Know an Aussie Web 2.0 Guru?

See if they're on my list!

In a very last-minute attempt to generate a list of Web 2.0 experts for the National Innovation Review Secretariat (helping with the Venturous Australia Report) With a little help from the wonderful folks on twitter (thanks y'all) I have thrown together a Squidoo Lens on Australia's Web 2.0 experts.

Please check out the list, add anyone you think I've missed and vote for who you think should be at the top. I have no idea how many experts should be on the panel, but maybe 5 would be good?

There are some awesome thinkers and doers there, with government, media, IT and heaps of other experiences that would really help.

Enjoy!

Just over 24 hours to go: Get your feedback in

The feedback window for your reactions to Venturous Australia (the Cutler Report) is closing. You have the opportunity (using a webform, no less) to leave a brief comment on an aspect of the report before the close of business tomorrow. Some of the things that might interest you:

• Proposals for more open access to public-funded research (see here and here)
• A Web 2.0 expert practitioner panel to advise government on what they may do
• Increases in R&D tax funding
• Proposed new grant schemes for our National Innovation Priorities

Please consider this list and see if anything there warrants a "good work", "more work to do" or "fail" response.

The beauty of a webform is that your response can be succinct, pointed and noticed.

Get to it!

Draft Government White Paper Due End of October

In what could be good news or bad news depending upon your stance on the Venturous Australia Report (Cutler Review), the word is that an interdepartmental committee has been formed to respond to provide a draft White Paper by the end of October.

This makes the timeline for policy dialogue very short. The Venturous Australia Report has a feedback timeline to 30 September and the proposals in the report, such as R&D tax credit changes, patent law changes and grants, as well as higher education and research policies, all deserve considered feedback from the stakeholders in the National Innovation System.

Get going, get active, and submit to goverment on your reaction to the Venturous Australia Report.

Venturous Australia: It's not Commercial Ready all over again

The Liberal Party jumped on the Cutler Review grant program recommendations as the return of Commercial Ready. Unfortunately, that's just not the case.

Prior to this year's Budget, Commercial Ready was a broad based grants program, funded to the tune of $200m per year. The average grant was around $900k in matching funds, and was not generally repayable.

The program proposed in Venturous Australia (or venturousaustralia) is quite different.

National Innovation Priorities
As I blogged last Friday, the proposed National Innovation Priorities; Resource industries, Space and Astronomy, Finance and Risk Management, and Marine Industries; reflect a departure from the broad based grants program that was Commercial Ready.

Whilst this has the potential to supplement the level of commercialised innovation in these industries, they have been selected because of their existing market structures and capital availability.

It would be interesting to look into the availability of matching funding is in these industries. Perhaps the Opposition could obtain statistics for the number of companies in each of these sectors that have received venture capital funding in the past 5 years (well, other than the resources sector as the information here is relatively accessible), as this would help shed some light on project size and need for funding.

This is a big difference from Commercial Ready. Unless you relate to one of these sectors, there is no support for software, biotechnology, general manufacturing or internet businesses. Is this giving up or growing up?

Repayments
This seems like a reaction to all the negative criticism the Productivity Commission had about grants in their report. Whilst that was the fundamental reason Commercial Ready was scrapped, it's interesting to go back a little further in the reasoning. Commercial Ready replaced R&D Start, a grants and concessional loans program. To my knowledge, no statistics on the repayment of the concessional loans have been released, but anecdotally there were many defaults and extensions granted. Further, the market spoke in that program with the vast majority of applicants ignoring the availability of the concessional loan program (which was for commercialisation) in preference for the full grant for R&D.

The issue with repayment is twofold.

• Is the intention to provide a grant or loan? If the government wants to issue a contingent loan instead of a grant then it should follow prudent debt processes and not the extensive application and merit requirements in the general grant application process.
• Second, if repayment is from "revenue or royalty" income attributable to the project funded by the grant (loan), what will the compliance burden on the company be? I am aware of several Australian companies that found the compliance process (audited statements, regular reporting and AusIndustry visits) to be quite onerous. Would this requirement continue for many years after receipt of the funds, until repayment of the loan? If so, it could be a source of frustration and affect the competitive options open to the company.

Unfortunately, on this front as well as many others, the Venturous Australia report makes recommendations but does not examine and explore the full policy implications of the proposed program, nor how it sits in a policy framework where Commercial Ready was closed without consultation or notice.

