<b>Dr Rowan Gilmore</b><br>Business School, <br>The University of Queensland

The brutal truth about innovation

Every now and then during our working lives we reach a point of despair where the time comes to say “cut the nonsense” (or usually, something stronger) and we realise that the trappings of nicety and competing stakeholder agendas have for too long prevented us solving the big challenges we face.

Such is the case with talk about powering innovation in Australia.

There is indeed a real problem with stalling productivity and innovation drivers in Australia. The brutal truth is that, as a nation, we are just not hungry enough to do much else about it.

It is said that necessity is the mother of innovation.

San Diego was hungry in the mid-eighties, when the defence industry left town and threw much of its population into the unemployment lines. The city embraced new industries, centred around its university. Today, San Diego is a global centre for the wireless industry and the birthplace and playground of much of America’s biotechnology industry. It’s known for much more than its zoo.

Finland was also a hungry country, in the early nineties, when its traditional Soviet markets disappeared almost overnight. Like San Diego, its population too faced high unemployment. Government and industry leadership decided to pursue a strategy based on technological growth, and the story of Nokia is history. Finland today is characterised by the highest levels of education, research, and collaboration in the world – and has become arguably the most robust economy in Europe.

Of course, having a full stomach and money to spend is not something any of us should seek to reverse. But it does make the life of innovators difficult, because prosperous times can mask underlying structural problems that only emerge when times become tough. We don’t like to think about Plan B (innovating) when Plan A (commodity boom) is working so nicely.

It’s not that we don’t know what to do. The irony is that no one disagrees much on what needs to be done, the problem is we’re just not hungry enough to do the hard yards and change what we’re all comfortable doing.

For example, let’s start with government. The Federal system needs to work with the states, and the states with each other. Let’s look at just one example of failed Federalism. The Australian Institute for Commercialisation (AIC) was established by the Queensland government as a national organisation, but because the supporting Federal Minister changed portfolios immediately after it was announced, the AIC ended up with a lone state shareholder. As a result, the AIC never gained traction in some parochial states, and was ultimately overlooked by a new government in Canberra that wanted something “radical and new”. This was in spite of broad agreement at the Commonwealth-State Advisory Committee on Innovation, to cooperate.

Government procurement is another classic driver that could be used to revitalise innovation in Australian industry. If we were Japan, Korea, or China, a $40 billion government procurement program would surely establish a “born-global” company on the back of such a capital investment (for instance, think Samsung or Huawei). In Australia, the NBN will instead only enrich construction companies that are able to dig trenches efficiently, while the value-added work is sent offshore. Governments are just not hungry enough to take the risk.

But innovation should not just be about government. Take research organisations. With a few notable exceptions, their collaboration with industry ranks them at the bottom of the OECD tables. Measuring impact is such a scary concept that all talk of it was banished from the ERA (Excellence in Research Australia) initiative. Invention disclosures as a percentage of research expenditure in Australia only just exceeds one-half that in the US and Europe. Why? Our system, in the main, continues to reward those academics who publish in the most prestigious journals and win the most research grants. What business would dare ask its peers to assess the quality of its output, instead of its customers? Universities do. Researchers are still not hungry enough, either.

Lack of finance is one of the most critical barriers to innovation. Yet our financial institutions benefit from a government stipulation that nine (and rising) percent of our income is invested into their superannuation industry, which you and I have done to the tune of well over one trillion dollars. Is there a reciprocal obligation on that industry for enlightened self-interest, to invest in new industries where our children might one day work? Of course not, it would violate their “fiduciary duty to their investors” we are told. Indeed, there is today little institutional investment of any fund into pre-seed or venture capital. Most of us would suspect that our bankers have never known hunger at all.

And what of industry itself? The good news is business expenditure on R&D continues to rise. More companies are “getting it”, and understanding the importance of technological innovation. Many of our service industries are innovating, particularly on the back of mining. Yet most big Australian companies seem happy as innovation followers rather than leaders, for example innovating by procuring new IT systems. Is that sustainable for Australia as a nation? Where are our new “Cochlears” and “Resmeds” coming from? My observation of the middle tier, of small and medium size enterprises, is that many are indeed hungry, but perhaps too famished to help themselves. It’s back to government and the finance sector once again.

The brutal truth about radical innovation in Australia is that most of us are just not hungry enough. We all lack the political will to do what we know needs to be done.

It was ironic that the recent rains had taken the pressure off industry to conserve water and make better use of its waste stream. It seems that now we’re just not thirsty enough, either.

If we’re not hungry, we should be exercising, building muscle and using our brains to put our brawn to work. Let’s summon the political will!