ENGINEERING ENTERPRISE DEVELOPMENT CENTRE (EEDC)
BUSINESS PLAN: OPTION A

Acknowledgement and Rationale

The following late-draft proposal for an Engineering Enterprise Development Centre was prepared in 1998 by a Technology Task Force of the Institution of Engineers (Queensland).

The latter's permission to reproduce the document here has been sought, because a lack of capability to commercialize new ideas continues to be seen as THE major deficiency in Australia's innovation system, yet those most concerned with the problem continue to argue that Australia's innovation system can only be developed by governments, though the latter have NO prospects of overcoming the acknowledged major deficiency (see Boyd T. 'Smartening up our ideas',  Financial Review,  30/7/02 - and related CPDS Comments)

The preliminary EEDC proposal illustrates one method whereby a more commercially-relevant innovation system might be 'bootstrapped'. It involves the creation of an institutional arrangement which leverages off existing commercialization capabilities and adds potential value to specific projects so as to create a sustainable level of demand for commercialization capabilities.

August 2002

1. BACKGROUND

Origin

The Institution of Engineers Australia (IEAust) established a Technology Task Force in Queensland to consider and develop initiatives whereby technology can contribute more effectively to community economic welfare.

A community's capabilities to create or identify technological advances and exploit them through innovation can be an important source of the competitive advantages which enterprises require to achieve high productivity. This source of competitive advantage has been under-emphasized both nationally, and in Queensland in particular, because of the natural resource oriented economic strategies traditionally pursued. Thus a real opportunity to achieve stronger performance is available - which has been increasingly sought over the past decade with some (but only fairly slow) gains.

Technological advance and innovation requires collaborative efforts of many persons and organizations with different capabilities (eg technology, finance, production, research, marketing). Concerted action to create a critical mass of persons and organizations with the complementary skills required for technological advances and innovation provides scope for important and self sustaining commercial and economic gains.

The IEAust believes that, given appropriate skills and support, its members, professional engineers, are likely to be the most effective catalysts available for creating such a critical mass in the community - because of the central role which technology plays in their profession, and their frequent graduation to 'management' roles.

In order to be effective catalysts to the creation of a critical mass of the skills required for technology based growth, the traditional focus of engineers in Queensland which has involved a technical role in responding to business and economic initiatives, needs to shift towards taking a leading role in organizing such initiatives at the enterprise level.

This initiative, to boost the enterprising skills of engineers, and to boost engineering enterprises as an economic force, through establishing an Engineering Enterprise development Center (EEDC) is a practical start in building a base from which engineers can increasing take such a leading role. This initiative is focused in Queensland, but may have national application at a later time.

The Economic Role of Technology

Technology is knowledge of how to do something useful (i.e. know how). Technology is not a machine (like a computer), though knowledge of how to create or use such a machine is technology.

Human progress is a process of technological advance. The industrial revolution which allowed appreciable rates of economic growth for the first time in history was due (in part) to the invention of the social 'technology' of liberal capitalism (which allowed enterprise) and the mechanical technologies derived from steam power. Subsequent economic cycles can be seen in terms of the emergence of new groups of social technologies (e.g. mass production in the 1920s) and physical technologies (e.g. electricity, internal combustion, electronics).

One way in which technology contributes to economic and jobs growth is through creating new products for which demand can increase rapidly if they have attractive features. Another way is through increasing efficiency. With fewer employees required for each unit of output, prices can be reduced (e.g. by an order of magnitude), and lead to a much larger increase in demand (e.g. by two orders of magnitude). Economic and employment growth usually focus in sectors most affected by technological advances.

Technological advances can result from insight; combining or building on existing ideas; copying ideas; or research. The practical application of a new technology is innovation.

Economic growth theories have focused on technology, and innovation. Until the 1930s, growth was seen as a result of investment (which allowed technological changes). The role of the catalysts who assemble the resources to attempt innovation (e.g. entrepreneurs) was also seen as critical. In the 1950s, Solow showed that most growth in the USA was not due to increased inputs of labour and capital, but to a 'third factor' / 'productivity' (i.e. most growth comes from technology). 'New growth theories' (e.g. from Romer) now place all knowledge (including technology) at the center of growth.

Even rapid economic growth may be unsustainable, if not based on productivity gains. A fundamental criticism of economic growth in East Asia (by Paul Krugman) suggested (perhaps not correctly) that such growth reflected mainly growth in inputs without a significant contribution from productivity (the third factor). If correct, Asian growth would be as limited as the rapid growth achieved in the USSR in the 1950s. It is probable (but has never been assessed) than much of Queensland's growth has been due to increased inputs with relatively little due to productivity. If so, this growth will also be unsustainable.