Conclusion
As I have observed in the past, a mixture of picking winners and broad market-based programs can make sense for Australia. Adding in the complexities of repayments and sectoral focus can also be positive. I suspect, however, that this policy will roll out very differently to Commercial Ready.

Whilst I studiously avoid crystal-ball gazing, I predict that the government will struggle to reconcile these grants with their overall innovation policy framework and, if they manage to do so, that the average grant size will be bigger than the $750k the Venturous Australia Report anticipate.

Last time I put a prediction out there I lost a coffee. Hmmm.

National Innovation Priorities

The Cutler Report (Venturous Australia) has identified the following private sector areas to be the priorities for Australia's Innovation policy. They have been selected to leverage our distinctive geography, economy and capabilities:

• Resource industries
• Space and Astronomy
• Finance and Risk Management
• Marine Industries

The proposed National Innovation Council will then manage and coordinate these priorities.

Does anyone else find this list interesting?
The industries selecting are a fascinating set of priorities for the nation. Cutler has avoided selecting industries such as software, pharmaceuticals, biotechnology, transport or manufacturing per se. Areas like engineering and software are included in the priority areas by implication, but only to the extend that they are connected to those industries, as supporting or service providers.

Why were these industries selected?
According to the report, these industries were selected on the factors of geography, economy and capabilities, but also because theye are:

"areas whereby public innovation could spillover into complementary private sector innovative efforts"

Venturous Australia goes on to highlight that it was also important that these priorities are areas where

"government stimulus can increase the returns to private innovative activity; specifically, activity that will lead to globally tradeable goods and services."

Resource industries
It is very easy in the context of the current mining and resources boom to understand that this is an innovation priority. And our track record of researching, developing, commercialising and exporting the types of knowledge and processes that are essential for the resources sector is fairly well understood.

Space and Astronomy
The Space and Astronomy industry is a little more surprising to me, and the reasoning seems to be dominated by the geographic conditions and location we have been blessed with (eg for monitoring and surveillance), our bid for the Square Kilometre Array and interest in accessing satellite based monitoring and sensing capabilities (eg for agriculture, water, etc). The final reason given seems a little defensive:

Australia has little involvement in the satellite infrastructure to support these strategic areas of application deployments based on satellite facilities. This is a putative area for more significant international collaborations.

which does not appear to link well with the rationale for involvement in some of these areas, but I guess the factor is relevant.

Financial and Risk Management
A particularly relevant topic given the current market gyrations, the selection of this industry is particularly important and, I think, sound if we are addressing "innovation". As the pool of funds in the Future Funds and Superannuation involves direct management and represents savings this will be very relevant. Moreover, having heard David Murray speak at some length about the work involved in running a custom operating environment on some of the Commonwealth Bank's server infrastructure that puzzled even the experts from IBM, I suspect that there is probably more great work going on in these institutions than ever sees the light of day.

Marine industries
Finally, as we are a "land girt by sea" and actively involved in marine tourism, offshore oil and gas, shipping, fishing, aquaculture and maritime logistics, and beginning to operate in the seafloor mining industry, this area has natural relevance. Again, there appears to be something of a disconnect with the rationale for these areas as the Report notes:

Submissions and roundtable discussions during this Review support an argument that Australia’s investment in marine research and maritime industries is underweight.

And, So What?
It is surprising to me that agriculture, software services, some aspects of biotechnology and even retail (as we're talking innovation) did not feature in the list of industries. Furthermore, the rationale for the selection of these industries is open to criticism and critique by many vested interests, but also on its assumptions. These industries are largely convenient. They represent current strengths. They naturally engage other industries and establish their own markets for the creation of knowledge and innovation and the distribution of capital. As such the recommended investment in these ares as "National Innovation Priorities" seems defensive in nature.

This is not a bold new investment, or vision, or statement of what Australia can be in years to come.
This is is a reflection of where we are now.

What is really interesting is that these priorities seem disconnected from other recommendations in Venturous Australia Report: with the exception of some grants (to which I will return in my next post), the R&D tax credit recommends removing support from some large-scale activities in the resources sector, which are short sighted. Major commercialisation and new technologies (such as CSIRO's smelting technologies and the work Rio Tinto has put into HiSmelt) are of fundamental and systemic importance to the resources sector and our future prosperity.

