innovation and ict in...
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Innovation and ICT in Australia
The 2008 Pearcey Medal and Roundtable Event
The 2008 Pearcey Award was a significant event that incorporated much more than the
award itself. It brought together over 200 of the ICT industry’s leading figures, and included
two panel sessions which discussed the key issues confronting the industry.
These panel sessions were particularly relevant, given release a few days before the event of
the review of the National Innovation System, Venturous Australia. Indeed, the theme of
the evening was how the ICT industry should respond to ideas outlined in that review. The
chairman of the review committee was Dr Terry Cutler, who also gave the 2008 Pearcey
Oration that closed the evening.
The event was held at Sydney’s Westin Hotel, on the afternoon and evening of Thursday 11
September 2008. MC was Peter Roberts, senior journalist with Fairfax Media. The welcoming
address was given by Barry Buffier, Director General of the NSW Department of State and
Regional Development. There followed introductory remarks by incoming chair of the
Pearcey Foundation, Wayne Fitzsimmons, which very much set the scene for the event.
Introductory Remarks
“The whole essence of innovation is a systems approach to science policy,” said Fitzsimmons
in his opening comments. “The Venturous Australia report is an attempt to do that.”
Fitzsimmons spoke of various initiatives in the past, such as Tony Benson’s paper in 1999 on
the subject, “but somehow these reports were swamped by the new technology waves that
inserted themselves into our economy – digital media, Internet everywhere, the broadband
debate.
“The Australian ICT industry remains diverse and fragmented. It can be characterised as
large players (mostly multinational, including telecommunications carriers) who are
generating the bulk of the revenue, smaller companies (mostly indigenous) who are
generating innovation and exports, and particularly service exports.
“It encompasses a broad product spectrum from software and media content to electronics,
to electronics manufacturers. Telecommunications generates more than 40% of the ICT
industry’s revenues. There are many industry stakeholders – numerous industry association,
state and federal policy formation groups and research institutions.”
Fitzsimmons said that ICT did not make nearly as many submissions to the innovation review
as did biotech or even nanotech, despite ICT being a major driver of innovation. “This passes
a comment on us as an industry. Are we just broad infrastructure that touches everything
but which is not significant when standing alone? Do we care about this lack of
representation? How important is ICT to improving productivity anyway?
“Most importantly, how should the ICT industry respond to this important paper?”
Panel Discussion – Entrepreneurs’ Perspective
Panel Chair
• James Tuckerman, CEO Anthill Magazine
Panel Members
• Christina Boedker, CEO, Society for Knowledge Economics
• John Butterworth, CEO, AIMIA
• Ted Dunstone, CEO, Biometrix
• Silvia Pfeiffer, CEO, Vquence
• Pia Waugh, CEO, Waugh Consulting
John Butterworth: We’ve been inviting people to submit innovative ideas, at the earliest
stages of their experience. It taught us a lot about the gaps we have when it comes to
fostering innovation.
We need to get to people a lot earlier than we currently do. We see lots of great ideas, but
no attempt to work out whether they may have a market or whether someone has thought
of it before. The most common thing we heard was that “I have this great idea, but we need
funding etc.” We had to ask them to step back and look at the fundamental basics about
whether it was a good idea or not and whether it made any sense.
Ted Dunstone: There are lots of real innovators within government in Australia. There are
many lessons to be learnt from the relationships between small companies, larger
companies and government. They need to work in a symbiotic relationship.
But while there are many people in government who are supportive of innovation, there are
also a lot who deal with larger corporations, so they are attuned to all those companies’
thinking and methodologies. There should be training for governments and large companies
to help them deal with small companies and the associated risks. There are risks, and there
are rewards.
There are all sorts of gaps in many large projects that can take a long time to sort out. In
these situations small companies can often deliver enormous value very quickly.
If you’re a small company, the engagement with the end customer is so important. Larger
companies are not going to sell your wares for you. You’re the person who’s passionate
about it and who needs to be engaged.
Pia Waugh: There is not a strong culture around true innovation in Australia. We don’t have
enough focus on the raw skills people need to be innovative. ICT training is going backwards
in Australia. All kids should be learning basic programming – it’s more important than maths,
no matter what they end up doing.
We need to distinguish between ICT as infrastructure and ICT that really is cutting edge stuff
that will take us to the next horizon. Both elements are important, but if we concentrate
only on the first and not on the second, Australia will fall behind very quickly. It will be a very
uninteresting place in 20 years’ time. We should be using connectivity and collaboration
tools a lot better. New Zealand is doing this, even using wikis to develop education. We have
the infrastructure, we need to do more with it.
Another thing we could so better is to help start-ups start up more efficiently. Australians
are very good at putting thing together in new ways, but it often doesn’t make sense to do
everything from scratch.
Christina Boedker: Education is very important, and to build a learning environment within
the organisation. We need to encourage everyone within the organisation to innovative and
make a difference. We also need to better understand what drives innovation – does it come
from small or large companies?
