The role of universities and other higher education facilities as innovation incubators needs to be more strongly supported | via SMH Malcom Malden

Brain drain is more a practical reality

Today’s detailed look by Good Weekend magazine at the emergence of a large, interconnected community of Australian information technology entrepreneurs on the US west coast raises the inevitable question: is there a way to stop the brain drain?

The answer is more complicated than you might think. Australia should, of course, do more to foster innovation, and its commercial development. Links between higher education, research and development and the capital markets need to be reinforced.

Last night’s $US100 billion-plus listing of Facebook, a company begun by Mark Zuckerberg at Harvard University, is a reminder of what is possible, and what is at risk as Asian governments build their own R&D machinery, and changes the Labor government has made to drive more R&D funding down to smaller companies are a step in the right direction.

Australians with talent will always have very good reasons to fly out, sometimes for good, however. Lamenting the fact that Australians travel to Silicon Valley or San Francisco’s burgeoning high-tech precinct to further their IT careers is a little bit like worrying that our best golfers and tennis players move overseas to compete on a global circuit.

When it comes to attracting the best IT talent, America has several things going for it that Australia doesn’t. One is market depth: its home consumer end-market is 311.6 million strong, 14 times larger than Australia’s. Its GDP is $US14,600 billion, outpacing Australia by a similar multiple, and its capital markets are deeper and more willing to risk capital in start-ups than its economic weight suggests.

The sheer size of the northern hemisphere markets, and the US market in particular, offers two things. Easier developmental funding, and, when the product is developed, a deeper customer base. Australia can’t overcome that easily.

An innovation survey that the Gillard government released half way through last year highlighted another long-term issue. Australia’s innovation tends to be second-hand: an adaption or development of primary innovation, rather than a ground-breaking ”invention”.

In the IT industry and other technology-driven sectors this is also a reflection of reality, however. The US is the heartland of the IT boom and the main incubator of new IT ideas and start-ups, partly because the IT revolution is founded on intellectual property that US citizens own. The rest of the world can make money using it, but it’s an inherently less rewarding proposition.

Australia is still doing reasonably well in the R&D league tables. Last year’s innovation report put Australian research and development spending by businesses in 2008-09, the last year for which a global comparison was available, at 1.35 per cent of GDP. That was below the OECD average of 1.63 per cent, but it still put Australia in 12th spot out of 33 nations, up from 14th place a year earlier.

And Australian businesses at least excelled as innovation ”modifiers” – companies that take products and processes that already exist, and develop, modify and market them. Almost two-thirds of Australian companies rated highly on this measure in the innovation survey, compared with 23.8 per cent in Germany, 41.2 per cent in Japan, and 19.1 per cent in Britain, for example.

Can we do better? Of course. Might we produce a Silicon Valley effect of our own? Perhaps – it has happened before: Finland got one, for example, when Nokia surged to global leadership in mobile phones (a lead it then lost as Apple’s iPhone ushered in a smart-phone revolution that Nokia had failed to anticipate).

One thing that is clear is that the role of universities and other higher education facilities as innovation incubators needs to be more strongly supported – and in this area, there is new threat, not just to smaller economies like Australia’s, but to the traditional brain-drain magnet, the US: the odds are reasonably short that the next Mark Zuckerberg is studying now at a university in China.

China’s R&D spending has been expanding for several years at a compound rate of about 10 per cent a year, about four times faster than America’s. Last year it overtook Japan to be the world’s second-biggest R&D spender. The US is still spending roughly three times as much, but by 2008 only four of the top 10 private sector recipients of patents in the US were American. Five of the others were based in Japan, and the other, Samsung, was Korean.

America’s share of global university enrolments also fell from 20 per cent to 13 per cent between 1990 and 2010. China’s share of enrolments doubled in the same time, to 15 per cent, part of a conscious R&D seeding strategy that emphasises science and engineering degrees that feed the innovation pipeline. Last year they accounted for 40 per cent of all degrees in China, compared with 12 per cent in the Group of Seven industrialised nations (the US, Germany, France, Britain, Japan, Italy and Canada).

Australia, the US and other Western governments are aware of the long-term challenge that Asia’s rise as an R&D powerhouse presents.

The ability of northern hemisphere governments to respond has been compromised by the global financial crisis and the debt overhang and economic slump it has caused, however.

Australia is in better shape: but with the major parties politically committed to a rapid return to a budget surplus, a concerted push is still in the mail.


The importance of being innovative | Sydney Morning Herald 15 Feb 2012

by Josie Gibson

A news editor pulled me aside once, after I had made a big editorial call, and said: “In future, I want us to be the second outlet to run a breaking story like that.”