For businesses, technology can contribute substantially to value added, by providing one source of competitive advantage. Business strategists argue that firms which lack competitive advantage tend (in a competitive environment) to be unable to generate the margins required for higher value added. The comparatively low productivity of Queensland's economy (a major theme of the 1997 State Economic Development Strategy) is perhaps due to traditional reliance on the natural comparative advantages of regions (e.g. natural resources from which producers can gain little market power, as all have the same advantages) rather than on the competitive advantages of enterprises.

Worldwide, the contest for the commercial and economic gains from technology has become more complex. For example, the social technology of mass production migrated to newly industrialised countries progressively from the 1960s, leading to de-industrialisation in Europe and North America. The Japanese challenge with unique (total quality) management methods appeared likely to dominate in the 1980s. Now a new social technology of networked, telecommunicated and globally oriented production is emerging in the (so called) 'new American economy'. Simultaneously rapid progress is being made in new physical technologies (e.g. biotechnology, micro-electronics, nano-technologies, eco-technologies) as potential sources of competitive advantages.

At the same time, social and environmental issues further complicate any attempt to unambiguously define economic and technological goals.

However, despite these complications, enhanced economic and jobs performance, and other goals such as a reduced ecological 'footprint' from growth can best be achieved by a stronger technological capability.

Status

The Technology Task Force considered a range of options, including:

• producing indicative technology strategies for business (and government);
• support to innovators (eg by a resource center; an expert system; IE Aust; a business funded enterprise structure) - which might focus on engineers or all professions;
• support to potential recipients of new technology;
• participation in the technology / economic policy debate;
• introducing commercial / economic capabilities in engineering education;
• providing formal IEAust recognition for 'Technological enterprise advocates';
• expert systems to provide such support;
• a technology 'yellow pages'.

An Engineering Enterprise Development Center (EEDC), as a means of mobilizing support to engineers as they initiate or expand enterprises, was adopted for detailed consideration because:

• this option had clear 'customers' (ie engineers - partly through the IEAust itself);
• an apparently successful precedent existed for such functions in the IIB (Information Industry Branch) - though because of its reliance on extensive public funding and the different character of engineering and information industries, the model could not be directly applied. A brief outline of the IIB's activities forms Attachment A;
• this could provide a 'stepping-stone' to more ambitious subsequent initiatives.

This draft Business Plan sets out an option for the EEDC, in terms of:

• an environmental scan of the context within which an EEDC has been proposed;
• the purpose of the EEDC;
• the rational for that purpose;
• principles underpinning the draft business plan;
• provisional marketing, operational, organizational and financial plans.

This draft will be developed into a firm business plan (ie Option B) for consideration by the IEAust, and others who might wish to jointly sponsor such an endeavour. At the same time, the Technology Task Force will develop a means of addressing broader issues related to enhancing Queensland's technological capability.

2. ENVIRONMENTAL SCAN

Factors in the Queensland environment which are relevant in forming a provisional business plan for an EEDC are believed to be:

Economic Context

• attempts have been made over the past 15 years to diversify the area's in which Australia has competitive advantages out a substantial reliance on unprocessed agricultural and mineral commodity exports. The latter have relatively low growth rates globally compared with manufactures and services, and face weak terms of trade (eg because of the inability of producers reliant on comparative advantages to achieve high margins).
• at the same time that Australia sought to diversify its economy, the 'goal posts' for doing so were raised from capital intensive mass production (the major basis for providing broadly based high productivity employment in developed economies) to knowledge intensive production - because economic globalisation shifted capital intensive mass production to newly industrialised countries with low wages;
• the results of attempts to strengthen the economy remain marginal (eg statistically limited), and limited in their effect on technological capabilities. Periodic attempts to develop policy, become lost. Business associations and government agencies supposedly dealing with economic development remain unfamiliar with the implications of technology. Public policy is thus not particularly supportive. Understanding of 'development' in practice remains limited to responding to foreign investors' projects.
• slow progress in terms of economic change have led to economic symptoms (large increased in net foreign obligations - as growth has been financed by borrowing and selling assets due to inadequate national income; high unemployment; poor quality employment; increased imbalance in the distribution of wealth; and a variety of social pathologies - suicide; drugs; crime). They have also led to political symptoms in the support gained by One Nation which has destabilised the political system, and made political initiatives for further economic reforms very difficult.
• economic growth in recent years has been underpinned by growth in East Asia (which had been the sources of 50% of global growth in the 1990s). However, a financial crisis which emerged as a result of institutional weaknesses in dealing with the financial aspects of that growth, has led to recession, and a potential spread globally of the financial crisis. The Asian crisis is not expected to be resolved easily (because it would require a cultural and political revolution in many countries if it is necessary to establish an economic development model which is consistent with Western financial practices). The economic repercussions for Queensland and Australia could be very large, requiring even more economic change.

