Can Aus­tralia be­come the in­no­va­tion na­tion: an in­ter­view with Christo­pher Pyne

Although Malcolm Turn­bull’s in­no­va­tion na­tion ini­tia­tive has given way – for the time be­ing – to an im­pend­ing dou­ble dis­so­lu­tion, there is still the need to dis­cuss just how such a new ini­tia­tive could ben­e­fit the coun­try. Busi­ness First spoke with Min­ist

Business First - - CONTENTS -

F irst, let’s set the scene: with min­ing in a down­turn, com­modi­ties slump­ing and the coun­try be­ing sup­ported by real es­tate, Aus­tralia must look to other sec­tors to en­sure its fu­ture.

En­trepreneur­ship and small busi­ness must carry some of that weight and to do so, it re­quires sup­port. Ge­off Green MD of GRG Mo­men­tum and au­thor of

The Smart Busi­ness Exit says, “A key point made in the In­no­va­tion State­ment is that Aus­tralians are renowned for their smart ideas, but of­ten fail to com­mer­cialise them. In other words, we are very in­ven­tive but not so in­no­va­tive,” Green says.

“As the In­no­va­tion State­ment goes on to high­light – you have to move past in­ven­tive and be­come in­no­va­tive. It’s in­no­va­tive com­pa­nies that go on to build and sell prod­ucts and ser­vices, cre­ate jobs and drive wealth creation.

“Many of our es­tab­lished busi­nesses, both pub­lic and pri­vate, have un­der de­vel­oped in­no­va­tion or good ideas ca­pa­ble of in­no­va­tion. The In­no­va­tion State­ment will pro­vide a strong foun­da­tion for fur­ther ini­tia­tives to en­cour­age greater lev­els of in­no­va­tion in es­tab­lished busi­nesses. The em­pha­sis on much bet­ter col­lab­o­ra­tion be­tween in­dus­try, the in­vest­ment com­mu­nity, academia, our re­search fa­cil­i­ties, par­tic­u­larly CSIRO, and govern­ment is re­ally en­cour­ag­ing as it’s a key to achiev­ing these out­comes.”

So what level of sup­port does govern­ment in­tend to bring?

The Na­tional In­no­va­tion and Sci­ence Agenda (Agenda) com­prises 24 mea­sures un­der the four themed pil­lars of: • Cul­ture and cap­i­tal, to help busi­nesses em­brace risk, be am­bi­tious and ex­per­i­ment to find so­lu­tions. An im­por­tant com­po­nent of these ini­tia­tives is the changes to the tax sys­tem to re­move bias against risk tak­ing and in­no­va­tive busi­nesses. • Col­lab­o­ra­tion, to in­crease the level of en­gage­ment be­tween busi­nesses, univer­si­ties and the re­search sec­tor to com­mer­cialise ideas and solve prob­lems. Mea­sures un­der this theme will change in­cen­tives to en­cour­age univer­si­ties and in­dus­try to work to­gether. • Ta­lent and skills, these mea­sures will train Aus­tralian stu­dents for the jobs of the fu­ture and at­tract the world’s most in­no­va­tive and en­tre­pre­neur­ial ta­lent to Aus­tralia. • Govern­ment as an ex­em­plar, to lead by ex­am­ple in the way Govern­ment in­vests in and uses tech­nol­ogy and data to de­liver bet­ter qual­ity ser­vices. The Aus­tralian Govern­ment will make it eas­ier for in­no­va­tive SMEs to de­liver tech­nol­ogy ser­vices to govern­ment, and lead by ex­am­ple by be­ing more in­no­va­tive in how ser­vices are de­liv­ered and how data is shared with the pub­lic. “The Agenda pro­vides greater in­cen­tives for in­vestors – through per­sonal an­gel in­vest­ments and via regis­tered ven­ture cap­i­tal ve­hi­cles – to sup­port new startup busi­nesses,” says Min­is­ter Pyne. “It also makes it eas­ier for busi­nesses to raise cap­i­tal for growth through em­ployee share schemes and crowd­sourced eq­uity fund­ing.”

In fact, new fund­ing will sup­port en­tre­pre­neur­ial in­vest­ments in biomed­i­cal dis­cov­er­ies with the $250m Biomed­i­cal Trans­la­tion Fund. The CSIRO In-

no­va­tion Fund will pro­vide a fur­ther $200m to­wards com­mer­cial­is­ing new and novel ideas that are sourced from the CSIRO and other pub­lic funded re­search or­gan­i­sa­tions.

