Australian R&D providers are good at value creation but poor at value capture. The biggest challenge facing innovators and entrepreneurs, who have “market ready” Intellectual Property (IP) to commercialise, is crossing the so called “valley of death”. Put simply, most Australian innovators and entrepreneurial firms do not have access to affordable capital especially when they need $2 million to $10 million to invest in building prototype products or a manufacturing plant. This is where so many of our brilliant innovations and IP fall into the valley of death or move offshore.
There is no clear consensus as to why so little of Australia’s world class IP has been successfully commercialised in this country. However, venture capital in Australia is often very conservative and institutional investors are more comfortable in investing in tangible assets. They fail to recognise the value that IP contributes to a business. Others will claim that in the current innovation system and business culture, research and IP is undervalued in Australia. Simply, the big money is made offshore.
And that’s Australia’s trouble spot. As a nation, we are investing billions of dollars in pure and applied research to generate IP. Trouble is we are not making returns by exploiting it.
This is a business model that does not make economic sense. It is unsustainable. We cannot afford to let our best innovations to be exploited offshore with little or no return of benefits to Australia. Surely there are better ways to capture the value of IP in Australia?
One of the most glaring problem areas is the gap between publicly funded research bodies and industry. Different worlds, different cultures and different mindsets. The result is destruction of shareholder and national building value. Experts tell us that successful commercialisation requires an alignment of different stakeholders.
Speaking recently at a seminar on Value Exchange between R&D providers and industry, Mr Ken King, CEO of nanotechnology niche firm Micronisers said the priorities of industry were totally different from those of research organisations, especially universities where the “publish or perish” culture makes it unattractive for academic experts and scientists to spend time on short term and highly demanding industry projects. There is often a massive disconnect between expectations of academics conducting long term research and industry wanting fast results as measured by sales, market share and environmental impact. Success for researchers is typically through showcasing their work at overseas conferences and publishing articles in top tier journals.
Organisations like Advanced Manufacturing CRC based out at Swinburne University of Technology are working to bridge this gap by co-investing federal funds with industry cash and in kind from R&D providers in high impact projects. A cornerstone of its efforts is to facilitate a clear and transparent agreement between industry and R&D providers on key project and commercialisation issues. In a nutshell, this provides high quality R&D for businesses with their clear path for commercialisation.
Project agreements are the mechanism for ensuring industry and R&D providers agree upfront on how they will share and commercialise the IP. The project selection criteria involves examination of the business model and capacity of the technology to transform an industry. It also looks at the management capacity and track record of the industry and R&D providers in the area of commercialisation. Successful project participants from industry and R&D institutions are then in a strong position to focus on making an economic, social and environmental impact for Australia and to come out in better competitive shape at the end of the project. The old paradigm of producing technological successes and commercial failures is being replaced with a new paradigm. This new paradigm looks at how the IP can be commercialised by asking where is the order book, who is the customer and the customer’s customer for the innovation?
New entrepreneurial firms and SME’s who sometimes lack the experience and skills to commercialise IP have access to various programs such as the Enterprise Connect (e.g. “Researchers in Business”) and COMET schemes. However, it is at later stages where large investments are also required where government, industry and institutional investors need to collaborate in setting up suitably large funds to facilitate and accelerate the commercialisation of our best IP.
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