Cargo cult innovation

What are we to expect from our new minister for Innovation, Industry, Science and Research?

A helpful critique of “The Innovation System” was recently given at a forum on innovative leadership by Professor Alan Hughes from Cambridge University.

He started his talk with a photograph of Melanesian cargo cult aircraft to illustrate one of the problems of constructing innovation policies. It is the difficulty of trying to understand how innovation occurs.

We have all been there before. We have had the Multi-Function Polis from the 1980’s and 90’s that finally died in 1997. We have had Co-operative Research Centres. We have urged universities to become relevant by spinning out inventions into new companies and the CSIRO has its flagship projects.

Australia in the last 15 years has experienced steady growth placing it among the top performers in the OECD. It is not clear that this growth has very much to do with our innovations, science or research policies in any direct way.

Professor Hughes picks out three elements common to science and innovation policies of many countries:

1. a tremendous emphasis on R & D;
2. exploiting science from research institutions through licensing and spinning out innovations; and
3. establishing new entrepreneurial spin-off companies.

The popularity of this model arises from the view that this is the basis of the superior economic performance of the United States. It is a cargo cult approach as it is picks out and emphasises selective elements and ignores others.

A study of productivity growth in the United States shows wholesaling, retailing, finance and insurance, administrative services and computer and electronic products accounted for most of the productivity growth in the last seven years. The first two on the list are two of the three key sectors in the last part of the 20th century. There is only one technology intensive activity in this list. The others are not traditionally identified as R & D intensive.

“High-tech” activity is a small part of the US economy. It is a minute part of the Australian economy. However what is thought to be happening is that there is a spread of high technology applications which enable productivity improvements in the “low-tech” sectors of an economy. In Australia the mining and agricultural sectors benefit from the dispersion of “high-tech” products. It the use that counts but the innovations may be sourced world-wide.

Professor Hughes deals with university patenting, licensing and spin-offs by comparing the scale of this to the actions within industry. As an example, IBM registered 2,941 patents in 2005 while the University of California state system in the same period registered 388. As far as spin-offs are concerned, some 500,000 new firms are started each year while in 2004 462 US university spin-offs were established.

Even more interesting are the sources of innovation for companies. There are even Australian statistics for this which show the key sources of ideas are within business, customers, suppliers, meetings and competitors. Universities score less than 10 per cent and R & D enterprises even less!

Finally he makes the point that entrepreneurial spin-off companies are, in general, not as important as established companies. It is only in sectors where “destructive” technological change is creating opportunities that they have a chance to grow and prosper. The spread of the Internet is an obvious example where established businesses are battling with newcomers for news, music, film and the general delivery of information.

But, Professor Hughes is not dismissing the importance of the role of universities and public R & D. It is making a key contribution in producing graduates who will invent, implement and deploy innovations for the benefit of their companies. The published research enables a spreading of information that is a public good. But most importantly the direct network of contacts from universities to companies and from companies to universities at many different levels provides what may well be the key link.

So what opportunities are there for a new Minister? Most important could be a better perspective on the role of universities with less prescriptive direction. Less emphasis on the “high-tech” sectors and more understanding of the important sectors of the economy and the export sectors would help. Finally a lessening of the political correctness of such things as bans on GM crops, when plant growth in a harsh climate might benefit from genetic alteration and the picking of winners with alternative or renewable energy.

Innovations have an ability to come from unexpected directions and the greatest contribution for a government is to ensure that we have a well educated and technically literate community. But remember that many innovations have nothing to do with new technology!