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Influencing innovation

By Tom Quirk - posted Monday, 29 September 2008


So where is Venturous Australia leading the Minister? It looks like the same old troughs will be renamed and then refilled. There is a gentle admission that innovation was not well understood in the 1980’s and 90’s. The commercial pipeline is found to have S bends and even manifolds. Now it is clear that collaboration is the key. Most of this explanation is sheer nonsense as the complications of innovation should have been well known to any informed policy maker.

The spirit of picking winners still moves among the people. There are National Needs, Innovation Councils and a review of the “Innovation System”. Policy makers should ponder the relevance of this to innovation following the American painter Barnett Newman’s famous remark about art critics that “Art criticism is to art as ornithology is to the birds”.

How does innovation happen? In our own lifetime we have seen the arrival of the PC and the Internet. Both of these developments have the characteristics of a random walk. There are hardware and software contributions from many sources: scientists, engineers, marketers, professional and of course amateurs - who are often the first customers. As the innovation develops the mighty are humbled, new businesses emerge and the products find increasing application that in turn creates new opportunities.

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How much does government policy influence innovation? Directly there is no influence but subtly it can make a difference through education, research support and buying power. These three are obvious but what about business culture?

In a seminal book, Regional Advantage, Annalee Saxenian, a Professor of City Planning at UC Berkeley, discussed the growth of Silicon Valley and compared it to Route 128 around Boston back in 1994. The lesson was the importance of culture. In Silicon Valley the model was co-operation among firms while in Boston businesses were defensive castles and silos with the enemy beyond.

Who set the culture was also discussed - as Saxenian is a sociologist. It is probably, alas, beyond government. It might emerge, as it has in the mining industry, if there are examples of success. You need clusters of business and experience and clusters spring up in some university cities. Universities attract students who often stay after graduating to work and some will found new businesses and some will cluster near a university. So universities are important but it needs more than that.

Markets determine success and one of the difficulties in Australia is the small local market. It is hard enough in California to get going in a big market where there are many imitators and predators so how can you do it in Australia?

Perhaps mining provides a clue. Miners have the sole right to physically use their licensed property. Patents provide the equivalent for inventions, but again it is not enough. You need access to skills to take and shape a product through development and marketing. Not all these skills are available in Australia but as we grow we learn and add to our abilities. But patents might give us enough protection to occasionally win out.

None of the above has much to do with government.

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Venturesome Australia calls for more development funding but this carries an opportunity cost for the taxpayer. So what about some innovation in funding? What about company R&D vouchers redeemable at universities or government labs? Give the customer buying power and researchers get government funding only when there is sufficient outside interest to trigger funding. Oh and forget about CRCs (Cooperative Research Centres).

Innovations have an ability to come from unexpected directions and the greatest contribution by a government would be to ensure that we have a well educated and technically literate community. But remember that many innovations have nothing to do with new technology!

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About the Author

Tom Quirk is a director of Sementis Limited a privately owned biotechnology company. He has been Chairman of the Victorian Rail Track Corporation, Deputy Chairman of Victorian Energy Networks and Peptech Limited as well as a director of Biota Holdings Limited He worked in CRA Ltd setting up new businesses and also for James D. Wolfensohn in a New York based venture capital fund. He spent 15 years as an experimental research physicist, university lecturer and Oxford don.

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