Who's responsible for Innovation in Australia now ... Anyone, Please!

2017 Budget Update to this article - its official, small business drives Australian innovation, large business are not innovating and those that do are focussed on simply driving down internal costs, and Government isn't helping!

In the 18 months since this article was first written:

• Australia has had 3 Federal Ministers for Industry, Innovation & Science - Chris Pyne for 302 days, Greg Hunt for 189 days and now Arthur Sinodinos for about 100 days
• And we've had 2 Assistant Ministers for Industry, Innovation & Science - Wyatt Roy for 302 days (until he lost his seat in the election), and Craig Laundy for about 300 days, who has extensive innovation experience working in ... the hotel business his Dad built
• We may consider ourselves to have stable government but no-one has been in place long enough to get to know what the job of Innovation Minister is in our current environment, let alone make a difference
• The 2016 Australian Innovation System Report from the Office of the Chief Economist states that The number 1 top barrier is lack of access to capital. So what has the Government done about it in the 2017 Budget? Extended the $20k instant asset write-off scheme for a year. That's about it. It's arguable the government's changes to crowd funding wont deliver any major inroads to this challenge for startups, and the next Budget measures to tighten up capital gain tax for small business works against the sector's appeal to investors.
• There was $300m given to States and Territories to reduce red tape. Fair enough.
• And there was one missed opportunity that would have cost the Government basically nothing. It could have tackled the late payment problems that small businesses have dealing with large corporations, who turn 7 day payment terms into 90 days. Long enough to send a small business broke. But it didn't worry about that.
• According to the Chief Economist, the number 2 top barrier to innovation stated by industry is "lack of skilled persons". However in last night's budget the Government ramped up visa taxes on the very businesses that are likely to be innovating and bringing in expertise from overseas that we can learn from.
• Yes the Government also announced $1.5bn in funding over 4 years for training. But that is largely going to apprenticeships and traineeships, which is fine for the small business sector, but almost meaningless for the innovation economy.
• The Chief Economist's report also states that Australia generates only 7.2% of total income from the sale of innovative goods and services, compared with the OECD average of 19.1%, ranking us 20th out of 23 countries.
• Our underperformance in exporting innovative goods and services is explained by two factors - (1) "the portion of large businesses that are innovation-active is relatively small" and "Australian businesses are process innovators ... [which] ... may reduce operating costs ... instead of producing a new product for the market."
• While our small business sector is highly innovation active, and places 5th on the OECD rankings, our large businesses rank 18th out of 29 countries. Well done!!

I know Im sounding negative and ranting, and I haven't analysed every nook and cranny of the Budget papers. But my question remains the same - who is responsible for Innovation in Australia?

In my opinion, government and large business both need to lift their game if we are to start making up some of the ground we've already lost.

Andrew Nelson - May 2017

We all know that innovation is critical for lifting and maintaining national productivity, living standards, employment opportunities and so much more.

But lifting national innovation performance is like commenting on your favourite footy team. Everyman and his dog has an opinion on how to get results - on the condition of the pitch, strategy vs other teams, fielding players, coaching and training, dare I say it, supplements?!? But with footy teams, few people are actually in a position to implement change. The rest of us are merely spectators and armchair commentators.

So is it the same for innovation? Is it incumbent on a select few in charge to make the calls; to make the changes, to prepare the pitch and field the team? Or is innovation truly democratised and fully in the public realm, regardless of how slow our legislators might be to catch up?

Who is responsible for innovation in Australia? Who should be responsible? Frankly, I don't think we agree yet. But we need to sort out our roles, quickly, if we are to truly collaborate.

If we look at the "few decision makers" model, this was the week that Australia acquired a new Prime Minister ... and Treasurer ... and also a new Minister for Education, and for Industry, Innovation & Science, and for Communication, and the Arts, Defence, Infrastructure, and did I mention Small Business. 

Christopher Pyne got the Industry, Innovation and Science Portfolio. So that now makes him ultimately responsible for the national policy settings for innovation implementation in Australia. Right? But surely we need innovation to be front and centre in the minds of all these new leaders, across all these vitally important industry sectors. And surely while there will be common ground issues, the needs of each Minister's portfolio will also differ. Are the needs of the IT & Comms industries the same as the Manufacturing, Infrastructure and Resource industries?

In making these appointments, and I think the Hon Christopher Pyne in particular, Prime Minister Malcolm Turnbull made a point that Australia needs to [and I paraphrase] lift its game in innovation and collaboration, in agility and partnering between business and universities and government. He made specific reference at one point to Australia's poor ratio of businesses partnering with universities (c. 3%) compared with other countries like Germany and Israel (above 50%) .

It seems Turnbull was channeling the thoughts of every Australian business leader and the Government's own Office of the Chief Economist. The Chief Economist puts out an annual report on the Australian Innovation System. It hardly gets a mention in the press but the 2014 report had a dire warning:

Australian industry needs to invest in innovation across all domestic and exporting sectors as one of several key strategies to lift long term total factor productivity and ultimately maintain our high standard of living. The scale and impact of innovation appears to be hampered by a poor management culture of innovation and collaboration, and shortages in a range of skills.

So here is a senior government bureaucrat putting a diplomatic rocket up the business and education sectors, and maybe the government too. He's also making the point that its not about picking winners, but about being "across all domestic and exporting sectors".

