Innovation: From buzzword to reality

Innovative activity is the most important element of long-term economic growth. Innovation and entrepreneurship are essential for Australia’s economic, social and community development, creating new enterprises and high value jobs for future generations.

The federal government’s innovation statement presents an opportunity to position ourselves as future leaders in knowledge creation, technology innovation and fostering industries of the future.

However, we need to think and plan for the long term and to articulate a vision for Australia that goes well beyond the limited perspectives of electoral terms of governments.

One system, many parts

Successful innovation systems have many components, including having a healthy startup culture. New ventures tend to be quicker at identifying market trends, responding more readily to the changing needs of customers and developing novel approaches.

Australia’s relatively high rate of startups is an engine for employment growth. Between 2006 and 2011, startup firms added 1.44 million full-time equivalent jobs, while all other firms lost more than 400,000 full-time equivalent jobs. Much of this growth is driven by fairly small numbers of high-growth oriented startups. It is notable that these ventures are found across a broad range of industry sectors.

Micro businesses that invest in research and development are much more likely to have higher growth in sales and profitability than firms of the same size that don’t undertake R&D.

Earlier this year I visited Harrop Engineering, a true Australian success story and world-class operation. Founded in 1955, Harrop have over 50 staff and continue to invest roughly $1 million into R&D annually and are subsequently recognised as innovators in their field.

We need to encourage greater numbers of startups and new ventures and to look closely at the factors that make them more likely to succeed. Access to venture capital and other sources of funds is one aspect. Another is the availability of a strong pool of appropriately skilled and experienced people for them to partner with and/or employ. Access to high quality professional advice is an area that needs further bolstering.

But startups are only part of the picture. We need to encourage innovation and collaboration among larger and more mature firms and provide opportunities for them to be more competitive in the global economy.

Australia has so many advantages. However, we need to be smarter and do much more to capitalise on these advantages. How, for example, can we best leverage our international reputation for having some of the world’s most livable cities?  Similarly, how do we harvest further benefits from the strong international demand for our education services? What can we learn from our many successes in areas such as biotechnology, and agriculture and food production?

Our innovation agenda needs a distinct vision, supported by short, medium and long-term policies and strategies to create a more creative, flexible and agile environment.

In the past, we have seen policies that are too focused on one-off grants, involving time-consuming application processes and red tape, which are quite frankly not worth the hassle for many businesses.

A new approach

New approaches are needed, including tax changes to encourage crowdfunding and angel investment. We also need greater tax concessions for employee share schemes, allowing employees to share in, and benefit from, the future growth and success of the business.

Our universities need to be more flexible and open to collaborating with SMEs and large firms. Australia ranks poorly compared to most other developed economies on this measure.

The percentage of innovation-active Australian businesses that collaborate with universities and non-commercial research institutions has increased in recent years but we still rank at the bottom of the OECD on this measure.

On September 4, RMIT in conjunction with ANZ Bank and myself, organised a Global Futures Thought Leaders Luncheon. The aim was to bring together government, educators and industry to brainstorm ways to encourage collaboration in making Victoria the startup capital and provide jobs of the future. We are still only scratching the surface in unlocking the enormous value universities have to offer through mutually beneficial collaborations.

Greater support is needed if businesses are to collaborate with universities to develop new ideas, processes, products and services. One option is to provide greater tax incentives designed to foster closer co-operation.

Some Australian universities have excellent programs to encourage entrepreneurship and to give students, regardless of the courses they are enrolled in, access to skills in business planning, finance and marketing.  A few have developed business accelerators or incubators to help turn ideas into successful businesses.

We need to have a range of world class facilities such as those at the University of Chicago and Harvard to stimulate innovation and help turn research and ideas into successful, job and wealth-creating ventures.

We need innovation in government too

Finally, governments should think seriously about investing more innovatively in their own businesses, especially in health, education and public transport. These are huge enterprises that affect millions of Australians every day.

How innovatively are these ventures run?  What scope is there to develop and implement novel approaches that are complete game-changers? Can best practice from the business sector be incorporated to radically change and improve current practices? Can we be creative and nimble like the very best startups and reap the innovation dividends this will entail?

Perhaps this is one of the greatest challenges for governments, especially state governments. Innovation is crucial for our economic development and prosperity. It is also essential that governments embrace agility and innovation in their own enterprises if the broader Australian community is to have access to the high standards of health, education and public transport services that it wants and needs.

David Southwick is the state Member for Caulfield and the Victorian shadow minister for innovation, energy and resources, and renewables.