“Mea­sures un­der the Agenda also pro­vide greater flex­i­bil­ity for early stage busi­nesses in re­la­tion to their in­tel­lec­tual prop­erty and ac­cess to com­pany losses al­low­ing early stage busi­nesses to be more flex­i­ble with their di­rec­tion as they se­cure new op­por­tu­ni­ties and fine tune their di­rec­tion.”

The Global In­no­va­tion Strat­egy (GIS) com­po­nent has been specif­i­cally de­signed to give new and startup busi­nesses im­proved ac­cess via ‘land­ing pads’ in key mar­kets across the globe in­clud­ing in San Fran­cisco, Shang­hai and Tel Aviv.

To­day, these cities are the hubs of in­no­va­tion from which we must learn and grow.

The Global In­no­va­tion Link­ages com­po­nent of the GIS will pro­vide seed fund­ing to as­sist Aus­tralian busi­nesses col­lab­o­rate with in­ter­na­tional part­ner­ships.

The in­no­va­tion ini­tia­tive doesn’t just cater to star­tups, ex­ist­ing busi­nesses can also ac­cess many of the pro­grammes un­der the Agenda.

“The In­no­va­tion Con­nec­tions com­po­nent of the En­trepreneurs’ Pro­gramme will fa­cil­i­tate greater con­nec­tions be­tween the busi­ness sec­tor and re­searchers,” Min­is­ter Pyne says.

The En­trepreneurs’ Pro­gramme has a range of other com­po­nents, in­clud­ing the Ac­cel­er­at­ing Com­mer­cial­i­sa­tion com­po­nent, which pro­vides fa­cil­i­ta­tion ser­vices by Com­mer­cial­i­sa­tion Ad­vis­ers, and grants to al­low in­no­va­tive busi­nesses to suc­cess­fully grow their new ideas.

Then there is the In­cu­ba­tor Sup­port Pro­gramme – also a com­po­nent of the En­trepreneurs’ pro­gramme – that will im­prove ac­cess to, and ca­pa­bil­ity of, ex­ist­ing and new in­cu­ba­tors across Aus­tralia.

“Busi­nesses that are seek­ing new mar­kets in the US, Europe, the Mid­dle East and Asia will be en­cour- aged to utilise the ser­vices of­fered at the new land­ing pad sites.

“Busi­ness Pro­grammes un­der the Agenda will be de­tailed – in­clud­ing guide­lines and ap­pli­ca­tion pro­cesses – on busi­ once they be­come open for ap­pli­ca­tions, which for many is from July 1 this year.

“AusIn­dus­try State and Re­gional of­fices have a role of en­gag­ing with their lo­cal busi­ness com­mu­ni­ties in or­der to con­nect their busi­nesses to the pro­grammes – in­clud­ing from the cur­rent suite of AusIn­dus­try pro­grammes - that are most ap­pro­pri­ate to needs.”

What are the eco­nomic ben­e­fits that will come from these?

“A greater in­vest­ment in new, in­no­va­tive startup busi­nesses will cre­ate in­creased em­ploy­ment and eco­nomic op­por­tu­nity for the fu­ture,” says Min­is­ter Pyne.

“Com­pa­nies that em­brace in­no­va­tion, that are ag­ile and pre­pared to ap­proach change con­fi­dently, are more com­pet­i­tive, more able to grow mar­ket share and more likely to in­crease their em­ploy­ment.

“With the sup­port of the Global In­no­va­tion Strat­egy, we will grow ex­ports and in­crease re­lated em­ploy­ment.”

