The Australian story about innovation oscillates between aspiration and disappointment.
As a nation we seek enhanced well-being and better quality of life.
In seeking these goals, we in Australia are no different to other nations. Innovation is seen as the means to secure our preferred future.
It is clear our aspiration is for Australia to be at the forefront of innovation from precision medicine to additive manufacturing, autonomous systems to new and more renewable and sustainable forms of energy and materials.
And this is because evidence shows innovation is vital to growing new jobs, new wealth, as well as improving our quality of life and mitigating unwanted degradation of our environment.
We have long relied on our education system to provide the capability to avail ourselves of the newest and best that the world has to offer.
Australia is quick to adopt innovations and prides itself on its facility to apply them to improve our lives.
Universities are central to the education system that supports our aspirations.
Our disappointment relates to the performance of our innovation system. Our recurrent concerns about insufficient engagement in Science, Technology, Engineering and Maths (STEM) subjects from school through to universities is because STEM skills are key to high levels of invention and innovation.
We are concerned that there is less collaboration to produce innovations, less commercialisation of new ideas, a less vibrant scene of start-ups and spin-outs than we see in some other nations or expect for our own.
In getting the balance right between aspiration and performance we should recognise that universities are not only vital to the provision of capabilities for invention and innovation, but for much more.
Universities are the most significant engine for ‘new to market’ innovation in Australia. It is how universities currently perform this role, and how this might be further leveraged for the betterment of Australia, that is the focus of my speech today.
NOT ALL INNOVATION SYSTEMS ARE THE SAME
Australian commentators and policymakers worry about whether Australia is able to innovate sufficiently to compete effectively in increasingly globalised markets for services and products.
The most recent Australian Innovation System Report 2017 from the Office of the Chief Economist of the Australian government made pertinent observations about Australia’s performance, which are important for considering the contribution of universities.
Principally, these were that:
- Research and development investment as a share of GDP is down (and has been declining since 2008-9) falling to 1.88 per cent in 2015-16 and falling in nominal terms for the first time in 2015-16.
- Business research and development, which is the smallest proportion of R&D expenditure (unlike other nations such as US, Switzerland, Germany, Japan and Korea to name a few), declined by $2.2 billion in 2015-16 (ABS 2017) .
- Business collaboration on innovation is low and towards the bottom of the OECD league table. There is very low collaboration business-to-business and business-to- supplier, and, according to the surveys, between Australian businesses and universities. Indeed over 80% of those Australian firms who innovate do not collaborate, despite the evidence that collaboration enhances innovation.
- Innovation in Australian firms is heavily tilted towards modification of innovations introduced by other Australian firms, while there is much less engagement in “new to market” innovation (perhaps the most valuable type). In this Australia languishes towards the bottom of the OECD.
However, Australia has a high level of entrepreneurial activity, measured by over 14 per cent of Australian adults involved in starting new businesses
And the proportion of firms who report engagement in innovation, at some 48.7 per cent is high.
These observations show the Australian innovation system is different.
We have an appetite for innovation and a system that happily spreads domestic innovations across the whole economy.
Yet, despite entrepreneurial and innovation appetite and activity, Australia has:
- low and declining levels of investment in innovation (particularly by business) with R&D investment dominated by governments and universities;
- low collaboration with others, and
- low engagement in the most valuable ‘new to market’ innovations.
AUSTRALIAN UNIVERSITIES AS COLLABORATORS
While there is evidence of low levels of collaboration between Australian firms, particularly SMEs, and Australian universities in OECD data, there is other evidence of Australian universities interest in and experience of long-lasting, effective collaborations.
The most recent publication from Universities Australia in 2018, Clever Collaborations, outlines the successful relationships between Australian universities and industry and the innovations that result.
Some 16,000 Australian businesses partner formally with a university. And collaborations between Australian businesses and universities generate an impressive $10.6 billion a year in revenue directly for the firms who partner with universities.
By the time that flows through the economy, these Clever Collaborations are contributing $19.4 billion a year to Australia’s income.
Cadence calculated that the return on investment to business is around $4.50 for every $1 they invest in collaborative university research.
And all of that economic activity supports an estimated 30,000 Australian jobs.
Let me give some examples.
One is a 13-year collaboration between Boeing and the University of Queensland.
This collaboration has helped the firm identify talented engineers and research students to recruit after graduation.
And it has enabled the company to work with the university’s brilliant research teams on incremental sheet forming, a more efficient manufacturing technique that could also be used in the biomedical and engineering industries.
Last year, the firm moved 30 staff onto campus so they could work closely with the University to tackle the next frontiers in aerospace technology.
And in Geelong, a collaboration between Deakin University, GT Recycling and carpet manufacturer, Godfrey Hirst, has created a new, lower-maintenance product from recycled polymer textiles to reinforce footpaths and roads.