Silvia Pfeiffer: Large companies in Australia are not very innovative. They like to see that
someone elsewhere has done something. “Why should we risk doing something new?” But
smaller companies in Australia do a lot of innovation.
The research process is the same the world over. The problems arise when you move from
research to making products that people want to buy. It’s particularly difficult in Australia,
largely because of the small local market.
The Innovation Review talks about an R&D tax credit for smaller companies. That’s a good
thing, as is the recommendation to set up a Web 2.0 panel to advise the government.
Comments and discussion from the floor:
Governments and government procurement. The private sector should lead innovation, but
the government can do a lot in terms of setting the scene and providing incentives and
information. But government has a greater role than setting policy. Governments a major
purchaser of ICT, and procurement processes are a major issue.
The procurement process is risk-averse and precludes the inclusion of innovative solutions.
There should be a mezzanine stage that allows government to trial innovative solutions. This
needs to be explored more thoroughly. What if a certain proportion of budgets were
allocated to small companies or innovative solutions? What if 10% of every project was
earmarked for small local suppliers and innovative solutions? That would help enormously.
We need to look at where the blockages are. Preferred supplier panels are one area – they
automatically exclude many innovative solutions.
Other points:
• We need more innovative VC funding, but we also need more education about how
to set up and run a company and how to deal with investors. Failure is frowned upon
in Australia, and because we have a small market failure is more obvious. We need a
greater tolerance of failure.
• Australian ICT companies either focus on technology or the market – rarely on both.
The second group does better, but companies would do best to concentrate on both.
• Australia has great talent and great people, and we do well at getting our first
customer, but it’s getting beyond that. It’s all about risk. Too many Australian
company and government user organisations are very risk-averse, and won’t go out
on a limb. Australians, too often, don’t value innovation.
Panel Discussion – Industry Perspective
Panel Chair
• Peter Roberts, Senior Journalist, Fairfax Media
Panel Members
• Ian Birks, CEO, AIIA
• Stephen Kowal, Vice President, ACS and CIO, CSC Australia
• Tony Pensabene, Associate Director, AI Group
• David Skellern, CEO, NICTA
• Katherine Woodthorpe, CEO, AVCAL
Katherine Woodthorpe: The report appreciates the importance of venture capital to the ICT
ecosystem. The tax incentives are also very welcome. There was a tipping point on climate
change a few years ago, when we went from no-one talking about it to everyone talking
about it. I hope that a similar momentum is building up about innovation. It’s not just about
widgets. It’s about process and productivity, about customer-facing systems and about
business broadly.
Tony Pensabene: The starting point for looking at the report is that innovation policy is
industry policy. How do we fit in globally? Strategy, staff, products, process, customers.
Innovation is part of a complex industrial process. Innovation alone is not enough.
The report understands that innovation depends upon capabilities – culture, adaptability,
processes. The Enterprise Connect program can be an important part of this process.
Stephen Kowal: It’s a good report, but we have a long way to go. We should acknowledge
that innovation comes from small and large enterprises, and from government. The SMEs
are the powerhouse of disruptive innovation, but there are many other sorts.
The report makes a comment on human capital, but there isn’t a lot about people, and
especially about skills shortages, training and the growth of the ICT profession. We need
talented people, and the report was light on in this area.
The tax credit system is good. But these need to be integrated with other related issues, like
procurement, intellectual property and the rest of the tax system. There are billions of
dollars of potential incentives if it’s done right.
David Skellern: The general tenor of the review is good. The idea of encouraging universities
and business to work better together, and perhaps international, is important. Increased
funding for postgraduates is a good idea.
But a few things are disappointing. We hear different figures on the extent to which ICT is
responsible for productivity improvements in the economy, but the report does not mention
any figures. I would have like more specific recommendations regarding ICT.
There is incremental innovation, and there is innovation brought about by fundamental
advances in knowledge. There is a huge gap in Australia between what is produced in the
research centres and what industry takes up. We need specific recommendation that will
help us bridge that innovation gap.
There are also too many disconnected small companies in Australia. We need to build up
clusters of companies that can operate “pre-competitively” to establish platforms that
multiple companies can draw on.
Ian Birks: There needs to be increased focus on workforce issues and on the academic and
research sector. The tax credit system is a great progression, but I agree that there needed
to be more that was ICT-specific.
ICT undersells itself. Talking about ICT as a utility or an enabler is underselling the
competitive differentiation and the large gains that can be achieved through the use of ICT.
It has the potential for transformational effects in areas like its effect on climate change.
There is not enough about that in the review.
Narelle Kennedy: There’s a critical challenge to the idea that innovation deals only with
science and technology. We “know” that investment in research is important. We “know”
that tax treatment is important. Non-technical innovation is also important. Many things
have been identified, but we need to hear the business voice more.
Comments and discussion from the floor:
Intellectual Property: There’s a “soft disrespect” for intellectual property by government.
