Why I care about innovation

Investment in innovation has several rewards, including the capacity to help and improve lives. But Paul Cheever reluctantly admits it is the economic benefits that fire his obsession with innovation.

About a dozen years ago, I happened to become responsible for advising a large superannuation fund on its private equity investments, including its initial venture capital investments.

Over my 40+ year career I had been involved on several occasions with innovative developments but this was the first time that I had the need to analyze the innovation process on a system wide basis, a task that frankly took several years to develop reliable data and insight. The outcome of this journey of discovery is that I have become more than a little obsesssive about our innovation system, its structure, operations and practices, to such an extent that a few years ago, together with some similarly concerned fellow travelers, we formed the Australian Institute for Innovation, a not for profit organisation dedicated to lifting innovation policy and practice in Australia.

So what is it that drives this obsession?

Of course, investment in innovation offers the prospect of profit, and indeed, there is no point for the private sector to invest without this objective.  It is pursuit of profit that informs a sensible allocation of capital.  If a new innovation cannot generate profit, it will not become available to users, and in many cases the lack of profit probably indicates a lack of value for users (although poor commercialisation skills can also be blamed).  So certainly profit is a necessary endpoint, but by itself not the food that feeds the obsession.

There is the emotional reward of helping to bring innovations to the market that will improve lives.  For example, it is hard not to get excited about the Australian developed wristwatch that provides precision measurement of Parkinson’s disease and so enables not only a breakthrough in medical management but also reduces the uncertainty that patients and families live with today.  There is the new therapeutics that will treat cancer and other disease, provide better and safer pain relief and provide better diagnostics.  There are the new tools that improve teaching. There are the breakthroughs that will increase the food supply to the world. And so the list of Australian discoveries and inventions goes on.

There is also the emotional thrill of the chase, the enjoyment of being in the game with the rewards of both learning and accomplishment.

So the innovation process provides emotional reward and excitment that add energy to the involvement but again this is not the central driver of the obsession.

I am embarrassed to admit to you that it is economics that fires the obsession, and in particular, the economics of an Australia that fails to make innovation a competitive and cultural cornerstone.  You see, my work has required a study of our innovation performance in a global context and the economic implications of that performance for our future.

We do have great examples of innovation successes but too few, and too often these mask important failures that we need to address.

Innovation systems are measured by analysis of their inputs and outputs.  We perform well across all surveys for the standard of our innovation inputs, but the barriers that impede our commercialisation activities have led to a poor performance for innovation outputs.

Our inputs are led specifically by the quality and effectiveness of our research, inventions and visionary ideas, underpinned by an educated and open community.  Our researchers and research outcomes are world class as befits a highly economically developed and educated community which at the Commonwealth level alone, provides some $8 billion of research funding annually, encourages collaborative use of research facilities through a National Collaborative Research Infrastructure Scheme, imposes a quality measurement system, and through a National (research) Workforce Strategy supports training at all levels of the research experience through to the prestigious Federation Fellows appointments.

In assessing our Innovation Inputs, the 2012 INSEAD-WIPO Global Innovation Index Report, like every other similar report, ranks our inputs at a sound 13th among the 141 countries covered.

This is cause for celebration until we turn to our Innovation Output ranking which drops to an unfavourable 31st.  And this leads the Survey to rank our Innovation Efficiency Index at 107th of the 141 countries.  One clear conclusion of this ranking is that our poor outputs relative to our inputs represent an Australian phenomenon, not a naturally occurring imbalance.

The problem with this ineffciency is not only the waste that is embedded in any inefficiency but that many studies conclude that innovation outputs are highly correlated with forward GDP growth.  Successful innovation is not just new products and services; it is the culmination of having true insights into global markets and the skills to tap thise markets.   This is, it is our ability, all 22 million of us, to compete with the other 7 billion folks out there.

Both the rankings and these fundamental observations clearly inform the need to raise the attention we give to our innovation policies, infrastructure, culture and practices.

So what really drives the obsession to bring our Innovation rating from 107th to the top 10?  It is simply the chance for my children and grandchildren to enjoy the standard of life this lucky country has given me.
 

Paul Cheever is the Chief Executive Officer and Director of the Australian Institute for Innovation.