But if you listen to our business and government leaders its not their fault. They're all innovative. You'll probably struggle to find a major corporation or employer in Australia that doesn't have "innovation" as one of its cultural or strategic pillars. But I can certainly list a bevy of them both here and overseas, for which the "innovation thing" is total lip service. Where there isn't even an innovation manager (with a budget), let alone a process and investment in outcomes. 

Our business leaders all spruik their credentials in R&D, they partner, they invest in people and ideas and infrastructure, they're creative, productive (but lean). But again, from the Chief Economist's 2014 Report on the Australian Innovation System is prescient:

Australia’s small and medium sized businesses appear innovative by OECD standards (ranking 5th). This is a positive for our domestic competitiveness. Australia’s large businesses, which do almost all our exporting, are not innovation leaders by international standards (ranking 21st in the OECD). ...  Australian businesses of all sizes perform poorly on new to market innovation compared to other countries and this situation is getting worse not better.

So if you're one of those CEO's, and you know who you are, who are amongst "the few" who can actually implement innovation, its time to stop paying lip service. Its time to help Australia take our place and really invest for the future sake of our shareholders, employees and all stakeholders. This means you, this means now.

Similarly our universities are "world class", "innovative" and commercially focused on producing the workforce of people skilled "for jobs that don't event exist yet". Yet last week Reuters released its ranking of the World's Top 100 Most Innovative Universities, and .Australia doesn't have a single university on that list. This is despite Australia arguably having at least six or seven "best 100" universities in the world based on other ranking criteria. Sure we may have pockets of innovation in the tertiary, vocational and secondary education sectors, but nothing on the scale that befits a country listed 12th globally by GDP on every major methodology.

At least our VC industry is somewhat honest about itself being small and having difficulty raising funds.  According to PwC's 2014 report on Australia's venture capital industry:

Compared to other developed countries Australia’s current level of venture capital activity is significantly lower .... Canada’s venture capital industry is nearly four (3.6) times larger than ours, and over the last decade the US invested US$285 billion in venture capital funding. This is four times more than Australia ( per capita)...

[Note: Canada ranks 11th by GDP globally, being about 20% larger than Australia. Not 360% larger.]

And all these major contributors to the innovation game all agree that government policy and government funding holds them back. And with so much common agreement, they must be right. Right?

Even Turnbull seems to be saying the same thing? That everyman and his dog can make suggestions, but ultimately is it government that needs to implement the policy settings to encourage the collective "we" - businesses, universities and entrepreneurs - to be innovative. Sure, every player, every trainer, every administrator, every uni, every corporate, every investor, needs to do their job - but is its government's responsibility to make sure we can all take the field in tip top shape.

But turning to the "innovation is in the public realm" argument, the world is full of entrepreneurs and businesses that have launched and developed remarkably innovative products and services in extraordinarily difficult circumstances. In countries like Nigeria, Pakistan, Turkey and Mexico to mention just a few. Places that are not known for their innovation infrastructure, but are known for the confronting realities of survival of the fittest or the most adaptable. 

Surely these examples show that innovation can happen anywhere, anytime and under any conditions - a fact well understood by students of Blue Ocean Strategy. Surely innovation is about individual creativity, skills, resilience.

So how does Australia actually rate for its innovation performance? Maybe Turnbull and I and all the rest are making a mountain out of a marsupial mole hill. 

Last week the WIPO INSEAD Global Innovation Index was released. It ranks every country on its innovation inputs and outputs. 

And while Australia ranks no.17 on the Global Innovation Index (remember we're 12th by GDP), the report highlights (again) is a continuing and big disconnect between our innovation inputs (which are high, ranked 10th) and our innovation outputs (which are comparatively low, ranked 24th). Inputs include things like our legislative environment, and outputs include things like our innovation exports.

Our 17th place ranking is a simple average of the our 10th (inputs) and 24th (outputs) ranking. But after all, isn't it our outputs that are more important than how much we consume to produce them? Isn't our ranking really 24th, not 17th? And why are we creating and consuming the top 10th ranked innovation environment but producing the 24th output? [We can go into the detail later in the pre and post game debrief.]

So, in my humble opinion, and I'm just one of the armchair comentators, if we are to maintain and even lift our living standards, we all have a role to play in this innovation game. 

Who's responsible for Australian innovation at a national level? For getting results, for assessing the state of the field, the strategy, the players, the line up, the plays, the coaching, the training, the supplements that will put our innovation on steroids, across the whole of Team Australia? 

If it is up to "everyone"; if it is wholly open and decentralised innovation, how do we make sure it is productive and not simply chaotic? 

Collaboration starts with recognising and respecting the expertise, opinions and roles of everyone in the room. But frankly, we clearly dont even understand or value each other's roles. 

We clearly need an awakening moment. Where all the finger pointing and fence sitting can be evolved into exploration, validation and execution. 

Christopher Pyne et al, we need a fresh, forward-thinking strategy for our national innovation activities. And more than paying lips service, tweaking policy levers or trying to pick winners, we need a national discussion about the strategy and roles that we all need to play in the team, on and off the field. To foster innovation through communication, negotiation, influencing, listening and partnering. We need leadership and transformation - not tinkering.

Who's responsible for your innovation strategy?