2008 National Pearcey Event Proceedings

To ensure there was a record of the views of the ICT industry on the Innovation Review Green Paper published in early September 2008, the Pearcey Foundation asked well known industry journalist and free-lance writer Graeme Philipson to record his impressions of what was said and discussed during the proceedings of the 2008 Pearcey Medal event. The NSW Committee of the Pearcey Foundation are very appreciative of Graeme's willingness to freely give of his time and resources to make a permanent record of this most significant industry gathering.

Overview

The 2008 Pearcey Award was a significant event that incorporated much more than the award itself. It brought together over 200 of the ICT industry’s leading figures, and included two panel sessions which discussed the key issues confronting the industry. These panel sessions were particularly relevant, given release a few days before the event of the review of the National Innovation System, Venturous Australia. Indeed, the theme of the evening was how the ICT industry should respond to ideas outlined in that review. The chairman of the review committee was Dr Terry Cutler, who also gave the 2008 Pearcey Oration that closed the evening.

The event was held at Sydney’s Westin Hotel, on the afternoon and evening of Thursday 11 September 2008. MC was Peter Roberts, senior journalist with Fairfax Media. The welcoming address was given by Barry Buffier, Director General of the NSW Department of State and Regional Development. There followed introductory remarks by incoming chair of the Pearcey Foundation, Wayne Fitzsimmons, which very much set the scene for the event.

Introductory Remarks

“The whole essence of innovation is a systems approach to science policy,” said Fitzsimmons in his opening comments. “The Venturous Australia report is an attempt to do that.”

Fitzsimmons spoke of various initiatives in the past, such as Tony Benson’s paper in 1999 on the subject, “but somehow these reports were swamped by the new technology waves that inserted themselves into our economy - digital media, Internet everywhere, the broadband debate.

“The Australian ICT industry remains diverse and fragmented. It can be characterised as large players (mostly multinational, including telecommunications carriers) who are generating the bulk of the revenue, smaller companies (mostly indigenous) who are generating innovation and exports, and particularly service exports.

“It encompasses a broad product spectrum from software and media content to electronics, to electronics manufacturers. Telecommunications generates more than 40% of the ICT industry’s revenues. There are many industry stakeholders - numerous industry association, state and federal policy formation groups and research institutions.”

Fitzsimmons said that ICT did not make nearly as many submissions to the innovation review as did biotech or even nanotech, despite ICT being a major driver of innovation. “This passes a comment on us as an industry. Are we just broad infrastructure that touches everything but which is not significant when standing alone? Do we care about this lack of representation? How important is ICT to improving productivity anyway?

“Most importantly, how should the ICT industry respond to this important paper?”

Panel Discussion - Entrepreneurs' Perspective

Panel Chair: James Tuckerman, CEO Anthill Magazine

Panel Members

  • Christina Boedker, CEO, Society for Knowledge Economics
  • John Butterworth, CEO, AIMIA
  • Ted Dunstone, CEO, Biometrix
  • Silvia Pfeiffer, CEO, Vquence
  • Pia Waugh, CEO, Waugh Consulting

John Butterworth: We’ve been inviting people to submit innovative ideas, at the earliest stages of their experience. It taught us a lot about the gaps we have when it comes to fostering innovation.

We need to get to people a lot earlier than we currently do. We see lots of great ideas, but no attempt to work out whether they may have a market or whether someone has thought of it before. The most common thing we heard was that “I have this great idea, but we need funding etc.” We had to ask them to step back and look at the fundamental basics about whether it was a good idea or not and whether it made any sense.

Ted Dunstone: There are lots of real innovators within government in Australia. There are many lessons to be learnt from the relationships between small companies, larger companies and government. They need to work in a symbiotic relationship.

But while there are many people in government who are supportive of innovation, there are also a lot who deal with larger corporations, so they are attuned to all those companies’ thinking and methodologies. There should be training for governments and large companies to help them deal with small companies and the associated risks. There are risks, and there are rewards.

There are all sorts of gaps in many large projects that can take a long time to sort out. In these situations small companies can often deliver enormous value very quickly.

If you’re a small company, the engagement with the end customer is so important. Larger companies are not going to sell your wares for you. You’re the person who’s passionate about it and who needs to be engaged.

Pia Waugh: There is not a strong culture around true innovation in Australia. We don’t have enough focus on the raw skills people need to be innovative. ICT training is going backwards in Australia. All kids should be learning basic programming - it’s more important than maths, no matter what they end up doing.

We need to distinguish between ICT as infrastructure and ICT that really is cutting edge stuff that will take us to the next horizon. Both elements are important, but if we concentrate only on the first and not on the second, Australia will fall behind very quickly. It will be a very uninteresting place in 20 years’ time. We should be using connectivity and collaboration tools a lot better. New Zealand is doing this, even using wikis to develop education. We have the infrastructure, we need to do more with it.

