Spit out those innovation stats – they make you ill!

by Neville Christie, co-Initiator, Innovating Cosmos - the global community of collaborating innovators.

          “Innovation is at the heart of what it is to be human.” 

Doom and gloom… but!

A growing number of research studies, heavily laden with statistics, point to Australia’s rapid decline in the global innovation stakes. But these statistics hide as much as they reveal.  We quote a few of the studies.  And then, we point out what they miss out… so, pessimism quickly morphs to optimism! 

We conclude: Don’t swallow the stats. Not only will they make you ill.  But far more is happening in Australian innovating than they record. And, in addition, there is enormous scope for individual Australians, collaborating teams, and organisations of every size, to:  “Think bigger. Test more broadly.  Fail and learn fast. Act collaboratively. And go global.” The key is a mindset change:  It can be done!  We can do it… 

“There is no evidence of a particularly risk-averse culture in Australia. Indeed, one of the higher rankings for Australia is for early stage entrepreneurship activity,” says the  Office of Innovation and Science Australia in its  review of the Australian innovation system.  

A small band of Australians, including a few members of Innovating Cosmos, are leading the way. With lots more yet to come… I warmly invite invite you to join the collaborative innovators…  Now!

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Innovation’s the name of the game

We know that innovation is vital to any nation’s long-term social, economic, cultural and political vitality and standing.  And that our whole globe is experiencing wave after wave of disruption as the 3rd and the 4th Industrial Revolutions clash and merge.  

These disruptions are changing the entire competitive and co-operative landscape within nations, and between nations. China expaands its boundaries and influence.   Trump cries, “Protect America”. North Korea threatens to drop nuclear bombs on everyone to prove it can – and is ‘harvesting’ bitcoins as a means of running rings around the various US and UN sanctions. 

End of leaders?

In addition, world-wide we see both leadership vacuums and wholesale rejection of current leaders.   

Personally, I believe this is highly adaptive, in times of massive change and uncertainty like we have right now…  Who on earth knows the one ‘right’ way forward?  

Importantly. without effective leaders, we’re all pushed back to personal responsibility, to citizen power, to collaboration, and to trialling new, different, and innovative ways of being, doing and having.   Surely a better outcome than making Grandaddy Government, or Prime Minister Thingamajig, responsible for creating our individual and collective futures!

Our score card

Okay, so, if innovation’s now so much the name of the game, what’s Australia’s innovation score card like?  

And what’s our way ahead – as global study after study concludes Australians are falling further and further behind in the innovation stakes? Like blockchain technology, we reckon, the answers are distributed. Not flowing from a central source – located in Canberra!

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Who said this, when?

“… our most urgent task is to build an innovative culture in industry … Above all, we need a cultural change – among business leaders, decision-makers and the community generally – which recognises the major significance innovation has for building national competitiveness.”

It might come as a shock to realise the Science & Technology Budget Statement 1993-94 made this observation nearly 25 years ago.  Not much has changed.

Our organisational score card    

Long before the ‘white invasion,’ Australians were significantly inventive.   Not just in tools like the boomerang and woomera, but also in painting, music, dance , myth-creating, complex social structures, and enormous reading and care for their sparse eco-systems.   

Ever since then, Australian individuals and organisations have been quietly innovative – mainly for domestic markets, and less so for global markets. Often getting little credit.  And making not that many pounds or dollars.

Punching above and below our weight

Of 195 nations, Australia ranks 19th in terms of GDP.    Not bad for a country with 1/3rd of 1% of the world’s population!   

And, if we’re inclined to say, that’s entirely due to our mining and agriculture, the 2015 Global Innovation Index ranks us17th in the world for innovation…

However, in the dynamic world we live in, some of our neighbours not only have caught up, they’re bypassing us.  In our region, Singapore, South Korea and China now outrank us.

Low innovation efficiency

Further, in measures like our ‘innovation efficiency’ - that is, how well we turn research and inventiveness into commercial outcomes or innovations – the Global Index now ranks us 72nd in the world.  Boo!  Hiss!  Shame, shame! 

Many individuals, including PM Malcolm Turnbull, point out we evidence very low levels of effective collaboration between primary researchers, universities, and Australian businesses. Yawn!  What else is new? Has it not always been such! And does pontificating about the need for change make it so?  