Ac­cord­ing to the govern­ment, The Na­tional In­no­va­tion and Sci­ence Agenda will cre­ate more in­no­va­tive busi­nesses. And com­pared to busi­nesses that do not in­no­vate, in­no­va­tive busi­nesses report[ that they are: • around 60 per cent more likely to report in­creases in

in­come from sales and in­creased prof­itabil­ity; • four times more likely to in­crease the num­ber of

ex­port mar­kets tar­geted; • about twice as likely to in­crease pro­duc­tiv­ity and

em­ploy­ment; • around three times more likely to report in­creases in

in­vest­ment in train­ing and IT ex­pen­di­ture; and • around five times more likely to in­crease the range of goods and ser­vices of­fered. “The Agenda sup­ports in­no­va­tive busi­nesses, which in turn cre­ates a stronger, more vi­brant econ­omy with ex­cit­ing new em­ploy­ment op­por­tu­ni­ties.” There are also tax and fi­nan­cial in­cen­tives. Un­der the ‘Cul­ture and cap­i­tal’ pil­lar there are mea­sures pro­vid­ing fi­nan­cial in­cen­tives for early stage in­vestors (an­gels and regis­tered ven­ture cap­i­tal lim­ited part­ner­ships), to in­vest in new startup busi­nesses seek­ing to com­mer­cialise new prod­ucts, ser­vices and ideas.

“Amend­ments to tax laws are be­ing made to make it eas­ier for young ag­ile com­pa­nies to ac­cess com­pany losses, and there are changes to rules that cur­rently limit de­pre­ci­a­tion de­duc­tions for some in­tan­gi­ble as­sets.”

There is a range of grant­ing pro­grammes avail­able un­der the Agenda, but pro­vid­ing grants to stim­u­late busi­ness in­no­va­tion and growth, is only one part of the equa­tion. Other mea­sures seek to change the cul­tural mind­set, and make it eas­ier for new and in­no­va­tive busi­nesses to com­mer­cialise their new ideas, to ac­cess fi­nanc­ing and fund­ing sup­port from in­vestors, and to have im­proved ac­cess to over­seas mar­kets.

When asked about chang­ing work­force de­mo­graph­ics and how they will in­flu­ence the rise of the Aus­tralian innovator, Mr Pyne says, “the govern­ment recog­nises that to main­tain Aus­tralia’s sta­tus as a first-world, high stan­dard of liv­ing econ­omy in the 21st cen­tury, it needs to fo­cus on high value, well paid em­ploy­ment op­por­tu­ni­ties for young peo­ple.

“In­creas­ingly, these jobs are found in knowl­edge-based ser­vice in­dus­tries, in­clud­ing those that re­sult from the com­mer­cial­i­sa­tion of new ideas. Aus­tralia has a tremen­dous track record of in­ven­tion, but a less than stel­lar one of com­mer­cial­i­sa­tion – and this is where the fo­cus of our in­no­va­tion agenda lies.

“We need to con­tinue to ex­port what we pro­duce, but in­creas­ingly what we pro­duce will be ideas, in­ven­tions, in­no­va­tions and ser­vices. The fo­cus in the Agenda on sup­port­ing STEM and dig­i­tal lit­er­acy for stu­dents will go a long way to en­sur­ing a fu­ture gen­er­a­tion well equipped to com­pete in a global en­vi­ron­ment.

“The Aus­tralian work­force has al­ways been highly adapt­able – but eco­nomic glob­al­i­sa­tion and com­pe­ti­tion means we need to work harder at en­sur­ing they have the skills needed for the jobs of the fu­ture.”

De­spite some com­men­tary that puts Aus­tralia be­hind other na­tions in ten in­no­va­tion stakes, Aus­tralia does fare quite well, par­tic­u­larly in the field of sci­ence.

In­ter­na­tion­ally, Aus­tralia’s in­no­va­tion and sci­ence ecosys­tem per­forms very well in some ar­eas, like the qual­ity of re­search: • In 2013 Aus­tralia pro­duced 3.7 per cent of the world’s re­search pub­li­ca­tions from only 0.3 per cent of the world’s pop­u­la­tion, rank­ing 10th in the OECD.[ 2] • From 2005 to 2014, Aus­tralia sig­nif­i­cantly im­proved its share of the top 1 per cent of highly cited pub­li­ca­tions, go­ing from 3.4 per cent to 6.9 per cent.[ 3] How­ever, Aus­tralia per­forms poorly by in­ter­na­tional stan­dards in trans­lat­ing pub­licly funded re­search into com­mer­cial out­comes.

