clear This Hurdle First
Twins have the potential to bring in more foreign direct investment in sectors Canada is already performing well in
Canada has catching up to do with other countries before any ambitions of using digital twins to secure foreign direct investment (FDI) can become a reality, says one local academic.
“It still seems to me that the understanding and usage of digital twins is very localized and the data that is a big component of [digital twins] is still closely guarded,” said Tessa Hebb, a Distinguished Research Fellow with Carleton University and a co-applicant of the Imagining Canada’s Digital Twin project. “Those two things mean that we haven’t seen the expansion of what a digital twin can do for us on a broader scale,” she added.
That broader scale includes the use of digital twins to bring in investment into the country. In Canada, FDI is when a company outside its borders or a non-residential investor purchases interest in a company. Statistics Canada considers 10 per cent voting equity in a company the threshold for whether an investment is direct vs. your average portfolio investment.
Simply put, a high level of FDI flowing into Canada (compared to its economy) signals how attractive its economic prospects are. Other perks include the adoption of new technology, know-how, and bringing upgraded skills to local workers. It also means better odds of multinational entities setting up shop in Canada and creating jobs.
Collectively, these entities represent less than one per cent of companies in Canada, yet account for 12 per cent of all employment and 15 per cent of the nation’s GDP, according to the government of Canada’s own estimates.
SPACE TO PLAY
There’s room for digital twins to help in Canada’s recovery, considering the beating FDI flow took due to the COVID-19 pandemic after contracting by 49 per cent (about $31B), roughly on par with what other countries saw around the world. As Canada looks to bounce back from its economic rut, growth and job creation will be leading the charge, according to Canada’s international trade minister.
“Canada’s  State of Trade makes two things clear: Canadians and businesses made significant sacrifices during COVID-19, and in our recovery, trade and investment will be critical to generating inclusive, sustainable growth, creating jobs, and building a stronger, more resilient future,” wrote minister Mary Ng in her foreword.
A closer look at inbound FDI 2020 numbers reveal Canada’s largest three sectors for attracting foreign investment were the “Management of Companies and Enterprises” valued at $255B, “Manufacturing” valued at $199B, as well as “Mining and Oil and Gas Extraction” valued at $187B — all sectors where digital twins have tangible applications at reducing costs and boosting efficiencies by providing real-time visualization and predictive analysis.
The real estate and rental and leasing sector, while pulling in just $22B, was also called out for its “exceptional resilience” during the first year of the pandemic. Also noteworthy is the sector’s growth in the last decade, jumping from $3.1B in 2010 to $22B in 2020.
Digital twins lend themselves naturally to Canada’s housing industry with multiple applications in the architecture, construction, and engineering fields. From a housing development perspective, digital twins have been potent in the planning and proposal stage, construction as well as sales and marketing stage.
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‘ONE BIG STUMBLING BLOCK’
But while the potential for digital twins to grow FDI is clear, so too is a hurdle Canadian creators need to overcome when it comes to accessing data to build digital twins.
“One of the big stumbling blocks is what governance model would you use that brings a level of comfort to data sharing,” said Hebb. Governance, as Hebb puts it, is part of the big three factors of environmental, social, and corporate governance (ESG) investors now look at when deciding where to park their money.
It’s something Ian McKay, CEO of Invest Canada, also predicts will be a major shaping force for FDI in Canada going forward.
“The more I hear from investors, the more it becomes clear that a focus on ESG principles are guiding their decisions. It is more than a secondary component of business deals; it is quite rightly fundamental to the investment decision,” McKay wrote in a blog post. “Capital will flow to sectors, jurisdictions and individual companies that respect ESG. Shareholders, customers and corporate boards alike will insist that goods and services are produced in sustainable ways and in sustainable jurisdictions.”
Canadian digital twin makers looking to gain access to private data might want to pay attention to their U.K. counterparts, according to Hebb, who highlighted the Centre for Digital Built Britain (CDBB) for their focus on use cases of digital twins to win over skeptics.
THE STORY ACROSS THE POND
The group got its start through a 2017 government policy document called “Data for the Public Good,” Peter El Hajj, the National Digital Twin Programme Lead at CDBB told 3D CityScapes. The paper recommended the creation of a national digital twin, leading to the creation of the Nation Digital Twin Program, a partnership through the U.K.’s Department for Business, Energy & Industrial Strategy (BEIS) and the University of Cambridge.
That buy-in from government and academics made swaying industry stakeholders easier, said El Hajj.