The government could show more respect for innovators’ IP. If the government thinks
something is a good idea, it would put it out to tender, and then that tender is won by a
large organisation and the small company who thought of it gets pushed to one side.
The way government treats others’ IP is a real problem that needs addressing (strong
consensus by all). Government procurement doesn’t understand the knock-on effect, on tax
and other areas.
Another related issue is the decline in patents in Australia, which is mentioned in the report.
Perhaps the government should consider a patent fund to help companies address the
ownership of their IP. But patents can be an inhibitor, and perhaps an open source model is
better. We need to re-assess the whole approach to IP.
Other points:
• There are two sweet spots on the creative spectrum – creation and use. But both are
dependent on technological literacy – unless we get that right we will simply be
documenting the demise of the Clever Country. We need to invest more in skills, not
just for today but for tomorrow.
• Too many users in Australia won’t buy from small Australian companies – they don’t
have confidence in them. It’s the reverse of “not invented here.” The attitude is – if
it’s invented here, it can’t be any good. This is related to the government
procurement issue. It can be hard to sell something overseas if the potential
customer sees that your own government hasn’t even bought the product. It’s the
first part of the credibility issue.
Presentation of Pearcey Awards
NSW State Pearcey Award
The 2008 NSW award went to Scott Farquhar and Mike Cannon-Brookes, co-founders of
enterprise software company Atlassian. The award was presented by NSW Minister for
Health and patron of the NSW Pearcey Awards John Della Bosca.
National Pearcey Medal
The winner of the 2008 Pearcey Medal was Neville Roach AO. The medal was presented by
Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy.
Fellow finalists Dr Neil Weste and Clive Finkelstein were admitted to the Pearcey Hall of
Fame.
The 2008 Pearcey Oration
(This is a summary of Dr Cutler’s remarks. A full transcript of his oration can be found at
(http://www.pearcey.org.au/images/9/94/Pearcey_oration.pdf)
Trevor Pearcey was one of those rare people who have a bold vision of how technology
could transform society. In 1948 he wrote:
"It is not inconceivable that an automatic encyclopaedic service, operated through the
national teleprinter or telephone system, will one day exist.”
That now looks uncannily like a description of the search engine Google.
How do we actually make innovation a priority in Australia?
Reviewing our recent innovation performance does not inspire confidence in Australia’s
future. We are doing very poorly. As a share of GDP we are investing less in education, talent
development, and R&D than we were more than a decade ago. Meanwhile the global goal
posts keep shifting, and the global hurdle rate for competitiveness keeps rising.
Only a third of Australian firms invest in innovation and R&D. And only 7.7% of these are
pursuing “new to world” innovation. Australia ranks poorly for “capacity for innovation” in
surveys by the World Economic Forum, and worse in the World Bank’s assessment of the
“value chain breadth” of Australia’s firm base. No Australian firm features in Business
Week’s annual global survey of the top 50 innovative firms.
Then there is the “absorptive capacity” of our firms, their ability to take up new technology
and innovation and apply it innovatively. Australian firms invest heavily in ICT. But Australia
ranks 24th
out of 28 OECD countries on the measure of firms with their own website.
Business expenditure as a percentage of GDP is half the OECD average. Government support
for science and innovation has fallen from 0.76% of GDP in 1993 to 0.58% in 2007. Surveys of
companies investing in R&D show that the most attractive foreign R&D locations are now
non-OECD countries, and Australia is scarcely on the radar. And Australia ranks last among
OECD countries for firms with cross-border collaboration in innovation.
One important observation from the Review and the analysis of the 740 submissions is just
how many of them raise issues bearing on ICT and a digital agenda. In the work on systems
theory, which spills over to the discussion of innovation systems, analysts talk about points
of systemic failure. These include:
• The adequacy or otherwise of infrastructure. Submissions raised issues such as the
lack of world-competitive broadband and the inadequate funding of national facilities
such as high performance computing.
• Industry’s lock in to established modes of production: things like Australia’s
dependence on coal fired energy, incompatible information systems, and proprietary
standards and IP lock-up.
• Inadequate institutional development and evolution. There is where institutions, and
especially legal frameworks and regulatory agencies, get out of kilter with market
developments. The classic example is the mismatch between media regulation and
the Internet in the 1990s.
• Inadequate linkages and information flows within the innovation system. This is the
problem of systemic blockages and missed connections. In general, government
programs and initiatives will focus on formal, contractual collaborations at the
expense of informal, trust-based relationships.
As a country we can no longer afford to lead relaxed lives where success is “the survival of
the least uncompetitive”. In a globalised and networked world our remoteness and
smallness no longer provides a de facto protectionist shield for uncompetitive firms and
industries.
Without advanced network infrastructure, without broadly based capabilities and skills in
ICT, we will continue to go backwards in the innovation stakes. The one point, the one
phrase, I hope might all remember from my comments tonight is that information and
communication technology is innovation technology. We need a coalition of the willing to
make sure everyone understands this.
