Mid-sized companies still overlooked

| February 2, 2016

Innovation is often seen as the province of agile start-ups or, at the other extreme, global corporations.

In reality, the engine of innovation are often the mid-tier companies who have survived the turbulent start-up years, but still have appetite for risk and the challenger spirit that feeds innovation. That often-overlooked ‘middle ground’ has plenty to contribute to the innovation discussion.

When my co-founder and I created the company MyNetFone thirteen years ago, we did so based on a single consumer insight. At the time broadband was just emerging and Voice over internet Protocol (VOIP) was green; it required technical skills to use properly and the user experience was difficult. We simply wanted to explore the technology and make it accessible for everyone.

Ours was a typical start-up mentality; we had an idea and wanted to see where the journey would take us. Like other successful start-ups we were lean and agile and focused on a niche market — and crucially we were able to respond to customer feedback quickly to make adjustments to our offer. I take pride in the fact that we still have this approach even as an established, ASX-listed multi-brand company and we continue to promote an innovation-driven culture, with ideas coming from staff at all levels driving the development of new products and enhancements.

So perhaps it’s not surprising that David Coleman MP’s comments last month to the House of Representatives about the need to shift Australia’s business culture from a pragmatic approach to one that embraces risk resonated for me.

Many of the issues that have led to this pragmatism are systemic thanks to the legacy of decades of government policy. The fact that Australia still spends the same per cent (2.4) of GDP on research and innovation as it did in the pre-digital transformation days of 1984 speaks volumes as to how the national innovation has stagnated. So it was with much anticipation that I read the recent government innovation strategy statement to find out more about Turnbull’s plan to unpick some of these issues, lead us into an ‘Ideas Boom’ and encourage a culture of risk-taking with a $1.1 billion investment over four years.

The renewed focus on STEM (Science, Technology, Engineering and Mathematics) topics from early childhood onwards is absolutely on the money. Turnbull’s ambitions to train “our students for the jobs of the future and ensuring that we attract the world’s best innovative to talent to Australia” is laudable, as is the introduction of a new Entrepreneur Visa for those with financial backing to develop their ideas in Australia. However, I think the proposed measures missed a couple of tricks that could have made things easier at a grassroots level to both attract and retain young talent.

While the innovation strategy delivers much-needed support to start-ups, and the big corporations have access to their own set of benefits, the mid-size companies remain overlooked. These are the companies that have already delivered ‘proof of concept’ with their innovation, surviving the turbulent start-up years, but now face challenges of growth and continued R & D.

We still consider ourselves at MNF Group to be innovators. But the government’s innovation statement does nothing to support companies like ours, who are no longer start-ups, but not yet giants. The current innovation strategy is a start, but I would like to see the government focus on supporting innovation in companies at all stages of the corporate life cycle, including those with a proven track record, keen to grow to the next phase.

In this context, one change that would make a big difference is the introduction of tax breaks to the employee share option tax structure. This would make it more viable for growth-focused Australian companies to use share options as a tool to attract and retain talented staff, in the face of tough competition from multinational corporations with deeper pockets.

Tax relief for investment in R & D is another key initiative that would jump-start innovation. Any innovation effort requires significant time, resource and capital investment with an uncertain pay-off. Mitigating some of that risk through targeted tax incentives would make R & D investment more feasible for companies of all sizes.

Lastly, government should look at how best to support Australian companies ready to make the big leap onto the global stage — to export Australian-grown innovation to the world. Helping companies promote themselves in the global export market would certainly help drive the shift from a resource to a knowledge-based economy.

Embracing a level of calculated risk through innovation is something that every company has to do to succeed. Creating a start-up is only the first risk of many to come — a decade on, we remain laser focused on fostering an internal culture of innovation. On a more practical level, our innovation now supports the next generation of Australian entrepreneurs through our MyNetFone retail brand. We focus on reducing barriers to entry for start-ups, with cloud-hosted services and special offers designed to minimise CAPEX costs and produce long-term savings on the services essential to any new business — telecommunications.

Any government innovation initiative is a step in the right direction, but the current strategy only affects a small portion of Australian companies. To really make a difference to the long-term competitiveness of our businesses, and our economy, innovation needs to be supported across the full business life-cycle. We look forward to the government’s initiatives being successful for start-up and smaller players, and hope for further improvements to help the medium-sized companies further build on their proven foundations.

This article is republished with permission. It originally appeared in The Australian Business Review’s Business Spectator.


One Comment

  1. catherine


    February 3, 2016 at 10:30 am

    A brilliant piece
    A brilliant piece articulating room for improvement in the NISA and reiterating the importance of supporting the Mid-Market in Australia.