Another thing we could so better is to help start-ups start up more efficiently. Australians are very good at putting thing together in new ways, but it often doesn’t make sense to do everything from scratch.

Christina Boedker: Education is very important, and to build a learning environment within the organisation. We need to encourage everyone within the organisation to innovative and make a difference. We also need to better understand what drives innovation - does it come from small or large companies?

Silvia Pfeiffer: Large companies in Australia are not very innovative. They like to see that someone elsewhere has done something. “Why should we risk doing something new?” But smaller companies in Australia do a lot of innovation.

The research process is the same the world over. The problems arise when you move from research to making products that people want to buy. It’s particularly difficult in Australia, largely because of the small local market.

The Innovation Review talks about an R&D tax credit for smaller companies. That’s a good thing, as is the recommendation to set up a Web 2.0 panel to advise the government.

Comments and discussion from the floor

Governments and government procurement. The private sector should lead innovation, but the government can do a lot in terms of setting the scene and providing incentives and information. But government has a greater role than setting policy. Governments a major purchaser of ICT, and procurement processes are a major issue.

The procurement process is risk-averse and precludes the inclusion of innovative solutions. There should be a mezzanine stage that allows government to trial innovative solutions. This needs to be explored more thoroughly. What if a certain proportion of budgets were allocated to small companies or innovative solutions? What if 10% of every project was earmarked for small local suppliers and innovative solutions? That would help enormously.

We need to look at where the blockages are. Preferred supplier panels are one area - they automatically exclude many innovative solutions.

Other points

  • We need more innovative VC funding, but we also need more education about how to set up and run a company and how to deal with investors. Failure is frowned upon in Australia, and because we have a small market failure is more obvious. We need a greater tolerance of failure.
  • Australian ICT companies either focus on technology or the market - rarely on both. The second group does better, but companies would do best to concentrate on both.
  • Australia has great talent and great people, and we do well at getting our first customer, but it’s getting beyond that. It’s all about risk. Too many Australian company and government user organisations are very risk-averse, and won’t go out on a limb. Australians, too often, don’t value innovation.

Panel Discussion - Industry Perspective

Panel Chair: Peter Roberts, Senior Journalist, Fairfax Media

Panel Members

  • Ian Birks, CEO, AIIA
  • Stephen Kowal, Vice President, ACS and CIO, CSC Australia
  • Tony Pensabene, Associate Director, AI Group
  • David Skellern, CEO, NICTA
  • Katherine Woodthorpe, CEO, AVCAL

Katherine Woodthorpe: The report appreciates the importance of venture capital to the ICT ecosystem. The tax incentives are also very welcome. There was a tipping point on climate change a few years ago, when we went from no-one talking about it to everyone talking about it. I hope that a similar momentum is building up about innovation. It’s not just about widgets. It’s about process and productivity, about customer-facing systems and about business broadly.

Tony Pensabene: The starting point for looking at the report is that innovation policy is industry policy. How do we fit in globally? Strategy, staff, products, process, customers. Innovation is part of a complex industrial process. Innovation alone is not enough.

The report understands that innovation depends upon capabilities - culture, adaptability, processes. The Enterprise Connect program can be an important part of this process.

Stephen Kowal: It’s a good report, but we have a long way to go. We should acknowledge that innovation comes from small and large enterprises, and from government. The SMEs are the powerhouse of disruptive innovation, but there are many other sorts.

The report makes a comment on human capital, but there isn’t a lot about people, and especially about skills shortages, training and the growth of the ICT profession. We need talented people, and the report was light on in this area.

The tax credit system is good. But these need to be integrated with other related issues, like procurement, intellectual property and the rest of the tax system. There are billions of dollars of potential incentives if it’s done right.

David Skellern: The general tenor of the review is good. The idea of encouraging universities and business to work better together, and perhaps international, is important. Increased funding for postgraduates is a good idea.

But a few things are disappointing. We hear different figures on the extent to which ICT is responsible for productivity improvements in the economy, but the report does not mention any figures. I would have like more specific recommendations regarding ICT.

There is incremental innovation, and there is innovation brought about by fundamental advances in knowledge. There is a huge gap in Australia between what is produced in the research centres and what industry takes up. We need specific recommendation that will help us bridge that innovation gap.

There are also too many disconnected small companies in Australia. We need to build up clusters of companies that can operate “pre-competitively” to establish platforms that multiple companies can draw on.

Ian Birks: There needs to be increased focus on workforce issues and on the academic and research sector. The tax credit system is a great progression, but I agree that there needed to be more that was ICT-specific.

ICT undersells itself. Talking about ICT as a utility or an enabler is underselling the competitive differentiation and the large gains that can be achieved through the use of ICT. It has the potential for transformational effects in areas like its effect on climate change. There is not enough about that in the review.

Narelle Kennedy: There’s a critical challenge to the idea that innovation deals only with science and technology. We “know” that investment in research is important. We “know” that tax treatment is important. Non-technical innovation is also important. Many things have been identified, but we need to hear the business voice more.