Technological Context

• Queensland has had technological strengths in limited areas (eg agriculture, mining) but has generally under-performed by national standards (eg as indicated by the level of R&D performance as a percentage of GSP), just as a Australia as a whole has under-performed relative to developed economies. The capabilities which are needed for stronger performance primarily are those relevant to the private, rather than the public, sector (eg weaknesses in commercialising those technologies which are available; and much below average R&D spending). The latter reflects the historical structure of the economy, and the high level of foreign ownership in strategic sectors;
• despite the weakness of Queensland's economic institutions (due to official orientation to natural resource based growth) a high rate of innovation has existed amongst individuals and smaller enterprises - whose economic contribution has been constrained by an unsupportive commercial environment (eg limited skills, market intelligence, market networks). The public policy environment has also been unhelpful - with government attempts often to trying to provide direct assistance to innovative enterprises (which are intrinsically limited) rather than to develop the economy.
• a proportion of this pool of potential innovation involves engineering activities - suggesting a real market for an EEDC, but not identifying its extent.
• attempts at economic diversification have had some effects on technological capabilities, eg in developing industrial liaison arms of most universities; increasing understanding of, and establishing some entities able to provide, venture capital; rapid growth of elaborately transformed manufactures off a low base (nationally but less so in Queensland); and the rapid growth of an IT&T sector (and some manufactures unconnected with resource processing) in Queensland.
• the internationalisation of Australia's economy, combined with globalisation of producer and financial markets, imposes considerable competitive pressure on Australian enterprises (which also opening a vast array of niche market opportunities). This requires Australian firms to develop competitive advantages, for which technology is an obvious source. This in turn raises enormous opportunities for engineers with appropriate skills. Furthermore it is increasingly common for SMEs to be successful in global niche markets (ie this option could now be available to many firms)
• with internationalisation, competitiveness is increasingly associated with regional clusters of similar enterprises which draw upon common supply / distribution networks. Clusters which will dominate in Queensland are not yet established. However engineering enterprises (particularly connected with services to agricultural and mining sectors, and with support for population growth and environmental management) are present in sufficient numbers to provide a base for expansion.
• engineers as a whole tend to be employees or consultants and have limited enterprise skills, and limited familiarity with the process of technological development and commercial innovation. Such issues have not traditionally been addressed in the education and training of engineers;
• corporatisation and commercialisation of public sector functions and increased private participation in infrastructure are increasingly freeing engineers from public sector constraints, and increasing scope for engineering enterprises

3. PROVISIONAL PURPOSE

The purpose of the EEDC is to nurture and develop engineering enterprises and industries, including professional engineering services and enterprises, as internationally recognized and competitive in producing products and services which are based on engineering skills.

To achieve this, the EEDC will provide access to a well-publicised, readily accessible, qualified and managed resource base which is able to:

• enable engineering enterprises to achieve the critical mass required for high quality support services, and achieve a leading industry cluster status in various regions;
• increase the export of Queensland engineering services and engineered products;
• assist other industries to exploit the benefits of engineered goods and services;
• identify and advocate engineering infrastructures to support the economy; and
• attract new engineering enterprises to Queensland.

This will indirectly establish an active and self-developing network of technology-driven engineers and engineering enterprises, and increase community support for engineering and engineers, in their efforts related to technology advancement.

4. RATIONALE FOR AN EEDC

The following outlines the rationale for an EEDC within the context outlined in Section 2.

Firstly, there appears be a potential for more effective and more numerous engineering enterprises in Queensland noting:

• the comparatively small number of such enterprises in Queensland relative to that in developed economies; and
• the large number of technological innovations (as above) which appear to emerge in the community (including the result of the work of engineers) which could be the basis for new and enhanced engineering enterprises.

Secondly: The potential for new enterprises based on engineering skills and innovation appears not to be translated into reality, because of a gap between the support required, and that which can at present be provided commercially. For example:

Engineers often have limited training and skills related to initiating and participation in enterprises. Business offers support for those who have 'got their act together' (ie who understand the possibilities of their business) However business has trouble helping those whose main problem is a limited understanding of their options;

Also Queensland business is still learning to deal with technological innovation - because traditional economic strategies relied on natural resources, rather than on the competitive advantages of enterprises. Thus the quality of commercial help, even for those who have 'got their act together', is not always high (though it is improving as demand increases);

Individuals who wish to initiate or enhance enterprises with significant growth potential often lack the resources to pay for the services required and the skills required to encourage others to invest. Covering this gap is the role of venture capital, which is only available to a limited extent.

Other areas from which support is likely to be required by engineering enterprises with an involvement in technological innovation will be universities (for education, research support, education) and specialized research bodies. Universities have established 'industrial liaison' arms to help enhance the interface with firms - which are effective to an extent (though have limited ability to interface with start-ups). Specialized research bodies generally do not exist because the limited demand for their services.

Queensland business and other institutions can be expected to become effective in providing the required support for engineering enterprises when there is a large market for those services (eg when there is a larger mass of successful engineering enterprises).

