In the 1950s Australia was the lucky country. Under Hawke we became the clever country. But are good fortune and bright ideas enough? UQ Business School's Professor Mark Dodgson argues that we must become the innovative country since innovation is the driver of future economic growth.
Innovation in Australia risks being stifled by a lack of collaboration between the business and research sectors.
Innovation and productivity growth have stalled in Australia since the 1990s. Public support for research and development has fallen by a quarter, and public expenditure on education has slipped below the OECD average, according to the government-commissioned report Venturous Australia, a review of the National Innovation System, 2008.
PROFESSOR MARK DODGSON
Mark has spent 25 years studying corporate strategies and government policies on technology and innovation. A former winner of the Eureka Prize, he has been described as one of Australia’s 25 future business leaders. He is a visiting professor at Imperial College, London.
How come? In 1990 our Prime Minister declared Australia to be the clever country, and announced a raft of initiatives designed to supercharge innovation throughout the economy. Surely something must have stuck? Not much, believes Professor Mark Dodgson from UQ Business School. Mark is Director of the Technology and Innovation Management Centre at UQ Business School, winner of the prestigious Eureka Prize for leadership in Business Innovation in 2007 and adviser to the Federal Government’s Review of Australia’s National Innovation System in 2008. “We import four times as much intellectual property as we export,” he explains, pointing not to a lack of ingenuity and inventiveness but to a poor application of innovative ideas in the business context.
“Our innovation problem in Australia is that we haven’t developed the skills, capability and management ability to turn good ideas into successful products and processes.”
Figures from the GE Innovation Barometer survey are more encouraging. According to the survey of 25 global markets funded by GE and conducted by StrategyOne, over 85 per cent of Australian business leaders link innovation directly to economic growth and competitiveness, job creation and a greener economy. They see that innovation can successfully improve Australian lives in five areas – communications (96%), education (90%) health quality (89%), job market (89%) and the environment (87%).
Australian business values innovation, so why is it stalling? And what can be done?
Professor Dodgson believes the answer is multifaceted. “Innovation should be approached in a professional and organised manner, with government policies that stimulate innovation, and by leaders in business, government and academia who seek opportunities to collaborate,” he says.
Get it right and there is much to gain, with Australia well placed to become a leader among knowledge-based economies of the future, Dodgson argues. “There is potential to unlock new forms of wealth from the strong demand for our natural resources, human capital and ties and proximity to Asia. However, there is much to be done.”
“Innovation should be high in the curriculum,” believes Professor Dodgson. “We should celebrate it. It should get children thinking that industry and business are relevant. It’s an exciting world and one that they can help change by doing innovative things.”
Tony Wagner, author of Creating Innovators: The Making of Young People Who Will Change the World, and Innovation Education Fellow at the Technology and Entrepreneurship Centre at Harvard University, believes it’s changing how children learn across the curriculum that will create tomorrow’s innovators. “It requires a new way of evaluating student performance and investing in education,” he says. “Students need digital portfolios that demonstrate progressive mastery of the skills needed to innovate. Teachers need professional development to learn how to create hands-on, project-based, interdisciplinary courses. Larger school districts and states should establish laboratory schools that pioneer these new approaches.
Wagner stresses the role of parents. “Interviews with parents of today’s innovators revealed fascinating patterns. They valued having their children pursue a genuine passion above straight As, and they talked about the importance of ‘giving back.’ They also encouraged their children to take risks and learn from mistakes.”
CHANGE THE LAWS
Government policies can be enablers or barriers. Reducing red tape, tailoring education and protecting intellectual property are three ways government can contribute to a culture of innovation, according to the GE Innovation Barometer findings.
Leslie Butterfield, CEO of McLachlan Lister, specialises in financing and project management of technology and advanced manufacturing-based innovations. She says governments can lead by example:
“Government is one of the biggest procurers of goods and services in the country,” she says. “There should be a debate around policies and procurement methods to allow some of our more forward thinking public servants to try something different without fear of reprisal.”
Dodgson believes the problem goes deeper, that there is a profound lack of understanding of innovation among policy makers in Australia. “Bureaucrats like things that are straightforward and accountable, and can’t deal with the messiness of innovation, its trials, errors and uncertainties.”