Being chided, however tongue-in-cheek, rankled. I hadn’t landed us in hot water, it was a calculated risk. His words stuck with me over the years as exemplifying Australia’s risk-averse culture.

We like to win, to lead the pack, but we feel vulnerable out front. What if we fail?

Later, working with seasoned executives, I was fascinated by discussions of leadership, strategy and decision-making. The global financial crisis separated the best from the rest as leaders were forced to make tough decisions fast, based on less-than-perfect information, throwing out the rule book without sacrificing  growth potential.

Like it or not, crisis mode is the new norm. Today’s operating environment is hyperconnected, volatile and fragmented. Technology is a major driver, but the changes are more profound and the implications for Australia are far-reaching. Sections of our economy might be cushioned by resource wealth and Asia’s growing markets, but such advantages are selective and finite.

The key is innovation and, depending on your perception, in Australia it’s either a massive problem or a golden opportunity.

New research by global corporation GE underlines Australia’s quandary. The GE Innovation Barometer found that while 86 per cent of Australian business leaders agree innovation is the main lever to create a more competitive economy, only 2 per cent of the 2800 global executives surveyed nominated Australia as an “innovation champion”. Asked to assess their own country’s reputation, 18 per cent of the 100 Australian executives in the survey put us in the “champion” category.

Australia fared better in another study commissioned by GE, leading the world in key areas of support for innovation efforts such as university-industry collaboration, and research and development spending. But the GE findings indicate a deep disconnect between how we perceive ourselves – innovators, risk-takers – and how others see us.

Regardless of whether it is fuelled by complacency, arrogance or fear, this perception gap potentially condemns Australia to global irrelevance. While we boast promising sectors and companies with genuine  records in innovation, research by leading European business school INSEAD, the World Economic Forum and others indicates that our relative innovation performance is languishing. Asia, in particular, is catching up fast.

In Australia, the innovation debate is too often fractured, hijacked by semantics and skewed to science and technology at the expense of deeper questions about leadership, culture and national identity. Business blames government, government blames business, and the research community blames everyone else.

Within organisations, the situation can be just as dire. Innovation efforts are often narrowly defined and heavily protected. Most workers are shut out of the process. Is it any wonder Australian productivity is suffering?

Changing behaviour is a complex, long-term proposition. It is about doing and trying, not just talking. It involves courage and a sense of purpose. Change is led by leaders prepared to cop flak and take risks. We do have such leaders, but not enough of them – yet – to influence the debate.

Government has a critical role to play in ensuring settings that enable business to create jobs, generate wealth, explore possibilities and tap new markets. Political debate aside, the potential for the national broadband network, for example, to transform service delivery and drive the creation of new business models within the public and education sectors is immense.

What is increasingly clear is that the terms ‘‘innovation’’ and ‘‘employee engagement’’ are inherently linked. Innovation is, at its core, a leadership responsibility, and therein lies the real opportunity. Harness people’s natural curiosity and capabilities and the race is half won.

Research published last year by Harvard professor Clayton Christensen and his colleagues found that organisations regarded as high-performing by industry peers and investors actively encourage the behaviours that produce innovation. The strategy is clear and widely communicated. Responsibility and accountability are pushed down to those with direct carriage, leaving executives clear to survey the horizon. Questioning is encouraged and experimentation is the norm. Reasonable failure is not a sackable offence.

As Australians, by default, we gravitate to our comfort zone. But we have the resourcefulness, pragmatism and resilience that come from living in a harsh land far from just about anywhere perceived to matter.

We also have high-calibre, globally competitive executives, a skilled workforce, political stability and populous, fast-developing neighbours.

Such dualities in our national psyche have been part of the problem and acknowledging them is part of the solution. Being able to embrace multiple, competing realities is a hallmark of a new world where either/or is increasingly irrelevant.

Innovation is often couched in sweeping national terms – “frameworks” – or technological jargon that intimidate and divert leaders from the real task, which is to motivate their people to improve things and try new approaches.

The most thoughtful leaders I’ve met rarely mention innovation; they accept change as part of the operating environment. They constantly scan for trends and future opportunities. Their management style  provides clarity about big goals and autonomy for those under them. Their remuneration and reward structures encourage staff to collaborate, question, solve problems and strive to do well.

Today’s good leaders know that the only way to steer through uncertainty and ambiguity is to  focus on the big questions – “What might the world look like in five or 25 years, and what are the implications for us?” – instead of adopting somebody else’s stock answer, or being diverted by short-term market or political sentiment.

For Australians, accepting the mantle of individual leadership on innovation and seizing the opportunity to act – to “put a ding in the universe”, as Steve Jobs would say – is more than achievable; it’s a national imperative, and not just for economic reasons.

A former journalist, Josie Gibson established a CFO network and now runs a creativity and innovation advisory business.