These are only two of the many examples in the Clever Collaborations Report. They serve to make a small number of points about Australian universities and collaboration.
- The collaborations occur whether universities are metropolitan or regional;
- The collaborations our universities undertake are with small and large companies, whether they are local or multinational;
The expertise developed may have application and opportunity well beyond the industry and firm with which the collaboration began.
This also demonstrates what the Australian Innovation System Report noted about Australia’s research sector, of which Australian universities and CSIRO are the dominant players.
They noted that “Australia’s research sector shows a strong collaboration performance on a range of indicators” , from collaboration with international co-authors on top research publications, through to an increasing share of the most highly cited publications internationally, and high levels of collaboration on co-filing of patent and trademark applications.
On all these measures Australian university collaborative activity is towards the top of OECD country performance, unlike the evidence of low collaborative activity outlined earlier.
An AiGroup report of 2016 indicated that companies that introduced a new innovation reported an annual 2.7 per cent productivity edge over their non-innovating competitors the following year. But the ones that did so as part of a collaboration had a productivity lift of 4.4 per cent a year.
We need to lift the level of collaboration with our universities, because these collaborations are about ‘new to market’ innovations. We know that Australian firms will adeptly adopt and modify those innovations to spread them across the economy.
The evidence makes clear that Australian universities, large and small, urban or rural, have a track record of collaboration and a willingness to engage.
But much more is possible. It just needs a behavioural nudge to encourage Australian businesses to venture where they have not ventured before.
The Commonwealth government’s business R&D tax incentive is the largest single program in the Commonwealth’s science, research and innovation spending. It is time to use this program to provide an incentive (a nudge) to businesses to partner with an Australian university on their research and development to build a stronger collaborative base for the future.
AUSTRALIAN UNIVERSITIES AS AN ENGINE FOR HIGHER AND MORE VALUABLE LEVELS OF INNOVATION
Australian universities are large by world standards. In terms of research performance, a comparatively high proportion of Australia’s universities rank in the top 100, 200 and 500 of the world’s universities.
Not surprisingly, with this quality of research Australia’s universities generate their own innovations and their own new ventures as spin-outs and start-ups.
In the last nine months, for example, Monash has raised more than $22 million for three of our spin-out companies.
University of Queensland, through UniQuest, has had more than 100 spin-outs since 1988, which have gone on to raise more than $600m to commercialise the research involved.
According to the National Survey of Research Commercialisation, “in 2015, universities in Australia accounted for 75 per cent of total invention disclosures, generated 29 start-up companies, held 13,391 research contracts, consultancies and collaborations with industry partners (total value $1,205 million) and reported 2,073 active licences, options and agreements (sic) that earned around $60 million” (Gao, 2017).
Licence option and assignments income for a single university can fluctuate wildly. However, in total they show the scale of invention currently captured through and generated by Australian universities.
The Australian environment to support development of spin-outs has improved substantially in recent years. More international venture capital funds, such as IP Group, have partnered with Australian universities to support commercialisation of research.
Australian universities have invested directly from their own funds in commercialisation. Examples include UniSeed, a venture fund comprising CSIRO, University of Melbourne, University of New South Wales, University of Queensland and University of Sydney, and the specialised catalyst fund, BioCurate, a partnership of Monash University and University of Melbourne with support from the Victorian State Government.
The federal government has also invested directly through the Medical Research Commercialisation Fund (MRCF). These are all significant and welcome commercialisation supports not available until recently.
Yet, Australia has had declining investment in basic research and in non-medical research, which needs to be addressed to prime the engine, lest the commercialisation opportunity now available outstrips the potential targets available.
AUSTRALIAN UNIVERSITIES CREATING AND ANCHORING INNOVATIVE ENVIRONMENTS
Universities Australia’s 2017 report, Startup Smarts: Universities and the Startup Economy, outlined the impact of universities through their research and through their graduates in building new and innovative businesses, with four out of five start-ups being created by university graduates.
In the last few years, from the vantage point of universities, there has been a discernible change in behaviour with the appetite of our students and staff to create new businesses or technologies growing dramatically.
Universities have created entrepreneurship programs and hubs to nurture the start-ups that are increasingly part of the aspirations of our graduates and our staff.
At Monash, a comparatively recent entrant to this space compared to long-standing entrepreneurship programs in other universities, The Generator, an entrepreneurship hub, supports our students and recent alumni, engaging with over 3000 of them to date.
The Generator, like other university examples, houses a five-week program the help students launch ideas to market and a seed funding program, The Accelerator, which financially and through active mentors takes the top-rated ideas – this year 10 from 160 applications – closer to scale and launch.
Monash also runs an interdisciplinary team-based industry placement program, which puts teams of students into companies to solve real-world challenges posed by and through those companies. From four teams in four companies in 2013/14, it now has 73 teams in 56 companies in Australia and overseas. While it is a student program it builds the collaboration for our graduates and our university that is fundamental to long-running partnerships.
