Australasian Science: Australia's authority on science since 1938

Let’s Get Positive about Innovation

By Alan Finkel

Recognition and acceptance that we will fail from time to time is a necessary part of belief that we can succeed.

Research and innovation – converting money into knowledge and then knowledge into money – is a virtuous circle that we aspire to in Australia, but the process often ends up as a virtuous arc with a gap at the innovation step.

Research and innovation are tightly coupled. If we concentrate just on one or the other we won’t enjoy the best possible outcomes for the country.

Australia has a mixed scorecard in this two-step process. Using the per capita rate of published scientific papers as a metric, in scientific research Australian researchers are doing superbly well, publishing at about twice the rate of the OECD average. However, if you compare the normalised number of triadic patents (those granted for the same invention in the United States, Europe and Japan), which is often used as a measure of innovation, Australia holds about one-third of the OECD average.

We’re twice the average on research but one-third the average on triadic patents. That’s a factor of six worse on innovation compared to discovery, and it is something we have to address.

There are two key factors that drive the innovation process: challenges and facilitation. If you set a challenge for a group of developers – they might be engineers or business process people – they will respond to that challenge. Setting the challenge is the most important step to driving innovation, and the best project opportunities – with the greatest challenges – are at the interface between the disciplines.

Of course, that’s not enough. Companies, governments and research institutes then have to facilitate the process.

The obvious facilitator is money. Unfortunately, when it comes to small companies and start-up enterprises, too often the available funding comes with excessive constraints – principally delay and restrictive conditions. Grant applications can take up to 18 months, delaying investment decisions, and grant requirements for matching funds, for instance, make it difficult for early-stage innovators to access funding.

Money is a form of active facilitation. Other forms of active facilitation are provision of infrastructure, administrative support, buildings and technological equipment. But innovation also requires passive facilitation or the removal of hurdles.

One example is the legal hurdle. I’ve seen too many projects get off to a slow start and suffer inhibited progress because of the legal hurdles that are put in place from both innovators and investors.

The failure of lawyers to understand the need to take into account commercial realities is a challenge for universities. Before students can graduate from law it should be compulsory for them to complete some units in entrepreneurialism and business practices. With adequate training in the non-legal aspects of commercialisation, lawyers will understand that in order for them to contribute constructively to the innovation process they have to accept that commercial considerations will always mean that risk for their clients cannot be entirely eliminated.

Another hurdle that confronts innovation is the taxation system. In the US, employee stock option plans provide employees with some upside in the success of the company. But in Australia the legislation was changed in 2009 so that employee stock options are taxed at the time the options are issued – a tax on money never earned – so employee stock options in this country are effectively useless. A strong innovation motivation weapon has been eliminated.

Another issue is attitude. Australians often lack the kind of positive attitude that, in countries like the US, underpins financial investment in innovation and personal commitment to join new ventures. When it comes to innovation, positive attitude is critical. Recognition and acceptance that we will fail from time to time is a necessary part of determination to succeed.

Fortunately, there are some superb examples of globally significant innovation developed in Australia. The more we celebrate these examples the more we will be able to improve the attitude that will underpin future success.

The Australian mining sector’s commitment to innovation – taking it to world leadership – is a superb example of globally significant innovation. It’s the kind of innovation success that leads to higher levels of productivity, and addresses a globally significant challenge. It’s the kind of innovation we should celebrate and seek to duplicate throughout the nation.

Dr Alan Finkel AM FTSE is Chancellor of Monash University, President-elect of ATSE, former CTO of Better Place Australia and Chairman of the Australian Centre of Excellence for All-Sky Astrophysics. For 20 years Dr Finkel ran Axon Instruments, an American company that made electronic instruments used by pharmaceutical companies. He established the Australian Course in Advanced Neuroscience to provide advanced training to young scientists and the STELR secondary school science program, administered by ATSE, which is currently running in nearly 300 secondary schools around Australia.