****
Terry Cutler 1
Not waving, but drowning
The Pearcey Oration, 11 September 2008
Dr Terry Cutler Today we gather to honour and recognise distinguished Australians for their contributions to the information and communications industry. I congratulate the recipients of this year’s Pearcey Medal and other awards, and commend the Pearcey Foundation for its work in promoting the wider recognition of information and communications technology within Australian industry and society. As an Australian community, what do we value? In 2003 a Centenary Medal was issued to commemorate the anniversary of our Commonwealth. It is instructive to scan the citations for the 15, 916 Australians recognised with this medal. The medal tally is as follows:
Innovation 4 or 0.03% ICT 23 or 0.1% Medical technology and biotechnology
23 or 0.1%
Sport 769 or 4.8% Trade 68 or 0.4% Exports 4 or 0.03% Industry 421 or 2.7%
When it comes to recognition through the Order of Australia, we value sport 54 times more highly than innovation, and 144 times more highly than information and communications technology. So it is clear why we need organisations like the Pearcey Foundation “to promote and encourage Australian ICT achievement” and “to promote the industry and its role and positive contribution to the whole of the Australian economy”. In 1948 Trevor Pearcey designed Australia’s first computer, and one of the first computers in the world. He did this the year I was born, and he helped shape the world in which I have worked and lived. It is also appropriate to recognise, as a member of the Board of CSIRO, that Trevor Pearcey was a CSIRO scientist, reminding us of the important role that CSIRO has played, and continues to play, in Australia’s industrial development. Today, fortunately, CSIRO continues to be an Australian icon and an institution highly trusted by Australians. Outside the ICT industry, however, few people remember the work of people like Trevor Pearcey. Unlike Donald Bradman, Trevor Pearcey was not part of the citizenship quiz devised by John Howard’s government. Trevor Pearcey and the Foundation’s medallists remind us that innovation and advances in technology and industry are fuelled by talented and creative individuals. Creativity, in science, industry, or the arts, is the ability to envision alternative futures and new possibilities for our society. Science, technology and the
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arts all provide us with “windows into realities under construction”1. Trevor Pearcey was not only a member of small global elite who created the foundations of today’s digital era but he was also one of the rarer cadre of people who were driven to such achievement through a bold vision of how technology could transform society. In 1948 he wrote:
"It is not inconceivable that an automatic encyclopaedic service, operated through the national teleprinter or telephone system, will one day exist"
In this he was on the same wave length as Vannevar Bush, the architect of post war science policy in the US, who a couple of years earlier had anticipated a Memex machine, or memory extender, which now looks uncannily like the search engine Google2. This other Bush said, in 1945, “in the application of science to the needs and desires of man, it would seem to be a singularly unfortunate stage at which to terminate the process, or to lose hope as to the outcome”. Today we might comment that it would be a singularly unfortunate moment to ignore the crucial role of information and communications technology as one of the key drivers of innovation and productivity. This week the Government released the report of the Review of the National Innovation System which I was privileged to chair. Tonight provides me with an opportunity to share a few of the insights I draw from an intensive six months of engagement with thoughtful people across Australia. The first thing we need to do is to actually make innovation a priority. It is unfortunate that innovation has become such a woolly and overused word. We spray the word around, but seldom step back and ask ourselves what innovating and being innovative really means, and what sort of culture and behaviours it calls for. Put simply, innovation determines whether our firms and industries stay competitive and productive. It is, and must be, a national priority because the competiveness and productivity of our firms determine, in aggregate, our national prosperity, the quality of our jobs, and the amenities we enjoy as a community. Reviewing our recent innovation performance does not inspire confidence in Australia’s future. Over the past few days I have been rehearsing our innovation scorecard many times. In starting to construct such a scorecard it is important that we look both at innovation output and outcomes, as well as inputs and the level of investment in supporting innovative capability. On both sides of the ledger we are not doing well. In fact, we are doing very poorly. As a share of GDP we are investing less in education, talent development, and R&D than we were more than a decade ago. Meanwhile the global goal posts keep shifting, and the global hurdle rate for competitiveness keeps rising. Here is the summary version of my personal innovation scorecard for Australia:
Productivity growth. After strong performance in the 1990s, productivity growth has now stalled. Even in the 1990s, the sources of productivity were highly concentrated (1992-2004) in agriculture, wholesale trade,
1 I owe this wonderful phrase to Peter Sellars, the controversial Director of the Adelaide Festival in 2002. 2 Vannevar Bush, “As we may think”, Atlantic Monthly, July 1945