Overcoming this market gap is the role of the EEDC.

Thirdly: There are a variety of stakeholders who could profitably join as partners in sponsoring an EEDC. People have finite time and resources, and those with the ideas, energy and enthusiasm to establish engineering intensive enterprises typically and those who provide such enterprises with support, do not individually have the experience or resources to build both engineering enterprises and their business infrastructure.

Functions like those suggested above for an EEDC can be of value both in supporting the emergence / growth of individual engineering enterprises and also in building a critical mass of such enterprises to justify better support.

Thus sponsorship of an EEDC may be of value to, for example:

• existing engineering enterprises - who want to improve the quality and competitiveness of the support services they rely on (ie by creating a critical mass of demand for those services - and thus leading to significant engineering clusters);
• forward looking providers of business services to engineering enterprises - who may understand its value a market development tool; and as a means for enhancing their skills in dealing with engineering enterprises;
• universities (through their industrial liaison arms) who may recognize the important role which engineers are likely to play in technology based enterprises, and thus the potential to develop the market for university research services through an EEDC;
• business associations that deal with engineering enterprises who may wish to expand their membership base, and find the EEDC a convenient way to deliver some services to their members.

Furthermore the EEDC will help locate potential 'gems' who could thereby be introduced to venture capital support. The filtering process which the EEDC would provide will be of value to such investors - who might thus take a role as sponsors of the EEDC.

The above potential gains to key stakeholders are the core of this draft business plan.

Fourthly, though governments may have an interest in developing engineering enterprises, they can not be relied upon to bridge the market gap limiting their growth.

Creating the critical mass of engineering enterprises needed to justify high quality business services involves 'applied education' - ie it involves introducing certain types of business- like skills to many engineers where:

• there is difficulty in capturing an adequate direct return (and thus support often can not be strictly commercial), and
• those skills must be tailor made for individual circumstances (and thus can not just be mass presented (say) in a publication).

Such 'applied education' can not reliably be provided by government agencies (ie activities like those of the IIB in recent years can not be maintained), because:

Constructive advice and assistance about enterprise development or innovation can only be provided by 'market conscious' organizations with relevant experience and skills. Government agencies need to be responsive to political considerations. Assistance which is not politically supported tends to be under-resourced, while that which is politically controlled is often of poor technical quality.

Public sector budgeting tends to reward the 'outputs' of government agencies (ie what they actually do) rather than the 'outcomes' of their actions (ie what is possible for the society as a whole). Thus government agencies have great difficulty in gaining resources for facilitating the emergence of 'market conscious' support mechanisms.

Attachment B presents a brief outline of the forms of government assistance which are presently available dealing with issues similar to those intended for EEDC. Despite their intrinsic limitations, those schemes should be recognized for those occasions when they might be of value..

5. DRAFT PRINCIPLES FOR AN EEDC

The EEDC will be different from other attempts at technology-based enterprise growth in directing its attention to engineering as a focus for economic growth, and concentrating on developing enterprise skills and opportunities around engineering products and services.

Several principles form the basis of the EEDC:

• The EEDC will be specifically designed for engineers and enterprises with large engineering input. Engineers are trained to be productive and practical, so that the EEDC will have advantages over an organization addressing all potential innovators in that 'perceptual motion mechanics' should be screened out of its client base.
• the EEDC will help bridge the largest gap to success, ie in the area of enterprise skills. This bridge will be between practical engineering considerations (where engineers continually adapt scientific principles to the real world) and the unstructured complexities and variability involved in creating enterprises (where customers rather than principles rule). This will be an individual, rather than a fixed, 'bridge'.
• The EEDC will deal initially with requirements common to a broad range of engineering enterprises. Customers will be expected to know their own technical speciality. However technical specialist assistance that is available will be systematically identified, and later development may see greater EEDC specialisation.
• The EEDC will focus on timely, practical and relevant outcomes and outputs to enable its customers to improve the financial performance of their businesses, and by so doing to achieve the goals of its sponsors. It will not be concerned with broader strategic issues.
• the EEDC is to be independent of government and academic institutions. Its foundation sponsors will include the IEAust (Qld Div), as well as potential business investors, existing engineering enterprises and firms providing services to engineering enterprises (including university industrial relation arms)
• The EEDC will be controlled and operated by people with proven industry experience and success in the development of engineering products / concepts / businesses. It will have access to a range of people with different skills that can assist in the various stages of the development cycle to enable its customers to achieve their outcomes.
• the EEDC's performance will be recorded and monitored against performance indicators, which address both internal performance (i.e. running the EEDC business; costs, revenue; customers; customer satisfaction; etc) and external performance indicators of EEDC's customers (i.e. industry measures, market / business changes / improvements) which are of relevance to its sponsors. Both types of performance indicators will be monitored in a range of time frames.
• the EEDC will have the flexibility to meet the changing needs of its customers and the business environment they operate in. The business of the EEDC will change over time and the people involved with the EEDC will need to change as well to continue to meet the needs of the customers. Monitoring of the performance indicators (internal and external) will enable the EEDC to change at appropriate times.
• the EEDC is to deliver results of benefit to its sponsors and services that are required by its customers. It will operate in the same business environment as its sponsors and customers, and will succeed or fail on the basis of their success. Over time, the founding sponsorship of the EEDC by the IEAust will be less financially important.
• the cost to the IEAust as the founding sponsor must be clearly justifiable with itsmembers, and involve drawing upon joint sponsorships (as suggested above). Furthermore, costs must be low (at least initially while the concept is being proven).
• to minimise direct costs, the EEDC will provide a reliable means for mobilising the best available existing resources - rather than being a repository of resources which duplicate them.
• the EEDC will initially focus on activities with quick pay-offs for sponsors (eg introducing existing engineering enterprises to available opportunities).
• The EEDC is a recognition of the skills professional engineers can bring to the task, as well as the responsibility of the profession generally to help prepare its own members and Australian society in general for the increasingly more competitive and knowledge intensive industries of the new Century.
• The EEDC will focus leadership in the engineering profession in the development of engineering products / concepts / businesses. Through its engagement with people with proven industry experience and success, the EEDC will be automatically recognised as the preferred choice for engineers in obtaining expert and practical assistance for their engineering business development.

