2016 Pearcey Oration

6 September 2016 Melbourne

Dr Amanda CaplesDr Amanda Caples

The 2016 Pearcey Oration was delivered by Dr Amanda Caples, Victoria's Lead Scientist and Deputy Secretary, Sector Development Division of theDepartment of Economic Development, Jobs, Transport and Resources.

Dr Caples also presented the 2016 Victorian Pearcey Award to Martin Hosking as part of an evening program held at International Chamber House - Level 5, 121 Exhibition Street in Melbourne. This activity was part of the Victorian Government's 2016 Digital Innovation Festival held from 29th August to 9th September.

Ladies and Gentlemen.

It is an honour to deliver the 2016 Pearcey Oration celebrating the life and work of Dr Trevor Pearcey, one of Australia's great technology pioneers.

I begin by acknowledging the traditional owners of the land on which we meet and pay my respects to their Elders past and present.

Wayne Fitzsimmons has asked me to follow on from Senator Kate Lundy's oration in 2014 and expand on the proposition that our capacity to create and innovate with technology will determine whether we will reach our potential as a society.

While that proposition may have generated a degree of debate in 2014, today with Industrie 4.0 becoming mainstream, with rapid advances in autonomous cars, artificial intelligence and cyber security, the question is more about how do we keep up with technology?

In my own area of medical research the volume of data generated is growing at an unprecedented rate due to advances in technology that has reduced the cost of an individual human genome sequence from $100 million in 2001 to $1000 today.

Data is the new gold in every aspect of our lives. But it only has currency if we can mine it with digital technologies and protect it with cybersecurity.

The making of an innovator

So what would Dr Pearcey have done?

Dr Pearcey would have had empathy with our situation. After all you will recall that he was a scientist with an interest in radioastronomy.  However (like us) he had a big problem - how to process increasing amounts of data?

In 1949 he teamed up with engineer Maston Beard on an experiment in high-speed electronic computing resulting in the construction of one of the world's earliest digital computers - CSIRAC (Council for Scientific and Industrial Research Automatic Computer).

CSIRAC is now housed at the Melbourne Museum just 500 metres from where we are today.

Many in this room no doubt know this story.  But what you may not know is that if you walked less than 250 metres south east to St Vincent's Medical Research Institute you would find the world's first protein sequencing machine on display. "Matilda" as it was called was the brainchild of Professor Edman the then Director of the Institute and a junior laboratory assistant, Geoffrey Begg. Like Pearcey, Edman had a problem. He had invented a method that allowed the order of amino acids in a protein to be determined, which is important if you want to understand biological interactions. But he had the same problem as Pearcey, how to automate repetitive work analysing huge volumes of data? In 1960 his junior lab assistant, Geoff Begg built the first prototype of an automated protein sequencing machine with an electric motor from home. 'Matilda' took nearly 6 years to perfect, and was largely built in the Institute workshop, because no manufacturer in the world would make parts to the necessary specifications. A description of the automated method and the machine, renamed 'The Sequenator', was published by Edman and Begg in 1968.

Like Pearcey, Edman was a scientist who responded to a data problem by adopting and adapting adjacent technologies and recruiting complementary skills (engineers) to develop a solution. They were both archetypal innovators who created inventions. Interestingly Edman refused to patent the invention, believing that the scientific world should be able to benefit from it. A commercial version was subsequently developed by Beckman Instruments in California, which has become widely used in laboratories around the world.

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I can't help but think how both Pearcey and Edman's stocks may have soared if they had been part of ecosystems that facilitated the commercialisation of their inventions.

So how do we facilitate the creation of an ecosystem that supports innovation and the commercialization of invention?

One of the biggest challenges we face is 'upping the tempo' on Senator Kate Lundy's 2014 vision. To remind you, Senator Lundy's vision was for a fair, civil, healthy, engaged and educated society that values diversity, social cohesion and global engagement and is supported by a digitally enabled economy. I think most people in this audience would agree with this vision and the proposition that our capacity to create and innovate with technology will rely on a digitally savvy society in order to get there.

