Aussie innovation: Six ideas to fix a broken system

It hasn’t been the best week for Australian innovators, given the announcement by Commercialisation Australia that it has been told by a surplus-fixated Federal Government to freeze all new grants to up-and-coming businesses.

There remains plenty of government help for start-ups, such as the R&D tax incentive and export marketing support, but the decision to stop CA dead in its tracks appears rooted in a short-termist view that innovation is a nice bauble to be indulged in during good times, rather than an essential long-term economic driver.

A new not-for-profit group, Australian Institute for Innovation, argues that major changes need to take place if Aussie ideas are to flourish, rather than wither on the vine.

The AII says it is pushing for the implementation of a “National Innovation Infrastructure, including the optimisation of public and private investment in innovation, and through encouraging the establishment of a connected and communicating innovation community.”

Below, Paul Cheever, CEO of the AII, outlines the six structural fixes needed for Australian innovation.

We’ll follow this up tomorrow with Cheever’s four proposals for cultural change:

Systemic change 1 – funding

Funding is the lifeblood of an innovation system. Our system is starved of capital.

We need to secure superannuation and other institutional investment to support the commercialisation of innovation and the expansion of New Growth Enterprises (NGE).

The investment funds by definition must represent long term and patient capital. But the form of funding is also critical.

The investment capital must be at risk so that efficient capital allocation is maintained both in the interests of the investors and the economy.

The capital must be available at all stages of the start-up, scale-up and growth stages of NGE development; and the system must ensure facilitated connections between these stages.

An Innovation Investment Pool should operate through the flexible allocation of discretionary investment funds to early commercialisation and venture creation and expansion by qualified managers.

It should be responsive in its allocation to market needs and opportunities. In this connection, and for other reasons, the US VC 10-year model does not work for Australia.

Systemic change 2 – capabilities

The innovation programs of more than 25 years have failed to deliver to the Australian economy at any one time the required set of innovation capabilities; that is, skilled and experienced people available and accessible across all investment stages, domains, and geography to support our innovators and NGEs.

Further there needs to be consistency and accountability in the processes and performance of our capability resources.

It is time to stop hoping this will happen of its own accord, or through narrow programs, and make it happen through a comprehensive and outcome-driven effort.

In our opinion this can be done through establishing, on a 10-year forward basis, a minimum $50 million annual Capability Fund.

The formation of the array of capabilities required to support innovation activity in the economy is analogous to other core infrastructures in our economy.

It is as appropriate for public funding as roads or research. The funding contemplated, spread among the states and the Commonwealth, would be easily accommodated.

This also needs to be a program run in an agile and close-to-market organisation under the guidance of outcome principles and not specific prescriptions.

While direct government administration of market programs is usually done in a professional manner, it is consistently unsuccessful in adapting to the market and often fails to achieve its targets.

Accordingly it should be operated against national outcome objectives but administered alongside the market-oriented Innovation Investment Pool.

Systemic change 3 – collaboration

Collaboration is essential across the innovation system if we are to effectively scale our resources and global presence and also diffuse our knowledge and networks.

Some collaborations will likely need to be permanent – see Systemic Change 4 – while others will be temporary to achieve interim objectives.

The fostering of collaborations needs to be a specific objective of the Capability Fund, and one that we emphasise again will only be achieved through an agile, market-oriented organisation.