Comments and discussion from the floor

Intellectual Property

There’s a “soft disrespect” for intellectual property by government. The government could show more respect for innovators’ IP. If the government thinks something is a good idea, it would put it out to tender, and then that tender is won by a large organisation and the small company who thought of it gets pushed to one side.

The way government treats others’ IP is a real problem that needs addressing (strong consensus by all). Government procurement doesn’t understand the knock-on effect, on tax and other areas.

Another related issue is the decline in patents in Australia, which is mentioned in the report. Perhaps the government should consider a patent fund to help companies address the ownership of their IP. But patents can be an inhibitor, and perhaps an open source model is better. We need to re-assess the whole approach to IP.

Other points

  • There are two sweet spots on the creative spectrum - creation and use. But both are dependent on technological literacy - unless we get that right we will simply be documenting the demise of the Clever Country. We need to invest more in skills, not just for today but for tomorrow.
  • Too many users in Australia won’t buy from small Australian companies - they don’t have confidence in them. It’s the reverse of “not invented here.” The attitude is - if it’s invented here, it can’t be any good. This is related to the government procurement issue. It can be hard to sell something overseas if the potential customer sees that your own government hasn’t even bought the product. It’s the first part of the credibility issue.

Presentation of Pearcey Awards

NSW State Pearcey Award

The 2008 NSW award went to Scott Farquhar and Mike Cannon-Brookes, co-founders of enterprise software company Atlassian. The award was presented by NSW Minister for Health and patron of the NSW Pearcey Awards John Della Bosca.

National Pearcey Medal

The winner of the 2008 Pearcey Medal was Neville Roach AO. The medal was presented by Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy. Fellow finalists Dr Neil Weste and Clive Finkelstein were admitted to the Pearcey Hall of Fame.

The 2008 Pearcey Oration

(This is a summary of Dr Cutler’s remarks. Please see Pearcey Oration(PDF, 227 KB) for the full text)

Trevor Pearcey was one of those rare people who have a bold vision of how technology could transform society. In 1948 he wrote:

"It is not inconceivable that an automatic encyclopaedic service, operated through the national teleprinter or telephone system, will one day exist.”

That now looks uncannily like a description of the search engine Google.

How do we actually make innovation a priority in Australia?

Reviewing our recent innovation performance does not inspire confidence in Australia’s future. We are doing very poorly. As a share of GDP we are investing less in education, talent development, and R&D than we were more than a decade ago. Meanwhile the global goal posts keep shifting, and the global hurdle rate for competitiveness keeps rising.

Only a third of Australian firms invest in innovation and R&D. And only 7.7% of these are pursuing “new to world” innovation. Australia ranks poorly for “capacity for innovation” in surveys by the World Economic Forum, and worse in the World Bank’s assessment of the “value chain breadth” of Australia’s firm base. No Australian firm features in Business Week’s annual global survey of the top 50 innovative firms.

Then there is the “absorptive capacity” of our firms, their ability to take up new technology and innovation and apply it innovatively. Australian firms invest heavily in ICT. But Australia ranks 24th out of 28 OECD countries on the measure of firms with their own website.

Business expenditure as a percentage of GDP is half the OECD average. Government support for science and innovation has fallen from 0.76% of GDP in 1993 to 0.58% in 2007. Surveys of companies investing in R&D show that the most attractive foreign R&D locations are now non-OECD countries, and Australia is scarcely on the radar. And Australia ranks last among OECD countries for firms with cross-border collaboration in innovation.

One important observation from the Review and the analysis of the 740 submissions is just how many of them raise issues bearing on ICT and a digital agenda. In the work on systems theory, which spills over to the discussion of innovation systems, analysts talk about points of systemic failure. These include:

  • The adequacy or otherwise of infrastructure. Submissions raised issues such as the lack of world-competitive broadband and the inadequate funding of national facilities such as high performance computing.
  • Industry’s lock in to established modes of production: things like Australia’s dependence on coal fired energy, incompatible information systems, and proprietary standards and IP lock-up.
  • Inadequate institutional development and evolution. There is where institutions, and especially legal frameworks and regulatory agencies, get out of kilter with market developments. The classic example is the mismatch between media regulation and the Internet in the 1990s.
  • Inadequate linkages and information flows within the innovation system. This is the problem of systemic blockages and missed connections. In general, government programs and initiatives will focus on formal, contractual collaborations at the expense of informal, trust-based relationships.

As a country we can no longer afford to lead relaxed lives where success is “the survival of the least uncompetitive”. In a globalised and networked world our remoteness and smallness no longer provides a de facto protectionist shield for uncompetitive firms and industries.

Without advanced network infrastructure, without broadly based capabilities and skills in ICT, we will continue to go backwards in the innovation stakes. The one point, the one phrase, I hope might all remember from my comments tonight is that information and communication technology is innovation technology. We need a coalition of the willing to make sure everyone understands this.


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