Terry Cutler's SmartCompany Article

The link referred to in Ian's post yesterday is to an article in SmartCompany, which you will find here:
http://www.smartcompany.com.au/Free-Articles/The-Briefing/20081110-Small-and-medium-technology-sector-could-be-wiped-out.html?source=RSS

The impacts of the current financial crisis on R&D

Guest post by MJA Manager Ian Ross-Gowan

Conventional wisdom would presume that the current financial crisis will have a negative impact on R&D. This would be especially so if the result is a sustained deep recession or ongoing tight access to financing funds. Indeed, Dr Terry Cutler in an interview with SmartCompany on the 10 November 2008 indicated anecdotally that the availability of funds from banks for technology start-ups is very tight – and this was already problematic with the cancellation of Commercial Ready Grants. But is it all doom and gloom?

As a result of the longest period of continual growth in our history the Australian economy was hitting three significant constraints

• attracting and retaining staff,
• capacity to supply and
• the high Australian dollar.

Attracting and Retaining Staff
One of the impacts of the uncertainty in the world’s economy is that staff should be easier to attract and retain. There will be less competition for staff with the reduction in opportunities and poaching of staff should reduce as businesses focus on costs and business sustainability.

Easing Supply Constraints

Capacity constraints should ease. This would be accompanied by lower turnover but it could also ease high marginal costs of inputs. From a researcher’s perspective it could also mean an increase in the availability of production facility and production staff time to focus on issues other than trying to keep up with demand. This could give researchers the time to focus on future product or process improvements that have been needed to be put off.

Lower Australian Dollar
The reduction in the Australian Dollar will give a boost to exports assuming the rest of the world is able to buy. The high Australian dollar was largely driven by increases in commodity prices. Businesses not involved with the export of these have been suffering from the high dollar. Import prices were low and the price to export customers high. It is not just the exporter who can benefit from the lower dollar; domestic manufacturers who supply Australia should be advantaged as well.

Finally it may be worthwhile remembering that a downturn can refocus a business with R&D leading the way to that business’ brighter future. With the downturn in the typewriter market and little prospect of future growth in the mid 20th century, one company refocused their business on managing information with new technologies. That company was IBM.

Borrowing from the future to fund today's innovation programs?

Yesterday ABC online spent some time analysing the Government's revised economic forecasts.
It's a short arc from there to uncertainty over the implementation of Venturous Australia.

Government revenues will fall by $40 million over four years.

Either government spending also contracts (which affects implementation of Venturous Australia) or Labor chances a deficit budget with a short run to the next federal election.

So the choices break down to short term economic stimulus (cash handouts, spending on necessary infrastructure) or longer term systemic change (investing in innovation capability for productivity growth).

One is good for votes, the other for the country.

Let's hope Prime Minister Rudd and Minister Senator Carr can convince Cabinet and the population that we need to Zig when traditionally we have Zagged.

Something in the ether?

For the first time (ever) I have had a blog post coincide with Seth Godin: he has written about The economy, the press and the paradox. Naturally, we have different angles, and Seth makes his point well:

Wealth is created by productivity. Productive communities generate more of value.

Productivity comes from innovation.

Innovation comes from investment and change.

And the insight about innovation and the creation of greater value from inputs is directly on point. But during times of uncertainty, here's the rub...

If, in the middle of some sensible budgeting and waste trimming, we stop investing in the future, stop innovating, stop finding the breakthrough that leads to the next round of productivity gain, then in fact they're right, it [fear, uncertainty and paralysis] does last forever.

There, now I've alerted you to that track, where can we take Australian innovation to the world? Smartcompany's list of Australia’s top web 2.0 entrepreneurs gives us some clues on who might be active...where can you take your company, your enterprise?

Know any inventors at UNSW?

MJA is sponsoring the inaugural Inventor of the Year Awards at UNSW. These awards carry a prize pool of $20,000 of, wait for it, real cash. Not services "valued at" $20,000.

Awards are open to all UNSW staff and students across biomedicine, science, the environment, and information and communciation technologies.

For more information visit the links above, contact Ilona Sherdan on  +61 2 9385 6505  or download an (Word) application form.

