Bill Ferris, AO, Chair, Innovation Australia - CEDA address

25 November 2015

Acknowledge organisers and MC. Good Morning everyone,

I’m delighted to be with you today and to be giving my first address as Chair of Innovation Australia here in Adelaide.

Of course, Adelaide is itself an historical start-up, being our first free settlement back in the 1830’s. And not too far up the road from Adelaide came the wonderful invention of the stump-jump plough in 1876. Designed by Richard Smith and improved by younger brother Clarence, this new technology plough enabled a breakthrough for farming lands of the Mallee district and beyond... no longer would farmers need to grub out acres upon acres of stumps.

The invention was followed by a 4 year proof of concept and redesign phase, then a start-up production facility was financed by the Harris Scarfe & Company in 1880. Soon thereafter, 100 jobs were created along with the stunning productivity gains in the development of broad acre farming.

Richard Smith later moved to WA and brother Clarence built a factory in Ardrossen (about 150kms from Adelaide) filling orders from around Australia.

I like this story not only because of the huge benefits but also because it demonstrates the difference between “invention” and “innovation”. Innovation involves the commercialisation process from proof-of-concept, through start-up and later stage market entry and expansion. The Smith brothers were undoubtedly among the best of this country’s early innovators.

Perhaps John Macarthur’s tenacity with the sourcing and breeding of merino sheep, then developing a fine wool product is further quintessential evidence of innovation from early colonial days. In the 1820’s his wool exports made him the richest man in NSW.

Another early innovation was James Harrison’s ether based freezing technology in 1857 making possible the export of uncured meat back to the mother country.

These are just a few examples confirming innovations are not just new to Australia; indeed there is a noble lineage.

Since those early days, there have been many more Australian inventions impacting the living standards of people the world over. I often try out my favourite 12 inventors quiz on friends: how many can you name?

Xerography, forerunner of the Xerox copy

  1. X-ray Crystallography
  2. Cardiac Pacemaker
  3. Atomic Absorption Spectrophotometry
  4. Orbital Engine
  5. Ice-Maker
  6. Black Box Flight Recorder
  7. Bionic Ear
  8. Penicillin
  9. Microsurgery
  10. Helicobacter,  Cause of Ulcers
  11. Vaccine against Cervical Cancer

In spite, of the awesome nature and impact of these world firsts, the average quiz score is only 4 out of 12. Sadly, this is probably because the commercialisation of the vast majority of these breakthrough inventions has been achieved by non-Australian innovators.

In this century, as Chairman of the Garvan Institute of Medical Research, I have been privileged to witness up close the continuing discoveries and inventions arising from Australia’s health and medical research sector. This remarkable performance now places Australia in the top 3 or 4 nations worldwide in terms of research breakthroughs as verified and acknowledged by the leading medical science publications. And national prowess can be similarly evidenced in other fields including astronomy, environment, agriculture, engineering, information and communications, renewable energy and more. Of this, Australians can and should be justly proud.

I cannot however make a similar boast about our ability to commercialise and get our fair share of the world’s marketplace for this intellectual property and inventiveness. Australia is struggling to even stay within the top 30 OECD nations in terms of any commercialisation metrics. We are now at risk of squandering opportunities created by our highly credentialed R&D platforms. For example, in the health and medical research sector unless we expand our investment in clinical trials and the development of new drugs and medical devices for Australian and world markets, we will lose the opportunity to create substantial increases in jobs, exports and profits.

This is not just about today’s jobs, exports and profits, although that is of critical importance to the prosperity of this country obviously; it is also about  future jobs, exports and profits as new industries and disruptive technologies continue to make huge impacts on  traditional industry.  So we have to build new businesses, new ways of doing things from the bottom up and top down if we want to have a robust economy for future generations that can also experience growth in jobs, exports and profits.

And at another level, the importance of this innovation process is also about national prowess, leadership internationally, ability to help solve the problems of diseases of all sorts, to play a role in the development of renewable energy technologies, to create better jobs that will survive the inevitable thrust of automation and artificial intelligence likely within the next two decades.

For innovation to impact at this high national level it has to be embedded in the thinking of all Australians. The Prime Minister, Malcolm Turnbull and the Industry, Innovation and Science Minister, Christopher Pyne have made this abundantly clear by elevating innovation to National priority status in Government policy.

What are some of the challenges to this imperative of improving our ability to innovate?

Some insights may be gleaned from the 2015 Australian Innovation System Report which I am pleased to release today. This report is prepared annually by the Department of Industry, Innovation and Science, and, inter alia, provides valuable tracking of our innovation ecosystems. I commend the report to your attention. Among its many findings are these:

  • Australia is highly ranked as an early adopter of others’ innovations and a very good modifier. Yet it ranks poorly in new-to-the-world and new-to-the-market innovations of its own.
  • Lack of access to additional funds and lack of skilled people are the two main barriers to innovation for all young SME’s.
  • 75% of all Australian businesses have siloed or have no innovation culture at all.
  • While academic collaboration nationally and internationally is thriving, collaboration between Australian businesses and universities and research organisations is amongst the lowest in the OECD.

In thinking about this and possible solutions, I have found it useful to create an action matrix. Imagine on one axis priority sectors, like agribusiness, biotech, oil and gas, renewables, advanced manufacturing, fintech; and on the other axis imagine stages of growth, from seed to start-ups, to later stage start-ups, later stage SME’s and through to larger corporates and projects. In this by sector by stage of growth matrix, you have 30 to 40 boxes in which there are different impediments and different possible solutions.

Certainly there is no single magic wand. For example, an entrepreneur with a business app start-up might well find out within 12 to 18 months whether or not her product gets enough traction to warrant scaling up. Compare this with the biotech entrepreneur funding a clinical trials process which may require several years and much greater funding before he has the in-person evidence necessary for any commercialisation success.

I believe six of the most important challenges to accelerating innovation in Australia are as follows:

  1. Access to risk capital funding
  2. Access to business and entrepreneurship skills
  3. Access to international markets
  4. Lack of active collaboration for commercial outcomes i.e. inadequate collaboration among universities and other research institutes, business entities and Governments
  5. Insufficient investment and interest in the STEM curricula of our schools, VET and university programs
  6. A risk averse culture which often results in the fear of failure trumping excitement of gain.

In terms of challenge #1, and in the context of the pending Innovation Statement, I can say that this is receiving a lot of attention at all stages of enterprise development, from seed through start-up and later stage growth requirements.

One of the longest standing interventions of Federal Government, in recognition of the need to incentivise R&D spending by industry, is the Research & Development Incentives Scheme. Running at approximately $3BN p.a., this scheme is sector agnostic with open access to all size enterprises. Evidence suggests that this scheme could be improved by a sharper focus on our higher growth and R&D intensive businesses.

The Prime Minister and Minister Pyne are intending to provide a national innovation and science agenda next month. I am confident that this will be a comprehensive blueprint, one which will include a number of significant measures to deal with the list of challenges I have just outlined.

While it is urgent to make a start on these challenges it is also important to manage expectations. Changed behaviour, such as that required for significant improvement in business and academia collaboration for commercial outcomes, will take years not months.

Nonetheless, my sense is Australians understand the importance of this innovation imperative.  Start-ups and small businesses of less than 2 years age managed to create 1.4MN new jobs in the post GFC years to 2012. This is powerful evidence of what’s possible in the years ahead and I share the Prime Minister’s view when he recently said “this is a very exciting time to be an Australian”.

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