On one hand the Report encourages the Financial and Risk Management industry as a National Research Priority, and on the other fails to recommend the removal of a powerful distortion in the current R&D tax concession around the "multiple sale" test for software. This is a clear disconnect.

Unfortunately, the more time I spend with this report the clearer it is that it was written by a committee in separate chapters. There are disconnected threads, an absence of compelling and coherent themes and probably a recognition that many readers would not make it past the Executive Summary.

All of this will be problematic when it comes time to respond, as government is left with the choice of either reinforcing the realities of our present economy by adopting these priorities, or striking out with a vision of its own that is not supported by the Venturous Australia Report.

As I've said before, it's going to be a very interesting journey from here to policy.

Are you along for the ride?

Venturous Australia comment timeline extended

The National Innovation System Review website now indicates that you can leave feedback on the Cutler Review Report (written variously as venturousaustralia and Venturous Australia - either way I'm not keen on the name) at any time up to 30 September 2008.

The link on the website takes you to a simple web form that you can type directly in to (but cannot upload any attachments), so the feedback will be brief from many individuals and organisations. It would be very easy to leave a one or two paragraph response on this page and (in the absence of any structure on the webform) you could choose to answer the following questions:

• What do you like about the Venturous Australia Report?
• What could be improved?
• What is the single most important recommendation as it affects you?

Previously, the cut off for the feedback was 23 September, so you now have a little more time!

Kris Gale quoted in today's Australian Financial Review

Pretty much as the title says, Kris was quoted in today's AFR, page 8. Here it is:

The managing director of Michael Johnson Associates, Kris Gale, supported the proposed changes to the IP requirements but did not believe the new rate of concession was enough.

"For companies making decisions about where to park their R&D, the [proposed changes] are probably not worth enough to drive behaviour...for a few companies who are on the cusp of a decision, this change could tip them over the line. But I don't think it's internationally competitive enough," he said.

As our team has been discussing the report, there is definitely a very long way to go before there is sufficient certainty on the proposals and the government's reaction.

Above is a word cloud from our blog (thanks, Jack)

Summary of R&D Tax Recommendations in the Cutler Review Green Paper

This is a summary of the R&D tax concession announcements in the Cutler Review of the National Innovation System Green Paper, released today and available for download here.

You might like to forward on to colleagues or contacts who would find the content interesting.

• The Green Paper acknowledges R&D tax mechanisms as an iconic and valid policy instrument as part of the National Innovation System, although they are currently "underpowered and overcomplicated".

• The Review proposes the transformation and rationalisation of R&D tax programs by replacing the current 125% tax concession, tax offset and 175% international premium concession with an R&D tax credit program.

• The R&D tax credit would be set at 40% (non-refundable) for large companies (group turnover in excess of $50 million) and foreign-owned firms, an effective concessional rate of 133% or an after tax saving of 10 cents per dollar. Whilst this restores the value to pre-1996 levels it remains below the cost of capital.

• For small companies (less than $50 million) the R&D tax credit would be set at 50%, an effective concessional rate of 166% or an after tax saving of 20 cents per dollar and the current $1 million limit would be abolished.

• The refundable tax credit may be paid more regularly than annually in arrears (eg quarterly) if appropriate risk management practices can be introduced.

• Claims for R&D conducted in Australia would be allowed regardless of where any resultant Intellectual Property may be owned.

• Open Source software may benefit from exemption from the "multiple sale" test and a lower technical risk threshold, but no other changes to the multiple sale test are recommended.

• The definition of R&D (or of directly related expenditure) or Eligibility Guidelines may be used to limit claims for "large one-off projects like mines and civil engineering" in order to "protect the revenue and continued viability of the R&D Tax Concession".

Overall, the Green Paper presents a positive future for the use of R&D tax mechanisms to stimulate, reward and incentivise the conduct of innovative and risk-based activities.

What will be of critical importance to Australian industry is how the journey from Green Paper to Policy is conducted, and beyond that how effectively the Policy is turned into practical, workable and actionable legislation.

The Government is taking responses to the Green Paper until 23 September 2008 and will announce its policy response to the program before Christmas.

"Underpowered and Overcomplicated"

The Cutler Review Green Paper has quoted Kris Gale in the R&D tax concession consultation process (although it is unattributed!).

It's going to be interesting to see what becomes of the recommendations in the government's response to the Green Paper, due before Christmas.