  • And with innovation and technology the centrepiece of many governments' jobs and growth narrative worldwide, what's the problem?
  • Why does it feel like we are still spinning our wheels?
  • How can we make "innovation as usual" the paradigm rather than the exception?

These are questions I have thought about many times in the past 5 years.

We're certainly not short of role models - think Pearcey, Edman and in more recent times the very talented CSIRO WiFi team. What I am certain about is there needs to be a common understanding of innovation.

When it comes to innovation policy, I think we collectively - governments, industry and the general public operate on different wavelengths. We are the proverbial two tribes divided by a common language (Rupert Howell 2000). Think back over the past two decades with both federal and state policy statements heavily oriented toward support of the innovation ecosystem and knowledge creation. While this is a globally well-accepted policy position, the unfortunate (and unintended) effect of this has been that public perception is that innovation equals science and/or invention.

The analogy that springs to mind is how can you expect an enzyme (in this case public innovation policy) to catalyse a chemical reaction when it is given a substrate at the wrong pH (an unreceptive community)? To engage effectively on the subject of innovation first we need to all be talking about the same thing.

Let's define innovation as a set of behaviours (reactions) to improve outcomes for customers.

I tend to think of innovation as a verb  - so a set of behaviours or reaction, rather than a noun. The thought of someone setting out to "get themselves some innovation" is somehow particularly wrong. Surely innovation is the process of converting an idea or new knowledge into a product or service that better responds to market-needs than existing products and services providing the organisation with a competitive advantage?  "Innovation" is also often used to describe a single one-off activity rather than to reflect the fact that innovation is a continuous feedback loop.

A business or organisation that successfully embraces innovation will also ensure it evolves as circumstances around the organisation change - internally and externally.

A great recent example is the utility company, AGL, which has at the heart of its innovation strategy a $300 million digital transformation program targeting everything from core systems to customer facing IT.

As CEO Andy Vesey said at a recent CEDA lunch, the power industry is ripe for disruption for two reasons - because the customer base is largely disengaged and because the retailers don't reward loyalty. In fact, quite the opposite, with loyal customers supporting discounts to new customers. So his deliberate reaction to this realisation is to develop and implement a plan to deliver a digital experience to drive value for customers and to change the quality of the relationship. So, I propose we define innovation as a set of behaviours, activities or reactions to improve outcomes for customers.  Customers can be internal (such as with Pearcey and Edman) or more commonly external.

Innovation is broadly accepted as boosting economic growth

So having redefined innovation, what do we do with this information?

From a public sector perspective, governments broadly accept that innovation is crucial to boosting productivity, which is the key to faster economic growth and rising living standards[1]. In Australia, the evidence to support the link between innovation and economic growth is that, compared to businesses that don't innovate, innovative businesses[2] are 1.4 times more profitable, three times more likely to export and more than two times likely to create jobs. But what does government do about it? The dry economists argue that competition should be sufficient to stimulate innovation behaviour in firms. I say that competition is necessary but not sufficient. This is because, as we have seen with both Pearcey and Edman, collaboration with other disciplines is required to yield real outcomes.

While collaboration is readily achieveable within an organisation, it is somewhat more challenging between organisations - particularly between business and publicly funded research organisations. We have competition policy in Australia but we lack a collaboration policy. Australia is not alone in placing priority on improving the efficiency of the innovation "system" rather than directly supporting firms. However we know that current innovation policy is not cutting through to those employing businesses in the economy who need to hear and understand the message.

So, it made me think that perhaps we are approaching this problem from the wrong end.

Given that governments invest in innovation to grow jobs and that jobs are created in private sector businesses, a good place to start the development of innovation policy might be to consider what drives innovation process in a business.

Drivers of innovation in enterprises

In fact research suggests that successful innovation processes evolve under the influence of three interactive factors[3]:

  1. Markets - broadly speaking what the customer needs or wants
  2. Organisational capability - how well the business operates and makes decisions, and
  3. Knowledge and technology - how well the business absorbs new knowledge and technologies that either dramatically lower the cost or open-up a new product/service opportunity.

