Cutler Review Green Paper public at the end of next week: Senator Carr

There's no details on the Minister's Media site yet, but Senator Carr has today addressed the Australian Industrial Research Group (AIRG) annual meeting.

The word is that Senator Carr has used the term "tax credit" where previously the government has been calling the program a "tax concession", perhaps betraying a change in policy on this program and an alignment between Australia and New Zealand. That could be positive or negative, depending on what other aspects of the New Zealand program are picked up, such as their treatment of related or supporting R&D activities.

Further, the Senator identified that he is a believer in the approach of Senator John Button, the former Labor senator who was responsible for the introduction of the 150% R&D tax concession in 1985. He then apparently indicated his support for the idea of increasing the base rate of the concession and "reducing the bureaucracy" associated with the current program.

Finally, this may only be idle speculation about where things are going. Senator Carr expects to receive the Cutler Review's Green Paper tomorrow, with a view that it will be released to the public at the end of next week.

Further developments to be posted soon.

Edited for typos - thanks Melanie :)

Operationalising Sustainability

To paraphrase Homer Simpson, "Has the whole world gone green?"

I'm presenting on Operationalising Sustainability at the next Hargraves Institute Forum. It's a brief scene-setting for some presenters from Telstra and CSC, together with Vikram Murthy.

Details are on the Hargraves website and I'll let you know how the topic is received.

Climate Ready application process: just like Commercial Ready

Reading the postings of Malcolm Lambert on the Climate Ready program (which is now open for business) over at TechNation (and Part 1 here), it's striking how familiar the process is. It's almost exactly the same as the former Commercial Ready Program. And that was not radically different from the R&D Start program.

So, if the Cutler Review proposes any new grants program it would seem that AusIndustry has the administrative machinery pretty well organised to sort out the applications!

It takes energy to change a system

There's a bit of a buzz in Sydney at the moment.

Entrepreneurs, tech-heads, digital marketers and even some investors are finally lifting their heads above the parapets, decloaking from stealth mode and sharing their coffee addictions. Although there have been quiet rumblings for a little while, like a flywheel gathering momentum, there is now almost enough energy going into the system to keep it going.

It may need a little bit more to be self-sustaining.

How has this happened?

I can point to two things that have been happening that reflect an input of energy into the system. First, three different groups have kicked off, each addressing different parts of the market and immediate needs, but all in a serious way:

• Sydney's Open Coffee Group has been meeting regularly and has some really excellent tech people there, representing real businesses with real startup needs and challenges.
• Silicon Beach Australia (via Google Groups) has been buzzing with activity and suggestions and a rather full-on crowd on Friday nights. Both of these have contributed to initial the success of Webequity has provided a community-based approach to bring together business and tech people and TechNation has started to act as a hub of publicity and sharing for the tech community.
• The Photon Group (publically listed and also the owners of Precinct, the design team behind MJA's new look) have kicked off Geeksville, a new internet media incubator and agitator (complete with Mayor of Geeksville!). This means that smart starts have access to some top grade resources, deep pockets and the talent that can go along with both of those. Interesting that this has come from the media sector and not the traditional IT space, but hey.

Next, lots and lots of activity has been happening "under cover" and slowly, slowly, slowly entrepreneurs have started letting more and more people know what they're up to. Check out the informative Startup Australia for more information. These aren't the pure R&D-type startups that we've produced historically (though there are some pretty serious projects kicking around in there), they range from ultra-trendy-of-the-moment enterprises like Carbon Free Solutions to online code generation sytems (GENNIT) and the retail voucher community, RetailMeNot.

What can we learn for the benefit of the National Innovation System?

All of this activity is interesting, but what can we learn from it for the purposes of making Australia more productive and pushing the entrepreneurial agenda of future wealth creation? How does it tie back in with the National Innovation System and the Cutler Review, and our domain expertise?

• What's really interesting to me is that all of the activity above has been market initiated and bubbled up within the system, rather than being the response of direct market interventions. In each case, individual entrepreneurs, technologists and companies have seen the opportunity to do something more than where the status quo is at.
• They have accessed tools and technologies on the web to either find, fund or further their business aims (in other words, the current state of the internet is an essential enabling technology for these groups).
• They reflect ad hoc and at times informal networks that enable conversations to create value.
• There is actually some altruism present, as some of the protagonists in the three groups above are not hunting money. They are not being paid for their commitment over and above being part of the buzz.
• The discussions being held reflect a genuine commitment of time and interest, without mention of Non-Disclosure Agreements and Intellectual Property being raised in a fearful way to prevent connections and lock down conversations (though I'm sure i f things advance further there would be a need for some of those tools).
• There is tacit recognition that the ideas are not as important as their implementation, and that the implementation won't happen without the conversations, the sharing of enthusiasm and the altruistic elements of the network.

One of the best things the Cutler Review can do is to Define the National Innovation System, so that the term has true relevance and meaning and that the system (which is also a network) has the opportunity to exist transparently. Another great thing would be the identification of barriers within that System that prevent or inhibit conversations and communication (some of which would no doubt be cultural).

All parties have an interest in this network creating value

Sadly, I see few companies "scanning" the universities, CRCs and other research institutes for conversations about their problems or technologies (this is not easy). I see few companies figuring out how to actively engage with universities on a "no agenda" or possibility basis; the possibility of a fortuitous connection is apparently not a sufficient ROI.

I see few universities actively engaging the business community and even their alumni in a constructive "open" way. They think they are engaging, but there is always a very clear agenda about funding and "our needs" rather than altruistic approaches.

