Spark and Grind

Following yesterday's Knowledge Nation 2016 summit many in the commentariat are highlighting the need for more graduates with the 'right' skills. As noted at the conference, successful innovation requires the confluence of many factors, a supply of suitably educated capable graduates is just one.  Moreover Australia's lack of success in commercialization, we rank last of the 33 OECD countries in commercialization of research, is not due to lack of bright ideas. The failure is not due to lack of supply of educated graduates.

We have the Spark

Australians are an innovative lot, and whether our inventors were graduates or just lateral thinking others, they have produced more than our share of inventions. We obviously have the spark of creativity.

...but lack the Grind

To paraphrase Mr Edison, Innovation is "1% inspiration and 99% perspiration". We lack the 'grind' required to turn our ideas into reality.

Many reasons have been cited for our failure, but I would group them into just three; -

1. The benign culture of our Universities 

Our Universities clamour for funding from the public purse but do too little to generate funds themselves. Academics are driven by pure research as their success as academics is more dependent on papers than patents. This has developed a sense of academic purity which eschews base commercial motives and distracting industrial dalliances.

2. Lack of risk capital

The commercial success of the best ideas requires significant investment over many years before returns are generated. Moreover such investment carries high risk so investors must mitigate this risk across many projects. With few successful locally commercialized innovations we have not developed the requisite venture capital market in Australia.

3. An all too mobile workforce

For the most capable inventors and for the best ideas the world beckons. Attractive facilities, high salaries and the opportunity to work with the best researchers in the world draw our innovators to greener pastures overseas.

Small significant steps

How do we counter these shortcomings? The glib answer is gradually. Each of the factors above has a positive feedback.  After each successful locally commercialized Australian innovation venture capital will be easier to raise and many capable graduates will be employed. Success will breed success.

Given we are so far below par incentives to redress our failure are very much overdue. But it is not easy to turn this around, and it will not happen with slogans or summits. Nor can you simply throw money at it, as it will end up like most government sponsored projects as a wasteful and even counterproductive exercise. Some improvement until the money runs out then a return to where you started.

Nevertheless I believe there are some simple practical steps that the government could take to gradually build an innovative culture that will continue to grow over time.

My ideas on this are still developing but I suggest the following as a start;-

• Provide a loan facility to inventors to fund patenting of new ideas and for proof of concept experiments. Similar to the HECS scheme the loan should be repayable together with a commercial return if /when the idea achieves commercialization
• Link some University funding to innovation activities. Say 20% of the funding of a University could be tied to activities which directly support the development of a future product. 
• Universities should retain some ownership of any invention/product developed by their staff and/or using their premises
• Provide risk capital for small start-up companies with standard commercial returns . The $1B already cited by the Turnbull government seems an overkill, and is likely to generate larger projects with higher risks. I envisage project grants with maximum $10m but mostly smaller. 

These act to remove the obstacles faced by innovators and provide funding, on commercial terms, until a sufficiently active local venture capital market meets this need.