WILL WE BE AN INNOVATION NATION

 Ben Kehoe

Since the period of economic restructuring in the late 1980s and early 1990s when Australia opened itself to the world with a dream of becoming globally competitive, what has happened?

When was the last time we had a genuine conversation about innovation, wealth and prosperity creation in Australia? We came close during those periods of concentrated microeconomic reform in the 1980s and early 1990s, with global competitiveness the driving aspiration. Our failure to have the conversation since then was a key driver for my book Innovation in Australia: Creating prosperity for future generations. A key message in the book is that our national culture is overly focused on lifestyle. We’ve become far too comfortable and complacent, reinforced by 29 years of continuous economic growth that ended with COVID-19. We are prosperous because of our natural resources – in fact, using a criterion like wealth per capita, we are among the richest countries in the world – but is it sustainable? Australia needs to confront some brutal facts as we move into the future.  

Australia’s innovation credentials – 2020 

The Why Australia – Benchmark Report appears to be Australia’s pitch to the world, yet its 2020 chapter on Innovation and Skills is sadly symbolic of the commercialisation challenge facing Australian innovation. It outlines six innovation credentials for our country: 

• technological readiness 
• the CSIRO ranking in the top 1 per cent of the world’s scientific institutions 
• seven universities ranked in the top 100 in the world (the 3rd highest number of any nation) 
• about 44 per cent of our workforce having tertiary qualifications 
• about 50 per cent of Australian firms being "innovation active" 
• our 5th place Global Entrepreneurship Index ranking 

Entrepreneurship in Australia as a ‘movement’ is a positive sign, but it is a phenomenon of the last decade. According to the latest published figures from the Australian Bureau of Statistics: 

• 44 per cent of Australian businesses are innovation-active. 
• The wholesale trade (61 per cent) and manufacturing (59 per cent) industries had the highest proportion of innovation-active businesses. 
• 37 per cent of Australian businesses introduced an innovation, whether goods and/or services or processes. 

However, the number of "for profit" businesses operating in Australia (or globally) as a result of our R&D expenditure is notably absent from the reporting. Australia spends just under 2 per cent of our annual GDP – about $32 billion – on R&D. We need to ask: 

• what is our innovation success rate or the ROI for our R&D investment? 
• what "for profit" businesses, industries and Australian jobs have been created over the last 10–20 years? 
• what Australian intellectual property has been commercialised over the last 10–20 years? 
• what international revenue has been created for Australia? 
• which industries are growing because of Australian investment in R&D? 

Over the past 40 years, Australia’s track record in commercialisation has been, at best, modest, and not much has happened since the period of economic restructuring in the late 1980s and early 1990s.

Six specific challenges for the commercialisation of Australian R&D 

1. Our devotion to lifestyle and sport. For over a century, many of our major industrial relations debates have focused on recreation.
2. Our focus on our natural mineral resources, which are the basis of our comparative economic wellbeing. The last 29 years of economic growth were underwritten by a mining boom, rather than investments in innovations such as computers, the black box flight recorder, transistors and satellites.
3. The absence of genuine models of commercialisation and innovative leaders. There are very few Australian global business success stories, and many of our innovations have been sold off internationally. How many Australians can name successful Australian businesses and startups like Atlassian, Aconex or Canva? 
4. Our low level of manufacturing commitment and competence. Over 60 years, Australian manufacturing has declined to less than 6 per cent of GDP. COVID-19 has further highlighted the weakness of our manufacturing capacity, which may take 30 to 50 years to redevelop.
5. Our limiting 20th century worldview. Historically, business has been treated with some suspicion, amid rumblings about unfairness and discrimination. Now there is a multiplicity of business degrees, and digital technology is the emerging platform. However, our government and business languages are limited by 20th century economic and financial paradigms, in turn limiting innovation.
6. The absence of a great aspiration. Our first identifiable national aspiration was the move to form Australia in 1901 after 20 years of debate, and even now, we do not celebrate the formation of Australia. In the 120 years since Federation, Australia as a nation has had few great aspirations.

We are not as good as we think we are 

Having been told for most of my adult life that Australia is a small country that "punches above our weight", I was more than a little surprised to discover that, in fact, we don’t. If anything, we pursue mediocracy with passion. To punch above our weight would mean we are in the top 10 of all the comparative indices listed below.

1. To become the healthiest nation in the world. 
2. For biotechnology to replace mining as the major driver of Australia’s wealth creation. 
3. To develop a global top 5 food/fibre brand. 
4. To develop a national transport system modelled on the best in the world. 
5. To become a renewable energy hub for the world (and especially Asia). 
6. To become water-resilient for a population of 50 million. 
7. To become one of the world’s top 10 defence technology exporters. 
8. To develop an advanced manufacturing sector that contributes 15 per cent of our gross value-added product. 
9. To develop trade links with at least 50 per cent of Asia by 2050. 
10. Literally landing a person on the moon via an Australian space project. 

The catalyst for change 

In the wake of COVID-19, the institutions that have sustained society for generations are under extraordinary pressure, setting the stage for Australia to revitalise our nation and transition from a mediocre 20th century economy into an innovation leader. This will require business leaders and government to work together and deliver a 22nd-century industry base. It’s important for the participants in the conversation to understand four fundamentals: 

1. Business is the primary wealth-creation sector in society. 
2. Innovation is a core pillar of wealth creation. 
3. The commercialisation of Australian intellectual property is a major platform for prosperity. 
4. For Australia to thrive in the later part of this century, some cultural challenges must be confronted.

Ben Kehoe is a management consulting pioneer in Australia. Since the late 1970s, he has worked with 250+ organisations and businesses. In that time, he has engaged in over 20,000 hours of conversation on the future with business leaders of Australia. In 2019, he wrote and published Innovation in Australia: Creating Prosperity for Future Generations.