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communications and finance3. (It is important to note that most of the productivity grow in services has been fuelled by ICT deployments). Multifactor productivity growth has stalled since 2003. The number of innovating firms. ABS surveys tell us that only a third of Australian firms invest in innovation and R&D. But only 7.7% of these innovating firms are pursuing ‘new to world’ innovation. Australia ranks poorly for ‘capacity for innovation‘ in surveys by the World Economic Forum, and worse in the World Bank’s assessment of the ‘value chain breadth’ of Australia’s firm base. Of the 8 Australian firms in the Fortune 500, only one is a truly global enterprise (BHP Billiton). Only 90 of our top exporters by value have a trade intensity greater than 10%, and only 49 have a trade intensity greater than 50%. (Trade intensity is exports to turnover). No Australian firm features in Business Week’s annual global survey of the top 50 innovative firms; but two Indian firms scored this year (Tata, and Reliance). Our terms of trade in knowledge are negative. In 2007 Australia had an intellectual property trade deficit of $2.5b, and rising. We are innovation and IP price takers, because the cruel fact of life is that 98% of new knowledge and innovation is developed elsewhere in the world. We need trade and IP policies that address this brutal reality. We are a 2% economy, and need global strategies that recognise this challenge. Next we need to turn to the absorptive capacity of our firms. That is, their ability to take up new technology and innovation and apply it innovatively. Australian firms invest heavily in ICT. But I was shocked to see Australia rank 24th out of 28 OECD countries on the measure of firms with own website. We have a declining number of researchers and technically literate people as a proportion of our workforce Australia ranks OECD last for employer investment in vocational education and training
Business expenditure as a percentage of GDP is half the OECD average. Government support for science and innovation has fallen from 0.76% of GDP in 1993/4 to 0.58% in 2007. Surveys of companies investing in R&D show that the most attractive foreign R&D locations are now non-OECD countries, and Australia is scarcely on the radar.
3 A. Hughes and V. Grinevich, (2007). The Contribution of Services and Other Sectors to Australian Productivity Growth 1980-2004, Australian Business Foundation and Centre for Business Research Cambridge, UK, 2007.
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Australia ranks last among OECD countries for firms with cross-border collaboration in innovation.
I find this a depressing scorecard, and one that should serve as a wake up call. The Pearcey Foundation prepared one of the 740 submissions to the Review of the Australian Innovation System. A number of the other ICT submissions also provide thought leadership. It is invidious to single out specific submissions, but several provide a platform to open up some general observations. First, the Pearcey Foundation submission proposes the establishment of an ICT economic studies institute. This underpins the general observation we make in the Report that we do not have enough of an evidence base about innovation on the ground, especially compared to other countries like the US and UK. We need to invest in survey and industry data about our innovation performance, and track trends over time. NICTA provided a important overview of the industry and the challenges – it is a very good read - and spelled out how a research agenda around platform applications and horizontal specialisations is not a ‘second best’ approach but, rather, one where leading edge breakthroughs can be secured. Google Australia made strong representations about the need to preserve an ‘open Internet’, and highlighted the extent to which local applications from Australia fed into Google’s global offerings. IBM, and IBM’s Nic Donofrio (Executive Vice President of Innovation and Technology) who assisted as an international adviser to the Review, stressed the need to focus on services science and the importance of open innovation models, especially in a small country like Australia. Mark Dodgson from the University of Queensland was a special adviser to the Panel, and he and his colleagues highlighted the importance of a new class of innovation technologies – data mining, rapid prototyping, simulation, design – which all depend on ICT and advanced skills in their use. Finally, the Centre of Excellence for the Creative Industries and Innovation, hubbed out of QUT, highlights the importance of the creative industries within innovation systems. This Centre is providing thought leadership around information policy and the need to rethink legal frameworks around innovation processes. The law, technology, and national policies are inextricably enmeshed. Our Report notes that we need to see intellectual property as an economic rather than a legal matter. One important observation from the Review and the analysis of the 740 submissions is just how many of them raise issues bearing on ICT and a digital agenda. In the work on systems theory, which spills over to the discussion of innovation systems, analysts talk about points of systemic failure, as somewhat super ordinate to the more familiar recourse to market failure as the rationale for government intervention. It is worth taking some of the commonly identified potential points of system failure and examining what submissions had to say about them. This overview is indicative, not exhaustive.
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The first area is the adequacy or otherwise of infrastructure. Submissions raised issues such as:
• Lack of world competitive broadband (this was widely seen as a threshold issue)
• Inadequate funding of national facilities (including high performance computing)
• Neglect of national collections, and their digitisation • Underfunding of research infrastructure • No statutory requirement for the legal deposit for digital publications • Policy neglect and underfunding of metrology and standards functions • Slow development of eScience and eResearch platforms
A second area of potential system failure is industry and firm ‘lock in’ to established modes of production. Professor Keith Smith, an adviser to the Review explained:
there is considerable evidence to suggest that even relatively minor shifts [in technology] can provide serious problems for firms who have no background in the new technology. This is particularly a problem for small economies which possess relatively small numbers of players in many sectors; relatively minor discontinuous shifts can provoke major changes in the industrial structure.