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The quality of a business's innovation process (and hence its competitiveness) is dependent on the extent that it recognises and integrates responses to these three factors. Big companies like AGL get this and in fact through their digital transformation program are doing something about it. No need for government intervention here. But while I expect most small to medium size businesses would intrinsically understand this concept, they may not be as adept as larger organisations to do something about it. To this point, if government SME support services were designed to respond to these factors in an integrated way, surely they would have greater impact?

Of course the innovation ecosystem remains important providing: publicly funded research organisations that generate knowledge and skills; shared working spaces; access to risk capital; digital skills initiatives; big data capability; R&D tax policy; collaboration policy, cybersecurity and more. And then there are features of the broader competitive business environment that include things like the education and health systems along with transport infrastructure, ICT services and connectivity.

In other words everything else that has made Melbourne the most liveable city for the 6th year in a row.

In short, I think there is an opportunity in this for us to transform community understanding of innovation by developing a policy model that:

  • Starts by expressing innovation in terms of businesses rather than the system
  • Reinforces the three major factors that drive innovation in a business - markets, knowledge & technology and organisational capability
  • Highlights the importance of science and technology, digital literacy and digital transformation and other factors of the system that facilitate collaboration

Victorian priorities: Shifting the entire economy to ensure social inclusion

Before wrapping up, Kate talked about social inclusion in her vision for a better Australian society. This is something we also think about quite a lot in the Victorian Government's Department of Economic Development, Jobs, Transport and Resources. In this slide I have used the metaphor of a normal distribution curve to represent jobs in the economy.

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Victorian Government policies span the spectrum of this curve with our goal to transition and grow the entire Victorian economy - in other words to shift the entire curve to the right intact so to speak. Against this curve I have mapped policies that are designed to act in specific segments. Starting on the left, we have initiatives to assist disadvantaged people to enter the workforce through a recently announced initiative by the Minister for Employment Wade Noonan called the Jobs Victoria Employment Network. At the other end, we have initiatives to support entrepreneurship and the next generation of bright ideas, being delivered through the Government's $60 million start-up initiative LaunchVic - $6.5 m of these initiatives were recently announced by Minister Dalidakis. And we are in the process of establishing Victoria as a cybersecurity hub with Data61 and the Oceania Global Cybersecurity Centre.

And then in the middle, we are putting intensive effort into transitioning the automotive workforce (through the 2015 Automotive Transition Plan), supporting the use of local procurement (jobs) and last but not least, delivering on our Future Industries strategies. Improving the innovation performance of every part of the economy will be vitally important in shifting the economy and in achieving Senator Lundy's vision.

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In closing, I'd like to summarise my key thoughts today.

(1) Digital technologies are transforming every aspect of life in the 21st century.

Major businesses understand that digital transformation is essential to survive and prosper. Smaller firms however are less well prepared and the current narrative around innovation is not helping.

(2) Pearcey and Edman were archetypal innovators who created inventions.

I believe separating these two concepts is useful because not all innovation has an invention associated with it. It's useful if we define innovation as a set of behaviours, activities or reactions to improve outcomes for customers and in this context identify where digital technologies can help a business prosper.

(3) Develop an innovation policy framework relevant to business

There is an opportunity for us to develop a new approach to an innovation policy framework that starts by expressing innovation in terms of business rather than the system. And for us to collectively work on a collaboration policy.

My final point is if we are to have a socially inclusive society we need to improve the employment prospects of everyone in the community. That is, shift the entire curve - not stretch or split it.

I look forward to working with you to make "innovation as usual" the paradigm not the exception.

Thank you.

[1] M Annunziata Global Chief Economist, GE. GE Global Innovation Barometer 2013

[2] Australian Bureau of Statistics (2012) Selected Characteristics of Australian Business, 2010-11

[3] Potts and Morrison Nudging Innovation NESTA 2009