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Rebooting Australia’s Innovation Appetite

Tech and Innovation

Posted on October 20, 2015

6 min read

The last time Australia was in love with technology innovation was the mid 1990s.  In that era, we were helping build the infrastructure of connectivity, with the development of WiFi at CSIRO, and ADSL at Telstra. We were even building world-leading cryptography solutions and peer-to-peer sharing systems – some of which found their way into Assange’s original Wikileaks platform.

But soon after this period, Australia’s technology innovation culture began to pall. We continued to conduct research, and some quality products emerged (particularly in medicine), but our love affair with the new, connected world was making way for a sense of self-satisfaction with the mining boom, and the skyrocketing valuations of commodities.

Not at all coincidentally, our productivity growth at that same point took a nose dive. From 1997, at the last peak, we experienced negative productivity growth until just the last year or two.

While businesses were adding labour, and investing in existing infrastructure, output was flagging.  And there was little, if any, appetite for innovation in technology that could boost productivity. Instead, the focus of investment was on delayed returns from the commodity market.

In hindsight, it’s all terribly predictable. After many years of focus on systems optimisation and productivity encouragement, and with the coincidence of strong investment in commodity industries, it totally makes sense that investment would shy away from high risk, speculative investment in high tech industries, in favour of something solid and tangible – goods we had in abundance, and could find in the ground.

But since the mining boom has peaked, and commodity prices have tumbled, investors are desperately seeking alternative sources for investment.  In spite of rhetoric about the continuing value of mining to Australia, the reality is that commodity prices show little sign of improving.  This is particularly true in the energy sector, where there are social and political pressures for emissions reduction, and where ongoing improvements in the efficiency, s torage and distribution of renewable energies will continue to exert a downward pressure on prices.

This is an important moment in time for Australia.  While the world continues to recover from the Global Financial Crisis beginning in late 2008, our economic position is both precarious and pregnant with opportunities. Our property market is strong (and arguably propping up the rest of the economy), but if we want to foster the continuing positive trajectory of productivity, as well as improve our global competitiveness, we need to find new ways to imp rove the ratio of outputs to labour force, and to optimise business systems.

Enter: the tech startup sector.

It’s not like the tech startup sector is particularly new.  There have always been tech startups in Australia.  But since the establishment of co-working spaces beginning with Australian Technology Park and Fishburners in Sydney, followed by a whole array of other venture-backed incubation spaces for new businesses around the country, that the startup culture began to gel. And since the establishment of Telstra’s Muru-D accelerator program in late 2013, the focus of investors, media and even some small pockets of the corporate sector has been increasingly drawn to these spaces and startups.  Sydney now has more co-working spaces per capita than almost any city on earth.  And the City of Sydney has released a draft Action Plan to encourage even more businesses to set up in the city precinct. The tech businesses themselves range in focus from (B2B) business services, consumer services, to medical and technical research aids, educational products and recreational products and networks.  And some have done so well in their accelerated growth that they have already established offices in other global cities, attracting serious investment from foreign sources.

But for all the excitement and interest in the tech startup scene, there is still lacking a genuine pride in innovative product development in the country and a concomitant lack of investment in the ideas being fostered. Among the majority of enterprises, as well as traditional small businesses, there still remains an enduring distrust and intolerance of startup products and services, regardless of how they may improve business productivity. And while th e tech startup scene is well organised and does celebrate its own successes (particularly in Sydney), there is a complete disconnect in communication between corporates, traditional small business and participants in the startup scene.

It’s not so much that Australia has lost its innovation mojo, but rather that it has forgotten how to celebrate the act of innovation.  While business rhetoric is focused on innovation for competitive advantage, intolerance of failure has rendered impotent, many innovation initiatives.

The solution should be clear, but it hasn’t yet been broadly realised.  Traditional Australian businesses can tap in to the talent and products being developed in the tech startup sector, if such innovation can be introduced in a manner that is beneficial for startups and for corporates. Instead of resorting to ideation and traditional strategic planning – the outputs of which are largely conceptual – businesses can assess a range of practical solutio ns for business problems, and select the ideas they wish to incubate to improve business productivity.

My business partner and I call this ‘Distributed R&D’; engaging an array of  innovative businesses and individuals who develop Minimum Viable Product solutions to problems worth solving in traditional business.  Importantly, this process of innovation facilitation improves risk assessment capability, as well as well as improving awareness of the talent pool available to business.  And while the cost of innovation to business remains steady, th e direct cost of innovation failure actually reduces, because the accelerated process of development sits outside the firm.  As such, this innovation technique should be considered tolerable, even for risk-averse enterprises, because it allows businesses to break free from developmental stagnation, whilst minimising costs.

The mining boom is over in Australia.  The property market’s future is hazy.  But there is an opportunity to reboot Australia’s innovation appetite by engaging the tech startup scene in improving Australian business. All it will take is a better understanding of the opportunities on offer. The innovation is out there. Business just needs to tap it.

The above is a personal post; any commentary on third party products or services in the post is not intended to be an endorsement by Telstra, which has no association with the mentioned products or services unless expressly stated otherwise.

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