Submissions and consultations identified examples such as:
• Australian manufacturing (exemplified in the parallel automotive and textile reviews)
• Australia’s dependence on coal fired energy • Incompatible information systems • Proprietary standards and IP lock-up • Weakening firm technical skill base • Global “innovation gravity” – and Australia’s 2% handicap
The flipside here is the role for government around emerging market or technology areas. As other international advisers, Professors Alan Hughes and Stan Metcalfe commented:
As it cannot be presumed that the prevailing distribution of private resources to innovate (based on past successful innovation) will correlate at all closely with emergent innovation opportunities (future successful innovation), the role of new firms in the innovation process in emergent technologies and the difficulties they face is well known in this regard. In these circumstances innovation policy will be required to identify and address key factors which are limiting the ability of actors in the system to respond effectively.4 (emphasis added)
Here there is probably a strong case for incentivising early innovators – as argued by Ross Garnaut in the case of climate change responses – rather than promoting the less risky strategy of being a global follower. Here, even if a firm fails in emerging markets, there are the public benefit spillovers of new capability and expertise created.
4 Alan Hughes and Stan Metcalfe, Market systems failure – a technical note, 23 July 2008
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A third area of systemic failure is inadequate institutional development and evolution. There is where institutions, and especially legal frameworks and regulatory agencies, get out of kilter with market developments. The classic example is the mismatch between media regulation and the Internet in the 1990s. But submission also highlighted the inadequate skills for and awareness of, in many institutions, emerging IP policy issues and the demands of next generation cyberlaw. Australia also lags the rest of the world in developing policies for open access to public sector information. A final area to mention, for now at least, is where there are inadequate linkages and information flows within the innovation system. This is the problem of systemic blockages and missed connections. In general, government programmes and initiatives will focus on formal, contractual collaborations at the expense of informal, trust-based relationships. We tend to neglect the role of social networking in innovation systems. Another point of blockage is the way we tend to create data and information silos (too often in incompatible formats and not interoperable or exchangeable) as a consequence of the walls we build around disciplinary, sectoral and bureaucratic specialisations. The digital environment provides the means to break down these barriers if we have the will. The Review Panel’s Report argues strongly for increased attention to better information flows. In support of this we argue the case for a National Information Policy because flows of information, our ability to access and use information, go to the heart of the innovation challenge. Information flows are the nerve system of innovation, especially in an era when models of ‘open innovation’ are being adopted in more and more areas of business. Open innovation models recognise that one person’s trash is another person’s treasure. There is, however, an inbuilt asymmetry between the owners or custodians of information, and potential users in terms of the uses of information and the value of those uses. We need better search and discovery tools, and informed intermediaries to help make the connections. The National Science Foundation in the US speaks of cyberinfrastructure as a new fifth dimension and shared space. In thinking about emerging information and collaboration infrastructures, it strikes me that many of the access issues we are debating around digital information have already been addressed in other domains, especially around open access to physical infrastructure. In my view there are clearly lessons to be learned from the principles established for access to, and the interconnection of, deregulated telecommunications networks and other forms of networked infrastructure5. Access regulation for telecommunications networks is based on two major premises:
1. The utility and benefits of networks are promoted by ‘any to any’ connectivity (inter-operability); and
2. Dominant players should not be able to create ‘bottlenecks’ to access.
5 I was personally involved in the early debates on these issues during the liberalisation of telecommunications markets in Australia and Asia in the early 1990s. Much of the clarity and sharpness of the principles then established has been eroded over time.
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A number of access principles6 follow from these premises and include the propositions that:
• arrangements should promote efficiency; • there should be reciprocity in rights and obligations; • the economics of arrangements should be clear and unbundled, promoting:
- the desired level of investment in infrastructure (without wasteful duplication)
- the lowest possible transaction costs; • obstacles to users accessing services should be minimized; and • redundancy should be supported.
Network ‘interconnection and access’ principles are clearly applicable to information infrastructures and content networks. Content is the new access bottleneck. The access challenge escalates as functional interdependencies increase massively in a digital environment. As a principle, networked information flows should aim to support ‘any to any’ connectivity. This seems especially apposite in the case of public sector information. Bob Bishop, a great Australian expatriate and a member of the Pearcey Hall of Fame, talks about today’s innovation challenge in ways that Pearcey would thoroughly approve of. Bob Bishop notes that computer and simulation based R&D gives us:
a tool to accelerate innovation; a technology to invent technology; and tools for rapid exploration and discovery
These provide keys to the formation of a knowledge society. Pearcey’s vision of an “automatic encyclopaedic service” is today’s cyberinfrastructure. As another colleague, John Wilbanks the CEO of Science Commons in the US, puts it, industry competition today is about exploiting shared information better than others. As a country we can no longer afford to lead relaxed lives where success is “the survival of the least uncompetitive”. In a globalised and networked world our remoteness and smallness no longer provides a de facto protectionist shield for uncompetitive firms and industries. Without advanced network infrastructure, without broadly based capabilities and skills in ICT, we will continue to go backwards in the innovation stakes. The one point, the one phrase, I hope might all remember from my comments tonight is that information and communication technology is innovation technology. We need a coalition of the willing to make sure everyone understands this. A venturous Australia needs a venturous ICT industry – enterprising, bold, and brave enough to mix it with the best. We need to follow in the footsteps of Trevor Pearcey and the Pearcey medallists.