6. PRELIMINARY MARKETING PLAN

The first stage of the marketing plan for the EEDC is to refine the current proposal for the EEDC to meet the requirements of its sponsors and customers. In this process it is expected that the EEDC will begin to win the support of sponsors and potential customers.

The process proposed to bring the EEDC to fruition is shown in Figure 1. Basically this involves presenting a preliminary EEDC concept to a forum of stakeholders including:

• potential sponsors (eg business investors, existing engineering enterprises, and service providers to engineering enterprises - including universities);
• potential customers;
• those with skills relevant to operating an EEDC;
• those interested in the economic implications, or the implications for engineering.

Information would be sought through the forum to develop the business plan, about:

• current situation facing typical potential customers;
• services which could best be provided by EEDC, the advantages required in those services, and the benefits of this to customers;
• developing partnerships in sponsoring an EEDC;
• requirements for effective EEDC operation, and benefits to an operator;
• scope for shared usage premises;
• precedents and partnerships which might be drawn upon in establishing an EEDC;
• the advancement of engineering and economic performance.

Following its establishment, the EEDC marketing plan involves:

• obtaining regular feedback from sponsors, customers and potential customers concerning the EEDC, and monitoring performance (as above) as a basis for reviewing EEDC strategy, functions and operations;
• monitoring the customer base, both in terms of current situation, and emerging trends to which customers must respond;
• dissemination of information about the EEDC amongst stakeholders.

The number of engineers in SE Queensland is currently ??? (with ??? in Queensland and ??? nationally), and the number of engineering enterprises ??, ?? and ??. The annual growth rate in such enterprises is ?, ? and ?. The total potential market for services provided through an EEDC (assuming an initial focus on SE Queensland) would thus be:

• ? for services to emerging engineering enterprises (ie it is assumed that establishing an EEDC would double the existing growth rate of such enterprises);
• ?? for services to established engineering enterprises;
• ??? for services to engineers generally .

Preliminary lists of established firms who appear likely to share interests with the EEDC in creating a critical mass of engineering enterprises have been prepared. No attempt has been made as yet to identify specific customers.

While the operating base for the EEDC would be SE Queensland, extension of its operations to other regions nationally will be considered early on, through contacts in IEAust branches, and through establishing a Web based mode of service delivery.

7. Preliminary OPERATIONS PLAN FOR EEDC

A draft Operations Plan is outlined below.

Services

The EEDC will seek four types of outcomes, through nominated services.

(a) Launching New Businesses

Free support to individuals / small firms, through

• introductory advice and 'think tank' with customers;
• checklist of needs to 'launch new businesses';
• introducing customers to experienced volunteer mentor, with whom issues can be discussed on an ongoing basis.

Support to 'qualified' and 'paying' individuals / small firms in becoming Business Ready through

• experience and skills of a Case Manager to match business requirements with the customers situation;
• market data and analysis;
• product development;
• specialist advice - eg finance, media, accounting, legal;
• international operations;
• 'Yellow pages' on specialized support - eg patents, advisors;
• training;
• regulation / environmental requirements;
• Knowledge to interpret data-bases to suit business needs;
• participation in incubation center;
• assistance schemes and public policy regime advice.