Innovating cultures

But wait, there’s more!    The research evidence is clear: Innovative firms are 60% more likely to show enhanced sales and profitability.  [Yeah!  And is that the sole criteria for great innovating?] 

Yet in 2015, only 16% of Australian firms evidenced a ‘high-performance innovation culture’.    This contrasts with 44% of the Global Innovation 1000.

36% of Australian businesses had a “siloed” innovation culture – divorced from the rest of the organisation. [Which is the case of ‘skunk works’ may be a good thing!   See our Blog 0005].   

Worse, 39% of Australian businesses evidence little or no innovation culture at all… I wonder how they assessed that!  “Have you had any creative thoughts this week?”  “Nope!”   “Right – another cross.”

Go West, young man

Next, researchers add another nail in our innovating coffin… they say, most Australian firms evidence a low push to network, collaborate or go global….

According to the OECD, innovative firms are far more likely to participate in international and public procurement markets. Yet less than one in five Australian firms operate globally.

Here our report card is admittedly dismal”

The Australian economy remains undiversified, particularly in terms of exports. Australia has only 19 internationally competitive industry sectors and only two in manufacturing: food and beverages, and basic metals. By contrast, comparator countries, such as New Zealand, Netherlands, and Canada, have at least 35 internationally competitive industry sectors.

Early adopters…. But stalling out

As far as taking on new technology developed and imported from overseas, Australians tend to be ’early adopters’.  And, until recently we did well in adapting to the third revolution digital economy.   

But now according to research from Tufts University we have ‘stalled out’ as the massive new technologies from the 4th Revolution hit - like: automation of service industry jobs, artificial intelligence, smart machines, virtual reality, genome technologies, new mind sciences, 3D printing,...

The researchers conclude, we and other ‘stallers’ can only revitalise our economies by redoubling our innovation spend, continuing to ‘go global’, and attracting highly talented young immigrants…

Our government’s score card

Redoubling our innovation spend!  Mmmm!  So, size matters!  Throwing more money at problems removes them.   Or do they?  Sometimes effective and efficient ‘small’ beats ineffective and inefficient ‘big’.   And sometimes other values than mere economics have an equal or even greater weight!

A large growth industry

In the last 16 years, Australia has seen sixty innovation reports at federal government level.    Yeap, 60!!!! Now there’s a growth industry!   

And we now spend A$9.7 billion on ‘research and innovation’ - way up from the A$3 billion of 1993-94!  That’s A$400 for every man, woman and child.

Effective?

But how effective is this spend?     Well, like handfuls of wheat tossed randomly on an unploughed and unfertilised field, the billions of dollars are spread across 150 budget line items, in 13 different portfolios. 

Of the many drivers of innovation, six stand out: money; infrastructure; skills; networks; culture; and policy.

As far is policy is concerned, former treasury secretary Ken Henry referred recently to the collective amnesia among policy-makers:  “Many departments have lost the capacity to develop policy; but not just that, they have lost their memory,” he claims.

Ah!  But at least the big end of town benefits

The OECD claims firms investing in R&D are more likely to introduce innovations…

And government support for innovation includes financial support via tax credits or deductions, grants, subsidised loans and loan guarantees.

In Australia this support goes, significantly, to our larger firms – mainly because of our generous R&D tax incentives.

These R&D tax incentives seldom meet the needs of young, innovative firms, And they tend to amplify cross-border tax planning by multi-national firms.

Money, money, money 

So, as we leave our pollies to their reports, talk fests, internal squabbles, and dearth of effective policy formulation… what about our venture capital market?

Both established Australian businesses and start-ups argue their biggest barrier to innovation, is difficulty in gaining funds.

And in many respects it’s true.  Between 2009 and 2014, venture capital investment turned around in countries like the US, South Africa and Hungary.  But in Australia it fell significantly. 

In 2005-06, 3% of Australian firms applying for venture capital funds, got them. During 2013-14, despite the number of proposals recovering to pre-GFC levels, just over 1% of firms got funds.