6 Austel, Study of Arrangements and Charges for Interconnection and Equal Access, Melbourne, 1991
Philipson column for 11 November 2008
Trevor Pearcey was the father of Australian computing. He was the driving force behind
CSIRAC, Australia’s first computer and only the third stored program computer in the world.
He died in 1999, but his name lives on in the annual Pearcey Awards, which celebrate
individual contributions to the Australian computer industry. The highest of these awards is
the Pearcey Medal, won this year by Neville Roach for his tireless promotion of the industry
in this country and abroad.
Roach is a former head of Fujitsu Australia and a former chairman of the Council for
Multicultural Australia. Born and bred in India, he has long been a champion of closer ties
between that country in Australia. He is one of the best known people in the Australian
computer industry, and is a deserved winner of the Pearcey Medal.
But this year’s awards night comprised much more than honouring Neville Roach. The event
started mid-afternoon and stretched late into the evening, much longer than usual. The
extra time was needed to accommodate some serious discussion about how Australia’s IT
industry should respond to the Federal Government’s recent review of innovation in
Australia.
The report is titled “Venturous Australia” it was released on 9 September just two days
before the Pearcey Awards event. The event itself was structured around two long panel
sessions, the purpose of which was to elicit industry reaction to the report.
As you can imagine, there was no shortage of opinion, either from the panellists or from the
floor. When you get 230 of Australia’s leading IT luminaries in a room, give them lots of food
and drink, and ask them to say what they think, you’re bound to end up with the odd
comment or two.
Some consensus emerged. Many people were disappointed that the report didn’t directly
address many IT issues. It was treated as an enabler, with little mention of how IT itself could
be innovative. But part of the reason for this, said the new chairman of the Pearcey
Foundation Wayne Fitzsimmons in his opening remarks, could be blamed on the IT industry
itself.
“We did not make nearly as many submissions to the innovation review as did biotech or
even nanotech, despite IT being a major driver of innovation. This passes a comment on us
as an industry.
“Are we just broad infrastructure that touches everything but which is not significant when
standing alone? Do we care about this lack of representation? How important is ICT to
improving productivity anyway?”
Those comments set the scene for what turned out to be a lively debate. “We need to
distinguish between IT as infrastructure and IT that really is cutting edge stuff that will take
us to the next horizon,” said Pia Waugh of open source group Waugh Consulting.
“Both elements are important, but if we concentrate only on the first and not on the second,
Australia will fall behind very quickly. It will be a very uninteresting place in 20 years’ time.
We should be using connectivity and collaboration tools a lot better. New Zealand is doing
this, even using wikis to develop education. We have the infrastructure, we need to do more
with it.”
Narelle Kennedy of the Australian Business Foundation, who was on the panel that produced
report, mounted a spirited defence of its conclusions. “It does challenge the idea that
innovation deals only with science and technology. That sort of innovation is important, but
so is innovation in business practices. We need to hear the business voice more.”
Another key theme of the evening’s discussion was the extent to which governments can or
should foster innovation and innovative small companies. There was a strong feeling that
while the private sector should lead innovation, government could do a lot more in terms of
setting the scene and providing incentives and information.
The view was also often expressed that government has an important role beyond setting
policy, especially in the procurement area. As a major user and purchaser of ICT,
governments could promote innovation by buying more innovative products.
“The procurement process is risk-averse and precludes the inclusion of innovative solutions,”
came a comment from the floor during a Q&A session. “There should be a mezzanine stage
that allows government to trial innovative solutions. What if a certain proportion of budgets
were allocated to small companies or innovative solutions?
“What if 10% of every project was earmarked for small local suppliers and innovative
solutions?” There was strong agreement with this view – it’s been a recurring theme at
many such events over the years. Unfortunately, little seems to happen.
The evening ended with the Pearcey Oration. It was given by Dr Terry Cutler, who chaired
the panel that wrote the innovation report. He quoted a range of statistics that indicated
Australia as a nation is an international innovation laggard.
“Australian firms invest heavily in ICT. But Australia ranks 24
th out of 28 OECD countries on
the measure of firms with their own website. Business expenditure as a percentage of GDP is
half the OECD average. Government support for science and innovation has fallen from
0.76% of GDP in 1993 to 0.58% in 2007.
Dr Cutler called for a range of measures to overcome these problems. The IT industry is now
compiling its response to the report. Let us hope it is not just more talk.
NOTES FOR PANEL DISCUSSION IN PEARCEY FOUNDATION INNOVATION FORUM, 11 SEPTEMBER 2008, SYDNEY
NIS Review – Overview
• Less a blueprint, which implies depth and detail, than a mud map which outlines the key features, roadways and intersections.