So universities not only educate the people who will fuel future innovations and collaboration. Through their programs they can increase the appetite and the aptitude of graduates for innovation and collaboration.
FROM ENVIRONMENT TO PRECINCT, NEW POSSIBILITIES FOR AUSTRALIAN UNIVERSITIES
However, when building innovative environments, there is one major set of possibilities still to be fully developed. These are the innovative precincts or regions that fuel innovation and collaboration.
In an increasingly globalised world of products and services, growing and developing Australian firms will not be enough. It was never enough.
Just as we need foreign investment to develop, and migration to supplement our capabilities, we need multinationals to lodge some of their research and development with us in Australia.
One of the best-known precincts for world-class research and development in Australia is the Melbourne Biomedical Precinct. It is home to more than half of Australia’s ASX-listed life science companies, major research institutes and two of the top five biomedical universities in the Asia-Pacific (University of Melbourne and Monash).
This Precinct employs around 49,000 people and has more than 7,000 biomedical students each year.
Governments, at federal and State level, have identified precincts based on their potential for high growth in employment and/or high potential levels of innovation.
People travel the world looking to replicate the performance of Silicon Valley, or Kendall Park in the US or successful examples in Europe and the UK, such as the Warwick Manufacturing Group in Coventry or Kennispark in the Netherlands.
All of them have, at their heart, strong universities with high quality research, collaborating with surrounding firms, spinning out new ventures and attracting a host of start-ups from their alumni and others.
At Monash we have worked with local, State and federal governments to support a stronger and more innovative precinct at Clayton in Melbourne’s south-east.
Governments are critical for appropriate land-use zoning, transport connectivity, and incentives to attract the key organisations, which anchor a strong, innovative cluster.
The area surrounding the Monash Clayton campus already supports 13,000 businesses and almost 90,000 jobs. Apart from the University, it has CSIRO’s largest site, the Australian Synchrotron, major research and teaching hospitals and the Melbourne Centre for Nanofabrication. Large companies such as Johnson and Johnson, Woodside, Pfizer, Bosch and Agilent all have research collaborations and related activities and centres located there.
Precincts cannot be willed into active being by government fiat or by the aspirations of any single university or local community. In each successful precinct there is a level of organic growth and collaboration that has been central to their success, but it has not been all of their path to success.
The evidence is this. If we in Australia are going to build the culture and the environment to foster higher levels of new to market innovation and collaboration, we need to selectively, based on evidence, invest in the regions and precincts where there is high-quality research collaboration with industry, spin-outs and/or start-ups to accelerate their future success.
We are all concerned about whether in Australia we have the level and type of innovation to secure our future?
The evidence suggests there are some important missing pieces and others that need attention or augmentation.
Universities are increasingly important in the globalised economy to innovation. This is why there has been concerted attention and investment in universities in major and growing powerhouses such as China.
In Australia, given the shape and scale of business in our innovation system, universities are more important for our future than in many other OECD economies.
Universities are a major source of capability, particularly when the fastest growing segment of jobs in our economy is professional, scientific and technical services (ABS Labour Account Australia, September 2017).
But they are also, in Australia, with the rest of the research sector, the dominant source of the inventions and ideas to fuel new-to-market innovation.
Universities are an engine for innovation through their collaborations, through their commercialisation and through the environments they create.
We need to work with the strengths of the Australian innovation system, and use them to address our weaknesses.
In a nation with a high dependence on research and development from its university sector, attention needs to be paid to whether we are safeguarding its long-term capability for invention.
Investment in research is not a separate question to Australia’s innovation future, it is the source, and needs to be replenished.
In a nation with an appetite for entrepreneurship, and a well-honed capacity for modifying and spreading domestic innovations, we are missing the benefits of collaboration and greater focus on ‘new to market’ innovations.
In Australia, we need a behavioural nudge in the incentives for business for research and development expenditure through the R&D tax scheme to work with universities on new to market innovations.
The environments to support spin-outs, start-ups and commercialisation of research generally are much improved, due to the recent actions of governments, universities and international funds.
There is not yet the evidence of systematic leverage of clusters of innovation around universities that would provide the highly-charged environments for collaboration and innovation that will draw the research and development activity of significant global players. That is our future challenge.
A final note about culture, if we spend all our time talking about where the nation is at the bottom of OECD tables, then it is difficult to get the message out about those areas where we perform towards the top of OECD tables.
Such success comes not from emulating others but working out where your strengths can propel you forward.
In Australia, we have an appetite for entrepreneurship, ways to spread innovation and a significant source of ‘new to market’ inventions and innovations in our universities.
Our universities are a source of our future strength and key to building innovative and collaborative environments. Universities are investing in these future directions – they can’t dance alone and they don’t want to.