“We do a lot of collaboration. In the U.K., you have something called the ‘catapults’, which are government-backed organizations that help advance innovation and specific technologies and we work a lot with those,” he said. “I think what made the program successful is a mindset of collaboration between academia, industry and government from the early days. I think this collaboration is key.”
El Hajj points to the Digital Framework Task Group, a group of about 30 groups spread across the three categories, that takes the approach of discussing “everything out loud and in the open” when it comes to and to try to resolve disagreements among the group.
That transparency, in turn, sends the message that digital twins in the U.K. are a safe bet.
“I think that would give confidence to investors in that collaboration. This is basically the starting point and the initial ingredients on the project,” said El Hajj.
Watch: How Digital Twins Add Value To Seaports
And while the attraction of FDI remains a benefit from digit twins in the U.K., it’s mostly tangential and doesn’t influence what CDBB intends on using digital twins for.
“I think what is driving it, the outspoken strategy for it is to enable better outcomes for people and nature through better decisions, through a better infrastructure system,” said El Hajj. “There would be lots of indirect benefits, which is FDI and export growth, but the main mission is to improve the infrastructure for decision making.
3D CityScapes is a Toronto startup specializing in building digital twins and 3D visualizations. Interested in building a digital twin? Get in touch with us here or give us a shout at +1 416-477-6846
Explainer: What Makes a Good Digital Twin? We Asked the Experts
Here’s what separate good digital twins from the bad ones
Well, it turns out the components of a good digital twin are as plentiful as its use cases. A quick reminder that the definitions of what is and isn’t a digital twin vary depending on whom you ask, but for Dan Isaac, Chief Technology Officer at the Digital Twin Consortium (DTC), “a digital twin is a virtual representation of real-world entities and processes, synchronized at a specified frequency and fidelity.”
The DTC is a global think tank focused on the acceleration and adoption of digital twins around the world. (Disclosure: 3D CityScapes is a member of the DTC) Technical details aside, Isaac says how good a digital twin is will come down to the job it’s created for.
“A good digital twin addresses a real business problem and provides a solution that can only be achieved using a Digital Twin approach.” He adds that, at the end of the day, good digital twins help businesses by enabling “optimal decision-making and effective action.”
That’s in line with Stephen Fai, an associate professor with the Azrieli School of Architecture and Urbanism at Carleton University in Ottawa, who shares a more holistic approach to digital twins.
“I think a good digital twin would be something that’s inclusive,” said Fai, citing the big players in the digital twin space tend to produce one-size-fits-all solutions and adds that good twins are “something appropriate for the application.”
Aside from treating digital twins as the right tool for the right job, data integration also plays a crucial factor.
“There’s no twin without the exchange of data. If there’s no data then it’s a mirror,” said Fai. He’s also the director of Carleton Immersive Media Studio and the principal investigator behind the Imagining Canada’s Digital Twin project, a federally funded research project into what it would take to make a digital twin of Canada.
Isaac takes it a step further, liking digital twins to a heart and data as the “lifeblood”.
“The frequency or the twinning rate is akin to the heartbeat,” said Isaac. “The virtual representation and the real world are synchronized – this is the mechanism for the transferal of the data to ensure the requisite level of fidelity between the virtual representation and the physical entity or process.”
It’s a sentiment echoed by David Weir-McCall, a business development manager at Epic Games, the company behind the Unreal gaming engine used to power some digital twins.
“For us, it’s the link to live, continuous data for it to be a digital twin and not just a digital snapshot,” said Weir-McCall.
At Epic, the company is less focused on making digital twins and more invested in creating tools to power them. That’s given people like Weir-McCall insight into examples that incorporate the four components present in any good digital twin: a 3D model, data integration, visualization of that data and an accessible user interface. He highlighted BuildMedia’s digital twin of Wellington, New Zealand, as a good case study.
“It’s a brilliant example of how data has been sitting — for free — in an open-source database from Wellington city council for the last number of years. It’s very inaccessible in the way that you have to read XML data in order to understand it,” said Weir-McCall.
“BuildMedia basically looked to create a place where that data is visualized so that the citizens of Wellington can actually understand how their city runs. That’s what a great example of a translation layer is between data that is open and free and available to people who want to understand and make better decisions with that information.”
The results of projects like BuildMedia have Issac excited for what’s to come.
“The next generation of Digital Twins will open the doors to what was only envisioned before in imagination. This means that we can better understand the world we live in today and provide the path to changing the future for the betterment of society as a whole.”
Do you agree or disagree with these takes of what makes a good digital twin? Let us know what you think in the comments below.