• Large remit and short timeframe, together with the imperative to address specific terms of reference given by the Government (eg. tax) decided the character of the Venturous Australia report.
• “Muddiness and motherhood” commented Peter Roberts in AFR on 10 September 2008. Maybe, but another take on this is that given the massive task of the NIS Review – to recast Australia’s innovation policy from the old‐fashioned settings locked into lone researchers and technologists to productivity‐enhancing collaborations and knowledge‐sharing in modern globalised services‐dominated economies – the report has just the right degree of untidiness and exploration of the significant issues.
• In an effort to reset innovation policy as a vehicle for securing and sustaining Australia’s productivity (ie. growth without inflation), the NIS review report models modern innovation behaviour. It is a mud map that results from and encourages the contestability of ideas, different perspectives and different areas of specialist expertise, and invites experimentation, improvisation and learning. It seeks to throw stones in the pond to cause ripple effects for 10 years. But is also seeks to satisfy some immediate and particular concerns in the Terns of Reference and with a time horizon to the 2009/10 Federal Budget.
Key Contribution – Business Innovation is Recognised
• The NIS Review makes important recommendations on actions to:
- increase Australia’s research spending;
- invest more in the education and skills of our people;
- improve the tax treatment and legislative and regulatory ‘rules of the game’ that foster innovation; and
- lift the innovation performance of government itself.
• But the single most important contribution of the NIS Review is to recognise the hidden realties of business innovation, where the real value of doing something new comes from users, not the providers of innovation.
• The critical dimension of innovative businesses and workplaces is not overlooked or undervalued in the Cutler Review. This is critical as it is here where the productivity effects of innovation are unleashed. We are interested in innovation not for its own sake, but because it serves to increase Australia’s prosperity and the wellbeing and quality of life of our people.
• Unlike past innovation reviews, the Cutler Review recognises the importance of innovation by businesses responding to market and customer demands. Such innovation serves to transform businesses not just with new products and technologies, but in their operations, relationships and business models.
• The active ingredient in innovation is transformation, not technology.
• There are two vital insights that result from understanding the importance of business innovation. Firstly, innovation is rarely based on traditional understandings of linear pipeline research and development. Rather, it involves changes to business organisation and consumer behaviour as much as science and technology. (see UK NESTA publications)
• Secondly, patterns of innovation have evolved and changed from closed to open systems, where users and customers are as much the source of innovation as producers.
• There has been a shift from the old‐fashioned concept of ‘innovation as discovery’ to innovation as ‘connecting for value’, ie. innovation that comes from new connections throughout the value chain. From Steen et al in Australian Business Foundation’s forthcoming book Inside the Innovation Matrix : Value is created through rearranging and recombining knowledge, people, processes and technologies‐‐‐ [it involves] problem‐solving and improvisional activity, eg. in project businesses and complex product systems such as wind turbines (eg. Vestas), construction (Laing O’Rourke) and management consulting (eg. Deloitte), or Beeline tractors and GPS for agribusiness. Recombinations of previously disconnected ideas, with fluid interactions and knowledge transfers.
• In short, the picture is, to quote the NIS Review report, that the miraculous alchemy of innovation occurs close to the customer.
Securing productivity from innovation
• Innovation as the smart application of knowledge to solve problems and create opportunities for customers worldwide results in the business transformations that generate new value.
• This is at the heart of how innovation is fundamental to productivity growth. Productivity is not about doing more with less, not about making people work harder for longer. Productivity results from transformations in business capabilities and offerings that are enduring and that have multiplier effects.
• The final word on the innovation / productivity equation goes to Professor Alan Hughes from the University of Cambridge who with Vadim Grinevich undertook a study for the Australian Business Foundation on Australian Productivity Growth from 1980 to 2004. The key findings of this study were that the main contributors to Australia’s productivity surge in the 1990’s were 3 services sectors – financial intermediation, wholesale trade and general business services. The development and application of information technologies, together with investment in management competencies and other organisational and often intangible assets, were behind the transformation of the sectors contributing most to Australia’s productivity growth.
• It is the high technology using sectors, not the high technology producing sectors that are the key component drivers of productivity growth, both in Australia and the USA. The diffusion of new enabling technologies that give enterprises fresh capabilities and that transform businesses are critical to productivity performance.
• Hughes and Grinivich’s study for the Australian Business Foundation provides some fresh insights about how to advance Australia’s productivity revolution. The key lies in their findings that the productivity gains evident in the sectors contributing most to productivity growth were generally not the result of greater capital investment to replace labour. Business transformation from the use of enabling technologies, management capabilities or capitalising on other regulatory reforms caused genuine productivity dividends to be achieved.
• This is the key lesson for the ICT industry too – to avoid special pleading as a sector in your own interests, and promote your position as an innovation carrier in all other industries, in a way that transforms them and which directly improves their productivity performance.