Support to engineering educational institutions through

• provision of user pays enterprise development training and skills to students

(b) Expansion of Engineering enterprises

• Free advice to firms, and introduction to an experienced volunteer mentor
• Supporting 'qualified' and 'paying' firms to become investor ready, through
• Advice on restructuring
• Finance guidance and support
• Investor Contacts
• Supporting 'qualified' and 'paying' firms' take-up of overseas opportunities, through
• Information on specific international markets
• Organizing overseas tenders for consortia
• Providing international contacts
• Advice about Assistance bodies

(c) Faster Development of Technology

User pays support for enterprises and research bodies in effective organization of technological development, including subsequent commercialization by:

• provision of advice
• maintaining information and contacts with specialized support for technological development

(d) Engineering industry Development

Developing proposals for engineering infrastructure opportunities, in conjunction with and at the cost of interested firms

Developing a critical mass of engineering enterprises, to improve the quality of services and support available to existing firms by

• enterprise development role of the EEDC
• communication with international / interstate engineering enterprises concerning opportunities, and providing relevant local contacts to any interested
• measuring performance;
• publishing results of research into engineering enterprises as a market;
• analysis of skills base required by future cluster of engineering enterprises.

In addition to these major programs, the EEDC will maintain communication with relevant entities eg by forums on EEDC capabilities; public relations directed at universities, firms, and its supporter's network; linkage to corresponding organizations; and contributions to public policies (eg R&D support)

Service Delivery

Three of these programs involve services to customers (while the others would be cooperative projects for sponsors). Strategies for providing customer services will include:

• providing free value-adding advisory and mentoring service, drawing upon sponsoring organizations and a volunteer EEDC support network;
• a screening process for access by 'qualified' customers to Case Managers (drawn from sponsoring organizations who may receive some EEDC financial support) who are experienced in enterprise development, and have access to other resources including good up-to-date databases through the EEDC itself; and
• other user-pays services.

The fourth program will be undertaken on behalf of sponsoring organizations, with some funding being project based.

The 'shop-front' of the EEDC will be a panel of Advisors - being staff from sponsoring organizations with 'generalist' skills related to the development of engineering enterprises, who will provide introductory EEDC services. At least one Advisor will be available at the EEDC premises at all times. Advisors will 'think tank' with customers about issues relevant to the latter and (where they believe it appropriate):

• introduce customers to volunteer mentors, for ongoing support and / or;
• 'add value' to customers' positions (through further research, advice, contacts) and / or
• arrange support services required by 'paying' customers; and / or
• obtain suggestions from two secondary Advisors (while maintaining confidentiality) and nominate the customer for assessment as being 'qualified' for EEDC support.

The 'back-office' of the EEDC will be Case Managers who will provide EEDC services for 'qualified' or 'paying' customers. Case Managers will be nominated by the sponsoring organization that accepts responsibility for the customer. Sponsoring organisations may enter commercial relationships with customers independent of the EEDC.

Resource allocation and incentives within the EEDC will be managed through floating and self balancing a Developmental Fund (see below) through which resources available to the EEDC will be made available to support 'qualified' customers.

Customers will become 'qualified' for modest assistance by the EEDC's Developmental Funds after initial help from an Advisor, and assessment of recommended customers by a panel established by sponsors. Assessment will be based on: intellectual property; international market potential; length of product(s) life cycle; likely longer term financial regards to EEDC sponsors; availability of specialized support required; ethical and social responsibility considerations; and availability of developmental funds.

Sponsors will then bid to service 'qualified' customers on behalf of the EEDC - with the opening 'price' being a $1000 payment from developmental funds to be increased if the customer's prospects looks poor and no one wants to deal with them, or reduced if several sponsors express interest, and include the possibility of contribution by sponsors to the developmental funds.

Sponsors will also 'bid' (contributions to developmental funds) to service 'paying' customers. Part of any contributions to Developmental Funds will be paid to advisors (ie 30% to the primary Advisor who assisted the customer prior to becoming 'qualified', and 10% each to the secondary Advisors).

This incentive system will ensure that:

• a basic level of free support is provided to all customers; and customers will not be presented with overhead costs for using EEDC services;
• Advisors try very hard (expend effort and cooperate) to ensure that customers who they believe to have good prospects obtain excellent initial support, so as to appear attractive enough to attract contributions to developmental funds from which advisors gain incentive payments;
• Sponsors are thus presented with 'value added' customer situations;
• EEDC sponsors do not provide more than initial advisory support to customers until they have been 'qualified' by sponsors as a group - thus limiting potential calls upon developmental funds to that which is available;
• Sponsors who identify most 'value' in a customer provide them with support;
• a reasonable cash flow to support Advisors and Developmental Funds will come from bids for 'paying' customers;
• the level of 'bids' will not become exorbitant, because in this process customers will be under no legal obligation to obtain services from the EEDC, and will be held only by the quality of support offered.

9. PRELIMINARY ORGANISATIONAL PLAN

The EEDC will be established as a tax exempt company limited by guarantee, whose memorandum and articles of association will define objects as outlined above, and provide for involvement of various sponsoring organizations (including the IEAust as the founding sponsor).