Productivity Growth: The Australian Miracle has no Clothes

The Productivity Commission Annual Report makes the case for Australia's innovation efforts to be increased. After all, despite the Australian economic miracle over the past few years, productivity has slowed.

Productivity growth through labour force participation and capital accumulation (and terms of trade) is all well and good, but we need much more if the Australian miracle is to continue. It all turns on how we reinvest the accumulated capital (risk capital) and how we achieve labour force productivity (such as through enabling technologies). This is the challenge:

Innovation and diffusion of new and better production methods, and the introduction of new goods and services, are the core drivers of productivity growth - getting more, and more highly valued, outputs from any level of inputs.

Although the Commission points to international experience that market competition is the best way to drive innovation, Australia's peculiar competitive structures (generally with two or three major market players) and the relatively low cost of acquiring latest-generation foreign technologies, particularly in the ICT and medical/health sectors mean that some form of innovation intervention is justified if we ever want to have capability in those fields.

The current government understands this to the extent that they recognised, at the time of commencing the National Innovation System Review, that in the twenty-first century Innovation Policy is Industry Policy.

In my opinion, we need three things to happen to generate future economic wealth for the nation.

First, we need goverment to deliver on the rhetoric and motherhood statements about innovation in a coherent, systemic, considered, targeted and collaboratively generated policy that stimulates the reinvestment of accumulated capital into activities that will result in future productivity.

The longer-term planning horizon (be that 2020, or beyond) is the relevant timeframe. This is policy that touches science, education, research, commercialisation, tax, capital concessions and availability, regulatory burdens, international treaties and standards, immigration, and infrastructure, not to mention our national response to the threats of global warming, the impending intergenerational crisis and associated skills and capital structure dislocations, and a possible economic slowdown.

There is, fundamentally, a need for leadership and strategy at a national level on this issue. This is not the time for ducking and weaving and playing a short-term political game. If we want a vibrant Australia with independent wealth for future generations (beyond the mineralised assets of fortune and circumstance) this is a time for bipartisan coordination and agreement on this touchstone.

Second, we (industry, entrepreneurs, investors, researchers and institutions) need to take action and stop whining about the current reality. In each decision we make we need to be open to these fundamental innovation touchstones:

• Will this decision enhance the value (output) from my team/organisation/assets, and if so, how?
• To what extent can the value be increased by the application of (Australian) innovation (being the act of introducing something new or different in the hope of creating additional value)?
• If there is no current (Australian) innovation in this field, what can we do to identify, generate and stimulate that innovation?

And if we don't have clear answers to these questions we need to deeply examine why we are making the decision at all.

We are way beyond solely R&D here. We are into value creation in its broadest and most systemic sense. The second and third questions above may lead to an R&D solution or identify an R&D need and result in investment, but there must be more than this.

This is where industry and all the other stakeholders in the National Innovation System can no longer sit back and wait for a seat at the table in the creation of innovation policy. Let's not wail and moan, let's get stuck into the thick of the debate, of advancing Australia through investment, through supporting risk and charting a pathway to future prosperity based on the mantra Productivity through Innovation. Let's get a comprehensive response to Venturous Australia through debate, discussion, and engagement with government.

Ideally, let's get the opposition to the table and articulate a productivity-based future for Australia well into the future planning horizons that can sustain the inevitable economic ups and downs that are ahead. If we need to borrow against our future capability to generate wealth, let's ensure that we have the ability to create and sustain that capability.

Finally, we need an approach to communicate all of this to the population at large. Too much of this debate sits in the rarefied air consumed by innovation policy makers, innovators and entrepreneurs and not in the government relations specialists in corporations, in boardrooms and in other parts of government. It is a very rare discussion at the dinner tables of Australia.

In the fairy tale the Emporer had no clothes and the population was too afraid to point it out until a child pointed, stared and laughed.

In Australia it is not the Emporer who has been tricked into thinking that he is dressed in the finest clothes, it is the populous at large that confuses the current economic success with a sustainable future, and worries about immediate tax rates, welfare, and health and education funding.

It is time for our highest leaders to point out the reality.