Fundamentally, I don't see enough people having enough coffee with people they wouldn't normally associate with, where the ROI is uncertain and the fear is that they will waste their time.

Coincidentally, it would be really interesting to document how many coffees the members of the Cutler Review and the associates working groups have had. And how many of those are outside the panel, and their normal networks.

Perhaps one of the strongest incentives the Cutler Review could offer the participants in the National Innovation System is a voucher for strong cup of coffee?

Where do you stand on Innovation Economics?

"As soon as I got this job I realised I had to learn more about economics. After all, economics is the language of government."
- Professor Robin Batterham, former Chief Scientist of Australia

As we (again) count down to the publication of the Cutler Green Paper on Australia's National Innovation System, it's a good opportunity to pause and reflect on our own system of economic thought. After all, any government intervention is going to be justified by an underlying set of assumptions and rules about how the economy and economics works.

You may already be familiar with the Keynesian school, the Supply Side school, even the Rubinomics approach, but there is increasing interest as the US Presidential Election inches closer in what has been termed "Innovation Economics". (Unsurprisingly, there is a web site, and even a quiz to help you determine which flavour of economics you subscribe to.) This is how they describe their approach:

In contrast, “innovation economics” recognizes the reality that a global, knowledge-based economy requires a new approach to national economic policy based less on capital accumulation, budget surpluses, or social spending and more on smart support for the building blocks of private sector growth and innovation.

Rather than focus on ensuring that prices accurately reflect costs to drive what conventional economists call allocative efficiency, innovation economists argue that the lion’s share of economic growth is determined by productivity and innovation

Fascinating, hey? Particularly given the apparently conventional approach taken to this area by our Productivity Commission.

So, why don't you take the quiz and post a comment on the type of economist you are (unfortunately, I fell into "no discernible philosophy").

Edited for formatting.

Does the Headline Tax Concession Rate Mean Anything? Implications of a 25% Tax Rate?

Momemtum is apparently building for the Australian corporate tax rate to be cut to 25%, potentially as part of a package of incentives to invest in climate change. As the Henry Review of Business Taxation starts taking submissions from corporates, The Australian reports that tax relief and incentives associated with investments in clean technology and emission reduction targets will be high on the agenda.

It is worth pointing out that this would have a serious negative effect on the R&D tax concession unless the basis of calculating the incentive is changed.

As I have argued for some time, the government first needs to decide the dollar level of support for R&D under the R&D tax concession, and then determine the rate of deduction attaching to that return. For example, the current headline 125% tax concession translates to a 7.5 cent net benefit to companies (ie 25% of the 30% tax rate = 7.5 cents). If the tax rate were reduced to 25% the rate of support would drop to 25% of 25% or 6.25 cents per dollar invested.  To me, this is all backwards.

The government should announce a dollar level of support for R&D and then set the headline rate after that. For example, if it wants to shift the cost of capital, the support rate would be closer to 14 cents, or a headline R&D tax rate at 30% of 146% or 156% in a 25% tax regime. This is the way of thinking about R&D tax concessions that lets you alter behaviour and have relevance in the ponderings of capital allocations within major firms.

Without this change, the R&D tax concession languishes as a mere (though important) environmental setting and simply does not achieve what is possible.

The Power of Hats

Classic video of Edward de Bono's Six Thinking Hats system.

The topic of thinking and creativity comes up regularly at many innovation community events. At a recent Hargraves Institute event a great summary of the evolution of thinking as a personal journey was given by Barrie Hill.

He related the impact of his insights that the world and what he had learned through thinking techniques and methods, such as the Six Thinking Hats system.

I've long been a fan of Edward de Bono, so I hope you enjoy this video. It's such a great refresher about the need to change your perspective or be mindful in your thinking when you are in a management or leadership role.

Are we a TechNation?

I've been following the goings on over at TechNation with interest, and just commented on an article by Malcolm Lambert about Climate Ready. He is going to share the experience he has getting a tech-focussed startup through the process and (hopefully) snag some of the early funding in the program.

I am a member of the Open Coffee group for Sydney, but my diary has not yet allowed me to get to a session in the city - but I'll be there soon.

There is a real need for two things: a series of these types of gatherings to allow various slices and sectors of the innovation/entrepreneur/researcher communitites to get together informally and without an agenda (I shudder at the memories of the forced and noticeably desperate First Tuesday events run in the early part of the century); and publicity for them, so that interested parties get to know what's going on.

So, that was my contribution to point two :)

Innovation vs Invention

Video: An interesting presentation of Australian "Innovations"

There has long been an important overlap between the fields of invention and innovation. Often they are used as synonyms, and sometimes their use is confused.

What do you think the distinctions are? Please visit this blog article and leave a comment.

I owe Kris a coffee...

Kris Gale - known for his enjoyment of food whilst travelling and report-predicting ability!

Kris and I ran a small bet over whether the Cutler Report (aka the National Innovation System Review Green Paper) would actually be released yesterday.

Turns out, I was naïvely confident in the ability of the Review to deliver its report on time. That the fact they had received over 700 submissions would not phase them. That extending the Review would be too costly and unlikely to lead to better outcomes. Obviously, Kris had better insight than I did.

This is what the Minister had to say in a doorstop:

The Panel has been asked for a month's extension on that review, we've had over 700 submissions and the Panel is working through those submissions and I've granted that extension for a month.

So, Kris, strong flat white then?