Linking Australia's #IdeasBoom and China
'Innovation’ is the buzzword of the moment – not just in Australia, but globally. In his first speech as Prime Minister Malcolm Turnbull asserted, “the Australia of the future has to be a nation that is agile, that is innovative, that is creative.” Sometimes little can be said for policy rhetoric, but it is these words that the Australian entrepreneurial community not only wanted to hear, but needed to hear.
While Australia has always been strong in developing ‘new ideas’, we have a poor track record of commercialising them. Despite high rankings in quality research output, in 2013 Australia came in last out of OECD countries for businesses linking with research institutions on innovation. Despite no short supply of entrepreneurial spirit, Australia’s startup scene has been suffering. Australian investors have been unwilling to take stakes in home-grown innovations and ideas. Instead they are looking to invest in a larger, more promising, and low-risk markets overseas. So the question is how to capitalise on the potential of Australian innovation and give startups access to capital?
The Turnbull government has jumped on the innovation train in full force with its ambitious National Innovation and Science Agenda (NISA) in an attempt to bridge this gap. Worth more than one billion dollars over four years, the initiative aims to capitalise on Australia’s strong research capabilities and encourage an #ideasboom that will drive growth, employment and success in the global market. The initiative brings to fruition a long-awaited policy from the Australian government – one that recognises the importance and strength of Australian innovation and facilitates its global competitiveness. However only time will tell whether it has been worth more than its rhetoric.
The Chinese government is also unleashing innovation and Research and Development (R&D) initiatives on a mass scale in a bid to aid its slowing economy. With Chinese corporations now struggling to move any further up the global value chain, there is a push for entrepreneurs to take centre stage.
As part of the One Belt One Road initiative, China is dishing out massive funds toward R&D and international cooperation in infrastructure and advanced manufacturing, as well as focusing on cultivating an international startup ecosystem. As a newer market with dynamic and growing demand, the allure of China’s innovation scene overshadows that of its East Asian neighbour economies. Despite being ranked number one in innovation, South Korea is struggling to foster an international innovation community due to inflexible government restrictions. Japan’s startup scene is also struggling, in an industry that is characterised by growth from failure and a country where being a square peg in a round hole is an anomaly. Innovation and entrepreneurship in Taiwan is thriving, though somewhat limited by its smaller market size and increasingly tense cross-strait relations.
As part of NISA’s global strategy, millions of dollars are being dedicated to setting up five ‘Landing Pads’ overseas for Australian startups to take their ideas global. One of the Landing Pad locations will be in Shanghai – the hot bed of Asia’s thriving innovation scene. With over 400 incubators and accelerators located in the city, and over twenty thousand operating across China, this market boasts incredible potential for Australian entrepreneurs. With Australian investors averse to investing funding in domestic startups, the eager China market presents Australians with the opportunity to access the capital to bring their ideas off the ground.
However, the risks involved in accessing the China market also deter some Australian entrepreneurs. Protection of Intellectual Property (IP) is a pressing concern. More so than other markets, the startup and innovation scene in China is characterised by ruthless competition and the need for speed in bringing products to market. As well as this, Australian entrepreneurs entering the China market must be aware of its uniqueness. Unlike entering other more traditional markets, ideas and products must be specifically tailored not only to the domestic Chinese market more generally, but also to the individual consumer trends and demands in each city. At the same time, it has the potential to foster a dynamic community and act to bridge the two nations in the innovation space.
While NISA has been important in acknowledging the importance of Australian innovation, there is a greater need to encourage startups to be more adventurous and tap in to the already huge traffic of idea exchanges between China and Australia. Australian universities and research institutes are rapidly engaging in partnerships with China. UNSW recently secured a multimillion-dollar deal to set up a Chinese innovation precinct in Sydney – the first partnership of its kind outside of China. Australian accelerator Muru-D has also recently expanded in to the Chinese market to offer participants great opportunities, as well as various Venture Capital (VC) funds being set-up to help Australian startups launch in China. To capitalise on Australia’s innovation potential and China’s access to capital, there is a need for more collaboration and communication between the different parties engaging in innovation with China. There is a need to go beyond the #ideasboom to foster the growth of a broader innovation community.
A version of this article was originally published on the Young Australians in International Affairs 'Insights' journal.
Firstly, the word innovation I think is now quite meaningless and is actually the wrong focus. Secondly, you actually touch upon one of the core issues which are the generation of ‘ideas’ and then an inability to commercialise them. Has anyone thought for a moment that those ideas were never destined to be commercialised as they would never deliver a ‘competitive’ outcome? Billions of dollars are wasted on R&D/Innovation in the belief that it will deliver a competitive outcome and much R&D and Innovation is undertaken without a defined purpose. Throwing money at it won’t deliver competitiveness and if it does it’s via luck, chance, etc. The US spends well over $400Billion per annum yet its national competitiveness continues to decline. Investors are probably reluctant to invest as the returns are extraordinarily poor. Some of the much vaunted VC pump-and-dump operations in Silicon Valley are lucky if 10% of their investments are successful. If you want to increase investment then an increased surety of outcome is required and one that delivers products and services that are truly 'competitive’. Only by being competitiveness can you increase national economic well-being. The government’s innovation initiative will fail as it has done so in other counties. The focus is wrong as it should focus on increasing national ‘competitiveness’. Furthermore, there is nothing to ‘glue’ the whole initiative together symbiotically. There is this hope that people will somehow by chance ‘connect’ in workshops and then something magic happens. It won’t. The Billion to be invested is puny when compared to Singapore which is investing well over $10Billion to create new industries. We, however, are wasting tens of billions on buying non-productive weapons. Now we come to China. China approaches technology in a totally different way. They use what is called ‘Centralised Technology-based Planning’. While we throw a little bit of money via ‘Finance-based Planning’ at our ‘innovation’ initiative in the forlorn hope it will make us competitive the Chinese will be maneuvering to pick off our R&D and innovations and turn them into competitive products they then exploit. People don’t realise the race to acquire technology is a hidden war and one that we are ill equipped to fight. Wars are fought in many dimensions not just through open conflicts. To compete with China Australia needs to ignore the frivolous innovation ‘approach’ and adopt ‘Technology-based Planning’. The Chinese will accelerate the close down much of their ‘smoke stack’ industries and ‘pivot’ to new industries. They are already becoming independent in a number of strategic areas – microchip manufacture for instance. How they handle the social dislocation resulting from the change will be interesting. Technology-based Planning is what we don’t do but should to maintain our economic well-being: 1. All planning and decision making is based upon out-manoeuvring the competition in the acquisition and utilisation of technology to generate and then maintain a competitive advantage 2. How effectively organisation or nation manoeuvres in the technology dictates amount of other resources required and how deployed (e.g., funds, manpower, natural resources, etc.)