After all, that's when Innovation becomes Industry Policy.

Early Reactions to the Cutler Review Green Paper

The Cutler Review Green paper is out and the early reactions look positive for the R&D tax concession. There is talk of a reviewed rate and recasting the concession as a 40% credit, removal of the 175% premium and international concession.

Most interestingly there is talk of increasing the turnover limit for the R&D tax offset from $5 million to $50 million on a group basis and abolishing the expenditure limit (presently $1 million aggregate R&D amount) entirely.

Further details to come. You can download a copy of the report from here: http://www.innovation.gov.au/innovationreview/Pages/home.aspx

Cutler Report due out this afternoon

Senator Carr has announced that the Cutler Review Green Paper will be released this afternoon. It's very hard to speculate, and probably risky to do so, but perhaps there will be a recommendation on and increase in the rate of the R&D tax concession?

Of course, there remains a risk that the scope of the program may be reduced to fund that change - an approach that would be a backwards step for the National Innovation System.

So, it's sounds as though it's safe to start the countdown again...

Senator Carr National Press Club Address

There is little to report after Senator Carr's National Press Club address. Aside from some interesting announcements, principally of interest to the humanities, arts and social sciences fraternities, it was sadly lacking detail on the National Innovation System Review.

He was unable to provide an update on when the Green Paper would be released, or what the initial reaction was.

In answering questions he made the point that the revenue foregone under the R&D tax concession amounts to a sum greater than that that allocated by the ARC, but that is not really news, nor really fair as the amount foregone is only a small fraction of the amount actually invested by corporates.

It is a matter, still, of "watch this space".

The Waiting Place

In Oh, The Places You'll Go!, the last book writted and illustrated by Dr Seuss, he dedicates an entire page to the Waiting Place:

You can get so confused
that you'll start in to race
down long wiggled roads at a break-necking pace
and grind on for miles across weirdish wild space,
headed, I fear, toward a most useless place.
The Waiting Place...

This is where the Australian Innovation Community finds itself at the moment.

The Prime Minister addressed the Ai Group Annual Meeting on Monday night and spoke in the most general terms about the government's commitment to innovation, viz:

The Government is building a 21st century innovation-driven industry policy - not the old industry policy based on protection and resisting change, but the 21st century innovation policy that embraces change, productivity and global markets.

And whilst this is heartening there is a sense that all of this discussion has been going on for far too long: the need is, after all, pressing.

In the same speech the Prime Minister addressed the fundamental need for renewed intervention and increased innovation intensity in the Australian economy: the Productivity Slowdown. He said:

In recent years productivity growth has declined sharply – from average annual growth of 3.3 per cent during the productivity cycle of the mid-1990s, to just 1.1 per cent in the current cycle. That productivity slowdown reflects the long-term neglect of investing in the drivers of productivity – our workforce and our infrastructure.

We must turn that around – because in the long term it is productivity growth that will build our future living standards. Over the last 40 years, productivity growth has accounted for more than 80 per cent of the improvement in Australia’s living standards.

The Government is committed to building our long-term prosperity by investing in five key platforms for future productivity growth – education, infrastructure, innovation, business deregulation and taxation reform. [emphasis added].

Simultaneously, CEDA has identified Productivity as one of its top ten "big issues", together with water, energy, education and training, labour skills, environment, transport, governance emerging industries and health. A round table will debate solutions to the top five issues, and you will hear more from CEDA on this as its media engine gathers steam, and the round table result is published in the BRW. Sadly, productivity was not one of the top five issues, so we may not see as much on this issue.

Finally, the opposition spokesman for innovation, Senator Abetz, addressed the AIRG annual meeting at the pre-conference dinner (Senator Carr got the floor during the conference). The delay on the Cuter Report (yes, Kris got his coffee) meant that Senator Abetz had little to comment on, other than the demise of Commercial Ready. In fact, he jokingly linked the two ideas, suggesting that the Cutler Report was delayed due to the reactions to that cut. Other than that he had very little to say, really reflecting that the opposition is going to have to do a lot of work on policy between now and the next federal election and, further, that they are likely simply to react to the government's policy position in short order, rather than generate their own.

I'm over the waiting place.
It's time for us to get on our way...

"Will you succeed? Yes, you will indeed. (98 3/4% guaranteed.)" (Seuss, again!)