High barriers to innovating

50 of our largest companies, represent around 63% of the Australian share market by market cap. And the top 12 account for 50%.  Leaving the remaining 2180 to make up the other 50%. 

Australia is basically a nation of small to medium businesses - who now between them produce 55% of all our goods and services.1

Of roughly 2.1 million trading business entities in Australia, 60.6% of these are one-person businesses. And a whopping 97.4% - defined as fewer than 20 people – are ‘small businesses’.  Yet these micro and small businesses all face the plethora of legislation designed for the Big Boys and Girls.  

Once again the OECD comes out strongly on this.  Australia not only has many barriers dismaying young, innovative start-ups, but governments have done almost nothing in the last 10 years, to lower them. 

These barriers include administrative hurdles to creating new businesses, regulatory procedures based on big firm experience, unwillingness of government departments to buy from smaller firms, government slowness in paying smaller contractors who are hired, and the regulatory protection of existing incumbents.   Almost time to slit our wrists!!!!

But, but, but….

But here, we start a theme, that needs to be shouted loudly…  This is far from being a complete or accurate innovating picture.

During the late C19th when maps of Africa had many red bits - indicating colonial ‘ownership’ by England - English scientists studied the eating habits of Africans. They clearly observed some tribes ate insects, special types of soil, bark from some trees, and a few unsavoury animals and grubs. 

Since to their eyes, these items were definitely not food, they eradicated them from their analyses – yielding a total erroneous picture of African diets, nutrition and malnutrition, which in some minds, still exists today. 

“A report released [in May 2013] by the U.N. Food and Agriculture Organization reminds us that there are more than 1,900 edible insect species on Earth, hundreds of which are already part of the diet in many countries.

“In fact, some two billion people eat a wide variety of insects regularly, both cooked and raw; only in Western countries does the practice retain an "ick" factor among the masses.”

What’s left out

Similarly, let’s look at what’s been left out, or purposively eradicated, from the studies we’ve quoted

1.   Businesses are seen as the only sources of innovation – whereas many social, political, artistic, welfare, charitable organisations are doing amazing things.  At the same they’re breaking down the old barriers between what’s a business and what’s a social impact organisation, or venture:  e.g.

·     thank you – ‘empowering humanity to chose a world without poverty’

·     who gives a crap – where 50% of profits go to providing toilets to 40% of the world’s population without one – meaning that diarrhoea-related diseases fill over half of sub-Saharan African hospital beds, and every day kill 900 children under 5.

·     social ventures australia - whose Social Impact Bonds finance social impact programs of pressing social need, by combining outcome-based payments with market discipline

·     mivote – makes it possible to have direct voting on any important issue. MiVote could have conducted the recent equal marriage vote for $1.2 million, or 1% of the $122 million cost.

2.  Amazingly, the studies limit innovating to new products, technologies and services.  Whereas, as we repeat ad nauseum, there are thousands of other ‘insects’.    See: Why the future of innovation is in ideas, not products.

3.   Every tried to fill in a questionnaire where none of the boxes accurately describe your situation? Well the Australian and New Zealand Industry Classification System is like that.  Although revised in 2006 to more accurately pigeon-hole rapid change industries like Information Technology, the system is an outcome of the Second Industrial Revolution. And it creaks hard around our many disruptive elements – especially when these split old industries asunder.

Study the start-up scene

Yes, start-ups are just one part of Australia’s innovation scene.  But an important part. And they don't hit the innovation statistics, of course, until they are established. Startup Muster, in their three annual reports, give an important snapshot of Australia’s growing startup ecosystem.  You can access all three reports from StartUpMuster.com

Nature hates a vacuum

Way back in the C4th BCE, our good friend the philosopher Aristotle claimed: ”Nature abhors a vacuum.”  

When we look at the stats and reports on innovation, we find many vacuums waiting for us as innovators to fill. Each week, blog by blog we spell out some of these. 

For now, we conclude: Chew on the stats, by all means. But don’t swallow them. 

Instead, switch, switch, switch in our heads, and see just how many new opportunities are now emerging for individual Australians, collaborating teams, and organisations of every size, to: “Think bigger. Test more broadly.  Fail and learn fast. Act collaboratively. And Go Global.” 

Let’s, together, change those stats!  Till next time…