This view is supported by Rio Tinto’s Head of Innovation, John McGagh, who suggests that firms prepared to take risks – an essential element of innovation – deserve support. “If you want to promulgate innovation you need to have a sophisticated debate between policy makers and shapers about how policy can encourage natural commercial risk taking.”
UQ Business School research has shown that innovating firms are more active collaborators than non-innovating firms. OECD analysis shows that collaborating businesses spend 20 per cent to 50 per cent more on innovation than non-collaborating firms. Yet a 2011 ABS study found that only 2.4 per cent of innovation-active businesses in Australia collaborate with universities. In Queensland the numbers are better: 6 per cent of innovation-active businesses sourced their innovation from universities or research institutes between 2009 and 2011.
“Collaboration between complementary areas of expertise, between research and business, and between the research and market-led stimulants to innovation is essential,” says Dodgson, who believes innovation in Australia risks being stifled by a lack of collaboration between the business and research sectors. Australia ranks among the lowest in the OECD for collaboration between firms, between higher education and firms, and second lowest on collaboration between firms and government.
Dr Geoff Garrett, Queensland Chief Scientist and former head of the CSIRO, agrees. “If the fruits of our labours don’t get to the market, create jobs and improve the quality of life, we’ve failed. It is the whole ‘lost in translation’ story.”
The link between research and development investment and market competitiveness is complex. After all, an innovation is only competitive if the market adopts it. A comparison between Forbes Magazine’s top 20 global companies by research and development spend in 2011 with Fast Company’s top 50 world’s most innovative companies in 2012 has few companies in common.
Perhaps it’s not what you spend, it’s how you spend your research budget that has impact. Australia spends 1.7 per cent of national GDP on innovation, a fraction of the amount spent in the US, Europe and Asia. Says Dodgson, “This means we must be more savvy in where budgets are directed. With small domestic markets, significant innovations must be prepared to confront the additional costs and challenges of internationalisation.”
Dr Tammy Hoffman, National Health and Medical Research Fellow at The University of Queensland, agrees that Australia has a problem prioritising what research is backed by the commercial dollar. “There seems to be much more interest and funding in the ‘exciting’ discoveries and the inventions,” she says. “It would be more cost efficient to focus on what we already know to work and getting that into practice. So many innovations languish in journals and don’t make it into policy and practice.”
In March 2013, the Federal Government announced $200 million to be invested in early stage, high growth Australian companies by three new venture capital funds supported by the federal Innovation Investment Fund (IIF). The plan is to match $100 million of Government funding, dollar for dollar, to funds from private sector investors Carnegie Venture Capital Pty Ltd, GBS Venture Partners Pty Ltd and Innovation Capital Associates Pty Ltd.
In his press release, the Minister for Innovation asserted, “Successful start-ups are essential to creating new products, jobs and economic growth. The IIF will continue to co-invest government capital with private investor capital into early-stage Australian technology-based companies.”
RISE TO THE CHALLENGE
Rising to Australia’s innovation and productivity challenge is about fixing the inputs, but it is also about attitude. Leslie Butterfield believes the way Australians think must be challenged. “As a nation we’ve become spoilt and lost our drive,” she says. “The attitude seems to be that what we’re doing is good enough so why should we try harder? But if we don’t look forward, what we have today will start to erode.”
Professor Dodgson believes Australia must address its attitude of scepticism and disinterest about entrepreneurial spirit and academic research. He cites former Labor Minister Barry Jones: “We must be among the few Western countries in which the terms ‘intellectual’, ‘academic’ and ‘theoretical’ are still terms of abuse”.
INNOVATION PIN-UP NATION
South Korea may hold lessons for Australia. “I remember walking through the gates of Pohang Steel Company [in the early 1980s], one of the largest steel companies in the world, under a massive banner saying ‘our only resources are our mind’,” recalls Professor Dodgson.
Today, South Korea is a major global exporter thanks to multinationals such as Samsung, Hyundai, Kia and Daewoo. Its people are wealthier than the Japanese.
Spend on R&D is among the highest rates in the world at 3.72 per cent of GDP (2011). The labour force is highly educated, including exceptionally high rates of tertiary level graduation with a strong emphasis on science and technology.