The EEDC will be directed by a Board consisting of persons drawn from sponsoring organizations who have successful experience in the development of engineering or technology based enterprises, and a balance of skills (eg international marketing, product development, intellectual property). The Board would be advised when required by special groups eg involving EEDC customers or particular engineering industry areas.

The EEDC will enter into agreements with sponsoring organizations of three types:

• existing engineering enterprises - who will participate in general development program
• service providers - who will undertake to provide services within EEDC framework as outlined below, and
• business associations - who will participate in the general development program, and may find the EEDC a convenient way to deliver some services to their members

The EEDC will also make contact, and actively network, with other institutions with complementary interests, such as:

• Association of Consulting Engineers of Australia
• Canadian Technology Network
• Center for Export of Light Metals, University of central Queensland, Gladstone
• Center for the Development of Entrepreneurs (University of Queensland)
• Cooperative research centers
• CSIRO (eg Exploration and mining, CITRI)
• Entrepreneurial Engineering Center at Swinbourne University
• Engineering Innovation, Ltd, Melbourne
• Innovation and Development Corporation, Canada
• Innovation investment funds
• Maths in Industry Study Group, c/- QUT
• N-W Technology, Manchester UK
• ORTECH Canada
• Rapid Prototype Development Center, Hong Kong
• Small Business Management Training Institutions (http://www.ola.edu.au/smallbus/sqit.htm)
• Technology Enterprise Center (http://www.adu.latrobe.edu.au/TEC/Gossip/Newsletter/1.html)

The EEDC will be located in 'commercial' premises which are convenient to its main customer base. These premises will be a shared user facility including the EEDC, representatives of various sponsoring organizations and some EEDC customers in an 'incubator' environment.

Linkages with regional areas will be maintained through contacts in IEAust regional branches who will be invited to: introduce potential customers to EEDC; identify potential regional participants in an EEDC franchise in the region; and participate in Internet conferences on the EEDC.

Training processes to enhance the skills of Advisors and Case Managers will be ongoing (based on contact with experts, and with complementary institutions).

The EEDC will also have a full time manager (with market development experience), and will draw upon administration services from the shared user facility. In addition to maintaining the EEDC operations, the Manager will:

• assist Advisors as an introductory point for contact by customers;
• organize support services and training for Advisors and Case Managers;
• assist Advisors and Case Managers in developing EEDC service standards;
• communicate regularly with complementary institutions, and circulate 'intelligence' amongst Advisors and Case Managers;
• maintain performance measures, and
• support the Board in ongoing development of the EEDC.

As the hub of a support network, the EEDC itself will not directly participate in commercial arrangements with customers. Neither will it accept legal liability for advice offered. Any commercial benefits and legal liability will only emerge as a result of specific agreements with clients through Advisors, or Case Managers.

10. PRELIMINARY FINANCIAL PLAN

The EEDC will require one full-time executive ($60k), supported by administrative assistance ($12k part time), as well as premises' costs ($24k), marketing and research ($25k) and developmental funds ($80k) for a total annual cost of around $200,000. This will derived initially from:

• IEAust - $50,000 pa
• Sponsoring service organisations - 10 @ $10,000 pa
• Other sponsoring organisations - 50 @ $1000 pa

The EEDC will maintain an Operational Fund into which sponsorship contributions will be paid, and from which basic operations and developmental costs will be disbursed, and a Developmental Fund used for developmental operations, and contributions.

In the long term sponsors contributions to Developmental Funds for the rights to provide EEDC services to 'paying' or good 'qualified' customers is expected to allow the basic sponsor's costs for the EEDC (especially by IEAust) to be reduced or eliminated.

IEAust members with experience of enterprise development are expected to support the EEDC with volunteer time as mentors.

Attachment A: Example of the IIB Export Centre

As an example of what can be developed, particular note has been taken of the apparent success of the Information Industries Branch (ex Board) Export Centre.

The Export Centre of the IIB has been fully operational for over 3 years. The focus of the Centre is to facilitate exports of IT&T products and services of Queensland based companies. Because Queensland has such a diverse mix of IT&T products, the Export Centre activities have become the Industry Development Thrust.

The Centre contains experienced individuals in the North American market, Asian market and the European market. By bringing together this market know-how, with the technology which exists in Queensland, the industry has grown exports from $74 million in 1995 to $325 million in 1997. (The industry forecast for 1998 is $629 million). This has been accomplished through many levels of activities ranging from consultation to long term comprehensive programs to 'demystify" the Export process for companies.

Approximately 50% of the time is spent on consultation. The where, what, when and how of individual company needs are discussed when attempting to export their products. The second level is more proactive than reactive.

