ginger's thoughts

Yesterday was a long and fascinating day of discussions about innovation in Australia.

At this year’s Pearcey Medal and NSW Pearcey State Award event, the focus was on the recently released innovation report from Terry Cutler with a focus on the effects on ICT (Information and Communication Technology).

If you only look at the summary report, you will miss the structure of the full report, which is why I have outlined it here:

• Chapter 1 stalling not sprinting
• Chapter 2 the national innovation system
• Chapter 3 innovation in business
• Chapter 4 the case for a public role in innovation
• Chapter 5 strengthening people and skills
• Chapter 6 building excellence in national research
• Chapter 7 information and market design
• Chapter 8 tax and innovation
• Chapter 9 market facing programs
• Chapter 10 innovation in government
• Chapter 11 national priorities for innovation
• Chapter 12 governance of the innovation system

I took home a few very interesting observations from reading the reports and from the discussions at the Pearcey event.

But before I can comment, I have to state which organisations I see as ICT innovators in Australia.

• The government-funded ones are the Universities, NICTA and CSIRO (CRCs fall in the same general class).
• The big drivers of transforming new research outcomes into business are start-ups and the SMEs.
• Further innovation happens in large companies and multi-nationals with a stronger focus on incremental innovation rather than disruptive innovation.
• In ICT, we need to add another big driver of innovation: open source software. I’ll explain this later in more depth.

The following observations on VenturousAustralia and what I took away from the Pearcey awards are on these topics:

1. Support of fundamental R&D in ICT
2. Commercialisation of ICT innovation
3. Enabling SMEs to succeed
4. Regard for the contribution of Open Source

TOPIC: ICT and innovation

At the Pearcey awards, we had long discussions about whether ICT was appropriately represented in the report and whether the recommendations are pushing ICT further into a supportive role while missing our opportunities to innovate and lead in core ICT.

It is generally accepted that ICT has a major effect on the productivity increase of almost all Australian industries. DCITA reports show that in service industries, between 35 and 65 per cent of productivity growth is estimated to have been driven by technological factors—mainly ICT related. In manufacturing, the range was between 45 and 75 per cent.

And yet, we only spend about 0.55% of our government outlays on R&D and very little of this on ICT R&D, putting us third-last in the OECD (p. 65 of VenturousAustralia). These are shocking numbers. Does the report recommend anything to change this situation and help Australia stay at the forefront of ICT R&D and innovation?

Checking in the 228 page full report (see VenturousAustralia), we find that the recommended innovation priorities for government are:

• Agricultural and food security
• Climate change mitigation and adaptation
• Population health
• Tropical solutions
• Broadband applications

while complementary recommended private innovation activities are:

• Resource industries
• Space and astronomy
• Finance and risk management
• Marine industries

Is ICT reduced to a need for broadband and support in the other industries? Are we as an industry underrepresented?

As much as I was looking, I found no recommendation relevant to fundamental ICT research in the report.

So, it does burn down to broadband. At least, the one paragraph that refers to broadband applications as a goal suggests not to invest more in the National Broadband Network itself, but into the development of relevant applications – specific to local needs. This includes applications in health, education, open democracy, traffic systems, and public national collections of information and knowledge.

It is a shame that there is no explicit recommendation to support Australian research and commercialisation that will push the technical boundaries of important fundamental ICT technologies such as networking, mobile devices, digital media, information analysis, system complexity, or robotics.

TOPIC: Commercialisation of ICT innovation

As everywhere else, in Australia, too, the powerhouses of commercialisation of fundamental ICT R&D and innovation are start-ups and SMEs. Interestingly, the CSIRO and NICTA find it very difficult to turn their inventions into new companies or get existing companies to pick them up.

It has been identified that this has much to do with individuals and their drive (or lack thereof) to see their invention through from creation to commercialisation.

Interestingly, much original R&D is and has to be done in start-ups themselves. This is because the fundamental research performed in organisations like the CSIRO and NICTA may be independent of a current need of the market, while actual current needs in the market for research are not addressed.

I think, while VenturousAustralia talks a lot about the need for more education, this critical point of bridging the gap from R&D to commercialisation – a critical step to make an innovation useful – is not supported enough.