“We risk slip­ping fur­ther down the in­no­va­tion lad­der,” Mr Pyne says. • In 2012-13, only 5.7 per cent of Aus­tralian busi­nesses gen­er­ated any new-to-mar­ket in­no­va­tions. This com­pares with up to 26 per cent in the top five OECD coun­tries and a 14.5 per cent av­er­age across the EU in 2010.[ 4] • Aus­tralia ranks 29th and 30th among 30 OECD coun­tries on the pro­por­tion of large busi­nesses and SMEs which col­lab­o­rate with re­search or­gan­i­sa­tions on in­no­va­tion.[ 5] Ad­di­tion­ally, Aus­tralia ranks 17th out of 141 coun- tries on the 2015 Global In­no­va­tion In­dex, well be­hind world-lead­ers like Switzer­land, the United King­dom, Swe­den, the Nether­lands and the United States.[

“That is why a fo­cus for the Na­tional In­no­va­tion and Sci­ence Agenda is mea­sured to con­vert more of our re­search into com­mer­cial op­por­tu­nity, so that we don’t miss out on eco­nomic and em­ploy­ment growth.”

The ques­tion is how can Aus­tralia be­come a world leader in the in­no­va­tion stakes.

“Aus­tralia’s econ­omy has en­joyed an un­prece­dented 24 years of un­in­ter­rupted growth. How­ever, we are com­ing to the end of the min­ing in­vest­ment boom and new sources of growth are needed.

“Rapid de­vel­op­ments in tech­nol­ogy and sci­ence are dis­rupt­ing tra­di­tional jobs and in­dus­tries around the world. They are chang­ing the way we live, the way we work and the way we do busi­ness.

“The op­por­tu­ni­ties of­fered by these changes and by the new global econ­omy are vast. If we are to make the most of them, we can­not rely on the old ways of do­ing things. We are on the doorstep of Asia – the world’s eco­nomic en­gine room – with our new trade agree­ments fur­ther open­ing doors to Asia and be­yond.

“The dig­i­tal revo­lu­tion means we are now part of a truly global mar­ket­place of ideas, prod­ucts and ser­vices. We must em­brace an en­tre­pre­neur­ial and in­no­va­tive mind­set to build an ag­ile econ­omy and cre­ate the jobs and in­dus­tries of the fu­ture.

“We must see tech­no­log­i­cal dis­rup­tion for what it is, a mas­sive op­por­tu­nity. We must em­brace, not fear it. We need not just to have the ideas, but to de­velop a hunger to pur­sue them, to take a risk, to learn from fail­ure and to profit from our high qual­ity re­search.”

Mr Pyne be­lieves that sev­eral in­dus­tries will rise through this ini­tia­tive, but he says that the ini­tia­tive is de­signed to boost the over­all state of Aus­tralian busi­ness.

“The Na­tional In­no­va­tion and Sci­ence Agenda is a non-in­dus­try spe­cific pol­icy set­ting. And whilst it does not tar­get spe­cific in­dus­tries, it does sup­port new, in­no­va­tive and ag­ile busi­nesses. Busi­nesses that will thrive in the 21st cen­tury, take full ad­van­tage of Aus­tralia’s as­sets and can build on the past ex­pe­ri­ence of our sci­ence and in­no­va­tion sec­tor.

“Aus­tralia’s prox­im­ity to Asia will re­quire us to de­liver prod­ucts and ser­vices that the Asian mar­ket de­mands in the 21st cen­tury.

“To re­main glob­ally com­pet­i­tive, we must seek to de­velop new in­dus­tries and ‘new to the world’ in­no­va­tions. We must also en­sure that the fi­nan­cial ben­e­fits of our suc­cesses re­main in Aus­tralia and ben­e­fit all Aus­tralians.”

Aus­tralian In­no­va­tion Sys­tem Report 2015 – De­part­ment of In­dus­try, In­no­va­tion and Sci­ence

(Source: Aus­tralian In­no­va­tion Sys­tem Report 2015, Ta­ble A9 p. 127 and World bank Data­base)

(Source: Aus­tralian In­no­va­tion Sys­tem Report 2015, Ta­ble A9 p. 127)

(Source: Aus­tralian In­no­va­tion Sys­tem Report 2014, Fig­ure 2.7, p. 51 and p.3)

(OK) Source: OECD (2013) Sci­ence, Tech­nol­ogy and In­dus­try Score­board. P 127

(Source: Cor­nell Univer­sity, INSEAD, WIPO (2011-2015) Global In­no­va­tion In­dex, GII 2015, URL: http://www. glob­alin­no­va­tionin­

Christo­pher Pyne

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