The following emphasis is an example of the long term programs:

• Geographic Market
• Regional Exhibitions for first time exporters
• Vertical Markets
• Clusters of companies with similar product (i.e. education, health care, exploration)
• Business Ready
• Helping companies acquire business know-how to compliment technical know-how.
• Financial Resources
• Network of overseas and local investors has been established
• additionally tracking World Bank (etc.) funding.
• Industry Cooperation
• Establishing good working relation with all associations, both National and International, for greater cooperation.
• Business Skills Development
• Conducting seminars and workshops in areas of interest. Internet Marketing, Mass Media Selling, Relationship Selling, Negotiation Skills, Security, etc.
• Facilitation
• Provide focal point to develop centres for software engineering, language conversion, professional upgrade of personal etc.

There are 14 parallel programs in progress which has resulted in the number of exporting companies being raised from 81 in 1995 to 194 in 1997. Even though the IIB Export Centre concentrates on IT&T the business model under which it operates is generic.

Attachment B: Government Enterprise Support Schemes

Most schemes in Australia are government dominated, and this ascendancy of political consciousness over market consciousness may be the key factor in the perceived persistent failures of these schemes. Despite this, such government schemes rarely die but undergo a series of Darwinian mutations as the political environment changes. Occasionally, there is a full metamorphosis as, for example, when the Section 39 larvae of the 1970s grant blossomed into a veritable swarm of CRC butterflies in the 1990s.

Systems to help business develop can be classified in many ways - eg chronologically; by scale; by type of system and outcomes proposed; or by industry or activity sector. The following is a classification in terms of the source of financing.

Australian Government

The two departments most involved with business programs are DIST (Industry Science and Tourism) and DEETYA (Education, Environment, Training and Youth Affairs). Other agencies (especially Department of Defense) also have a role.

DIST schemes have gone through a number of mutations but they appear to have followed three principal themes. These are:

Product or Process Development: This usually finds expression as R&D grants. This is directed to the technical side of the company.

Business Operations: These blossomed during the Quality consciousness phase of the mid 1980s and usually took the form of programs to develop business skills delivered via a partly funded consultant. The NIES program was the dominant one and subsumed a whole range of programs.

Overall Company Performance: The objective of these programs was to optimise local company growth by aligning it with, typically, a large multinational via offsets of the Partnership for Development program or by creating networks of non-competitive companies to emulate the published results of business networks in the USA, Italy and other selected areas.

Virtually every business idea or fad from Quality, R&D, Partnership, Worlds Best Practice, through to Networking has had its moment of glory and much has been achieved, particularly in growth of the consultancy population. All schemes, however, assumed that the enterprise already existed and the processes leading up to the creation of the enterprise were outside the ambit of these programs. This would still appear to be the case, although possible enterprise creation via University / CSIRO / Industry collaboration programs now appears to be an objective of programs such as the CRC.

A list of DIST programs is:

• DEETTYA has been more concerned with the training of people rather than the enterprise itself. One program that has parallels with the EEDC is that of the Business Incubators.
• Defense: The Department of Defence at various times plays an active interventionist role. This may be in the form of offsets, mandatory local supply, compulsory R&D in Australia and so on. A problem with these is that they are very much due to political rather than market consciousness and such 'assistance' can be very significant but short term and unpredictable since it is usually on a contract basis.
• Others: Treasury and Finance, as the approvers and providers of money, have an essential role but do not create or administer the programs. Similarly, the Taxation Department is omnipresent and Trade, Foreign Affairs and Customs are often involved in export/import matters, and assistance either with money (e.g. Export Grants), information or foreign relationships.

State GovernmentS

State Governments have had several roles in enterprise development. One has been as the 'local agent' of the Australian government programs and another has been to emulate Australian programs but on a smaller, more focussed scale (e.g. QGRAD).

State Governments have, however, been more involved with 'bricks and mortar' issues eg assistance with land and buildings, development of technology parks and special grant assistance. A 'cargo cult' mentality often exists is these programs whereby large levels of direct assistance are provided to multinational / interstate companies to locate in the state hoping for major economy gains in less than an electoral cycle time. Investing in resident people and organisations to build enterprises the hard way is outside the field of view.

Current support is provided by the Queensland Government to organizations including:

• Queensland Manufacturing Institute at Brisbane Technology Park
• Clunies Ross Centre at Brisbane Technology Park
• Queensland Centre for Advanced Technology at Pinjarra Hills, with CSIRO
• Research Part at Mt Gravatt with bio-technology focus
• Queensland Science and technology Council
• TECHQUAD (with university support also).

Local Governments

Local governments have also tried to assist on a reduced scale. Some local government assistance can be of immediate benefit to small companies, eg the provision of serviced land on good terms, facilitation of planning requirements, extension of services and so on. Large councils (eg Brisbane City) have extended assistance to export funding.

An interesting example of an enterprise creation program is that undertaken by the Ipswich, Boonah and Esk Councils.