Culture, Capital and Connectivity are the keys to successful innovation

A similar successful partnership exists in the agricultural industries.

There have also been some outstanding successes of Australian manufacturing, services and IT&T firms taking their products to the world, such as News Corp, QANTAS, ResMed and Looksmart. But overall, Australia's record in these industries is patchy. This is a problem because these industries account for nearly 80 per cent of world trade and their dominance is increasing.

In these sectors, our greatest problem is not so much that of a lack of start-up companies but our apparent inability to grow enough start-ups into substantial globally operating corporations.

Many analysts, including Karpin and the Australian Business Foundation, have identified the need for more highly qualified managers who understand the requirements of technology companies. Lack of people with such skills is inhibiting the maturing of start-ups into full businesses.

The essential ingredient is strategic management and leadership of the business - the type of leadership we already have in the energy and minerals sector. Australia needs to develop this capability in all its enterprises.

The second driver of innovation is CAPITAL - both investment in specific ventures and in the physical and intellectual infrastructure that will support innovation.

There is a crucial need to rejuvenate Australia's basic science and engineering effort in the university system.

In the US, President Clinton has just announced an additional $2.9 billion into S&T initiatives. Canada, United Kingdom and Finland have also all agreed to allocate additional resources to research. Closer to home, countries such as Korea and Taiwan are now investing heavily in basic sciences and we are beginning to lose ground to them. There is also disturbing evidence that our education system is beginning to falter in terms of the quality of graduates it produces.

By contrast, our Capital support for new ventures has received a great deal of attention recently. Schemes such as START and COMET, the recently established Investment Innovation Funds, the pooled development funds have greatly increased and welcome the supply of venture capital in Australia. CSIRO, the CRC's and many Universities also give active support to start-up ventures.

In fact, I don't think the venture capital pump needs to be primed further and would go so far as to say supply of venture capital is no longer a major constraint. The risk is that any further funding will flow into ventures that have not been well thought out.

However, I see two critical areas where action on capital is needed. One is in the pre-venture capital phase of turning a good idea into a business plan and the other is in the post-venture capital growth phase of businesses.

The pre-venture capital phase is when the innovator is still forming the venture - taking an idea that might have been hatched over a bottle of red wine with a friend and gathering some basic information to support a proposal that can be worked up to put to a venture capitalist. This phase, which is well before any cash flow is generated is usually supported by the personal funds of the innovator. This is when some initial help can be decisive.