I have been thinking about this issue a bit (since I have come out of the CSIRO and now run a start-up) and have a suggestion.

There are some projects that support the placement of PhD students from universities into large companies to mentor them through their projects. However, I do not think we have any government supported placement projects for SMEs.

If the government would pay for a intern or a PhD student or a CSIRO/NICTA researcher to be placed in a start-up and do a research project there that has a direct use in the company and the IP would belong to the company with the researcher getting a share in the company and publications be done for the University/CSIRO/NICTA, then a commercialisation path would be built. It would help do more fundamental research, would help bridge the gap into commercialisation, would help the SME to do R&D, and would possibly help the researcher discover a more commercial side of his personality.

I had hoped for some recommendations like this in the report, but found nothing that directly focused on bridging this commercialisation gap.

TOPIC: Enabling SMEs to succeed

We were all positively surprised to see some of the recommendations in VenturousAustralia that will really support SMEs’ efforts in ICT innovation.

For example, the recommended tax credit would in my own (probably flawed) calculations be able to give us at Vquence a 50% larger tax rebate.

I was further surprised to see recommendation 10.6:
“The Australian Government should recognise its role as an active participant in facilitating innovation through procurement practices.”

This recommends a similar requirement for Australian governments as exists in the USA to spend a percentage of procurement on testing and using Australian innovative products and services.

Another recommendation that initially really excited me is recommendation 10.2:

“An advisory committee of web 2.0 practitioners should be established to propose and help steer governments as they experiment with web 2.0 technologies and ideas.”

It sounds like the recommendation means that we should push the boundaries of Web 2.0 more in Australia. However, when reading the report, it becomes clear what this recommendation means: the government should use Web 2.0 technologies that have been proven elsewhere to enable a more open communication, discussion, and collaboration between government departments and the public. As awesome as this is – and as much as it fits with the principles that we have been pushing in open source for many years – it is also limiting ourselves to the use of existing technology rather than pushing the boundaries by developing new technologies.

TOPIC: Regard for the contribution of Open Source

There is an enormous amount of innovation happening in the open source community and Australia is one of the big contributors to open source software internationally. However, the open source communities are often overlooked as innovators in ICT because commercial success from them is only visible indirectly, e.g. through a successful project in government, a successful new start-up, or a process optimisation in a multi-national.

In this report I am slowly seeing a recognition of this and the advantages of open technologies and open content.

In recommendation 8.7 you can read (extracted):
“Further exploration may be warranted to see if there are practicable ways of expanding the definition of eligible activities to include some of the less technically risky activities involved in innovation in services. In the immediate term, R&D on open source programs should qualify for the multiple sale test.”

This will enable Open Source work and services to be used for Tax Concession and Tax Credit – a big step forward.

Yet, the undertanding is still limited, I think.

Looking at recommendation 7.14:
“To the maximum extent practicable, information, research and content funded by Australian governments – including national collections – should be made freely available over the internet as part of the global public commons.”

I like the drive for opening up public content repositories in this. But I’d like to focus my observations on the part that states that “research funded by Australian governments should be made freely available over the Internet”. In my view, this is a great push towards supporting the open publication of research outcomes by Universities, NICTA, CSIRO, and CRCs. But I seem to be misunderstanding this bit, since there is no such mention in the Cutler report – it only focuses on content.

CONCLUSIONS

After all this criticism I have to say that I was rather impressed by the breadth and depth of the report. I was not able to cover all the good bits, which also include more support for investment activites. My criticism is only on the rough edges and I’ll take some time to feed it back, because I have a real belief that the feedback will actually end up in the final report.

Why do I think that constructive feedback will still make it into the report?

First of all, I think the committee has tried and mostly succeeded in succinctly putting into the report all the input they have received. I don’t think we have ever seen such a comprehensive analysis of the Australian innovation landscape beforehand.

But more importantly, I was at the Pearcey awards event, I heard some of the committee members speak about the process and respond to some of the feedback, and I heard Terry Cutler speak about it. I got the feeling of overwhelming support for ICT innovation and I hope we see a lot of the recommendations turned into reality.

I’ll end this lengthy discusion with Terry Cutler’s final words of the evening: “ICT is innovation”.

UPDATE: Charles Lindop just published the audio recordings of the event on his blog.