[Draft]
Suggestions to Interim Board of Trustees for Institute for Innovation and Wealth Creation
Some Source Documents

The following suggestions relate to the development of a business plan for a proposed Institute, and refer specifically to the source document Creating Wealth through Innovation: Making it Happen.

Institutes Objectives

The objectives of the Institute (p13) might more appropriately be expressed as:

• to identify opportunities for wealth creation through upgrading Australia's innovation capabilities;
• to develop indicative plans to address those opportunities and potential public policies in conjunctions with relevant private and public sector stakeholders; and
• to create a consensus (etc as is)

This would seem to be better because:

• it is impossible for any central group to obtain the dispersed information and stakeholder commitment required to reliably identify specific opportunities for innovation;
• it is deficiencies in (mainly commercial) capabilities within the economic system as a whole (eg in knowledge and skills; organisational arrangements; complementary functions in supportive enterprises; appropriate public policies) that are the primary obstacle to increased innovation in Australia;
• the required capabilities need to be developed as an integrated system rather than piecemeal - and this could be achieved through an appropriate indicative planning process (see Developing a Regional Industry Cluster). This process needs to be opportunity focused, but its primary goal would be the development of capabilities that would also be of use in dealing with many subsequent opportunities;

Institute Skills

The primary skills (p13) required by the Institute would involve strategic market management, complemented by: technological and commercial expertise; understanding of economic and business strategy; networking capabilities; and government / public relations.

Primary Focus

The focus of such activities (p13) should be on major existing industry clusters and those related to globally focused SMEs, as well as on regional economies.

Building a Business Plan

In the development of a firm business plan for the Institute from the Creating Wealth through Innovation proposal, it is also suggested that:

• the challenge to Australia (p2) should not be expressed in terms of creating wealth, as compared with 're-arrangement of wealth'.
• there has been a huge increase in wealth creation over the past 15 years, not just a 'rearrangement' (p3). The problem arises in terms of the (a) side effects - including the effect on equity and (b) sustainability of the type of growth that occurred. Wealth creation was (often) achieved by cost cutting - a process which can't be continued indefinitely. A better alternative (which stronger innovation capabilities would allow) would be new business development;
• goals related to innovation (p3) can not be simply national as (a) businesses must be the primary actors in the innovation process and (b) states have primary responsibility for economic development in Australia;
• the primary method of helping SMEs (p3, p8) should be through development of effective innovation capabilities within the economy;
• government authorities have NEVER led in offering high quality apprenticeships and technical training (p3). There has always been a skills gap. There is thus a need for something that never existed before - which won't exist until strong demand is created for those skills, because business can profit from using them;
• the purpose of the Institute (p3) should be stated to involve the development of innovation strategies appropriate to major regional economies and industrial clusters;
• considerable attention should be paid (p3-5) to the numerous efforts which governments have made to develop Australia's innovation capabilities over the past 20 years, and to the reasons that those efforts have (on balance) not proven very successful. A speculation about this is presented in The Economic Futility of Backing Australia's Ability. Key issues include (for example): shifting the focus from supply of economic inputs (eg education and R&D) onto upgrading commercial capabilities to use them - and thus to increase demand (b) emphasis on 'demand pull' rather than 'technology push' in developing Australia's embryonic innovation capabilities and (c) the need for new leadership mechanisms (such as the proposed Institute)
• in discussion of past actions (p 3-5) and future option there is a need for more than a distinction between (a) doing nothing (the neo-liberal option) and (b) government intervention (the government industry policy option). The third option would involve catalytic development of the economy;
• technology-led innovation (p8) can be driven by basic R&D;
• constraints on Australian innovation apart from those identified (p8) can be suggested. Some are outlined in Commentary on Smart State;
• there is probably no current shortage of venture capital (p8) for proposals which have good commercial prospects. Venture capital should not be confused with risk capital;
• advice to government about innovation (essentially a matter of business strategy) should not be expected to come from a Chief Scientist (p8), though such an entity might have a role in formulating such advice;
• the Framework for Innovation and Technology (p 10A) needs to show the role of the market in some way;

"Debate about innovation in Australia would be more sensible if biotechnology were taken down from its pedestal. Think about industries such as surf-wear, fast ferries, animation, mining software, contract engineering or wine. In each, Australia is winning in export markets because of the application of knowledge. In none of these has government incentive played more than a peripheral role ... all of them have been driven by market demand. The extraordinary diagram of the knowledge nation ... was similar to one presented at the Innovation Summit by the Business Council of Australia and the Department of Industry last year. They show government at the top, lots of circles for producing knowledge like the universities, the CSIRO and manufacturing industry .... and no mention whatsoever of market demand" (Uren D. 'Market demand, not science, drives innovation' Australian, 7-8/7/01)

• short and long term initiatives (p12) need to be developed which are broader than those related to the supply of technological skills.