Making it easier for business to connect with world-class R&D

A strong, vibrant research and innovation ecosystem is critical to the future economic and social wellbeing of Australia – and will be a key component of our jobs-fueled recovery. However, despite world-class research institutions and a diverse industrial base, Australia remains a global laggard in the translation and commercialization of ideas. We talk to David Gonski AC FAICDLife about strengthening our R&D system and creating a better environment for collaboration between research and industry.

Throughout last year’s pandemic-triggered global shutdown, collaboration and innovation across the community saved thousands of jobs. However despite this momentum, Australia has fallen to 23rd in the latest Global Innovation Index. The index, which measures a country's capacity for - and success in - innovation, the ranks Singapore, Republic of Korea and Hong Kong as the best performing innovation economies in our region. So why is Australia falling behind? And how do we bring our world-class research institutions and business together to create more jobs and boost our innovation capacity? The answer lies in getting our R&D system right.

Navigating the R&D system is difficult for business

Vital to fostering innovation, R&D activity is essential in raising Australia’s productivity, solving the problems facing business and the community, driving the development of new products, services and businesses, and transforming and growing existing and future industries. And while industry and universities have belatedly started to cooperate more actively on the commercialization of research, the system remains difficult to navigate with the vast majority of businesses not knowing where to start to access or invest in academic research that could be of value to their organisation.

Collaboration between sectors is vital in a vibrant innovation ecosystem

“Universities are a very important part of the economic system, developing research as well as delivering a supply of skilled people,” says NSW Chief Scientist, Hugh Durrant-Whyte. “Academics have become more interested in translational research in the last ten to 15 years with about 30 per cent of the revenue for research now coming from companies rather than government grants.”

Collaboration between universities and industry on research and development projects leads to a range of mutual benefits. University researchers gain a better understanding of the problems facing business and can direct their research accordingly, and industry gains access to research expertise, infrastructure and an awareness of new intellectual property and emerging technologies.

Modelling conducted for Universities Australia found that in the 2018-2019 financial year, industry-university collaboration generated $12.8 billion in direct benefits to business, delivered $26.5 billion in benefits to the economy and helped support 38,500 fulltime jobs. Clever collaborations between Australia’s universities and organisations, it suggests, returns on average almost $4.50 to companies for each dollar they invest.

Australia far better at conducting research than commercializing it

However, despite Australia’s world-class research strengths in key science and technology areas, plus universities that rank highly on a global scale (with 7 universities in the top 100 globally), and federally supported research organisations like the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia’s Nuclear Science and Technology Organisation (ANSTO) and the Defence Science and Technology Group, Australia has traditionally performed relatively poorly in industry–university collaboration.

Australia ranks above OECD average in terms of research excellence, however sits well below OECD averages on the rate of collaboration between universities and industry. And, while improving, research translation and commercialization is also well below our economic peers. A recent CSIRO report ranks Australia 27th out of 29 on collaboration between large business and the higher education sector and 29th out of 29 on the collaboration of SMEs with the higher education sector.

So why is Australia so much better at conducting research than using it to establish and grow new companies, products, services and jobs? Potential reasons include systems that motivate and reward universities for focusing on academic outcomes rather than economic and social impact, the challenge of apportioning IP ownership between business and universities, and the significant lack of connectivity between Australian universities and industries.

An action plan for NSW

In an effort to address weaknesses in its disjointed approach to research and development, the NSW government recently released an R&D Action Plan ‘Turning ideas into jobs – Accelerating research and development in NSW’. The plan looks at how the state can better harness the research undertaken within the state, and globally, and tackle the issue of connecting businesses with ideas and translating high-quality research into positive economic, social and environmental outcomes.

When announcing the project in 2019, NSW parliamentary secretary to the Premier Gabrielle Upton, who along with chief scientist and engineer Hugh Durrant-Whyte drove the process, said “we know that R&D is not the whole answer to having an innovation economy but we can road test some of the gaps and learn how we can do better.”

Ms Upton worked with an Advisory Council of eminent leaders, chaired by David Gonski AC, and undertook broad public consultation before developing and releasing the Action Plan in March. The plan recommends the five priority actions below.

• Launch a Small Business Innovation Research (SBIR) program – to provide grants to small and medium-sized enterprises to find and commercialise solutions to problems facing the NSW Government and its agencies. [On 31 May 2021, the NSW Government launched the Small Business Innovation & Research program for small and medium-sized businesses, which will receive $24 million in funding over its first two years.]
• Boost open data – make government datasets more readily available so businesses can make better decisions, entrepreneurs can build new businesses and government can solve complex challenges.
• Turbocharge precincts – to attract national and global technology industries and investment, and drive collaboration between universities, research organisations, start-ups, scale-ups and SMEs to commercialise R&D.
• Target strategic support for NSW universities – to build stronger collaboration between universities and government on research that drives future NSW strategic growth industries and research-led industry attraction, and better leverages Commonwealth Government research funding.
• Establish an R&D matchmaking platform – to better connect research ‘sellers’ and ‘buyers’ and link researchers to research infrastructure and expertise.

The Action Plan also includes a suite of 16 supporting actions to address the limitations and gaps in the existing innovation ecosystem. The implementation and funding of the Action Plan are the subject of a separate piece of work, though it will partly be funded by $26 million from the 2020-21 state budget.

Stakeholders urge government to take a more proactive approach

During the consultation phase for the Action Plan, many stakeholders urged the NSW Government to take a more proactive approach to connecting stakeholders in the innovation ecosystem – be they start-ups, scale-ups, universities, government research organisations, SMEs, industry or investors. They suggested the government could do more to promote the value of collaboration between universities and industry and to build awareness of the state’s research strengths.

The Action Plan’s proposed R&D matchmaking platform aims to better connect universities and other research providers to government, industry and investors by reducing transactional complexity and uncertainty for sellers and buyers of R&D, leading to higher and faster rates of commercialization and the creation of new products, services and jobs.

The platform will essentially link ‘good ideas’ and technology opportunities to business expertise and mentors.

Stakeholders also asked government to publish more of its datasets – and make them easier to use.

Advisory panel chair David Gonski AC on the importance of getting this right

We recently spoke to chair of the advisory panel, David Gonski AC, about the NSW Government’s R&D Action Plan and more broadly about boards engaging with R&D and innovation.

How would the advisory panel ideally want boards to engage with the action plan?

There are various levels that I would talk about in terms of accelerating research and development in NSW. The first is that there are undoubtedly innovative pockets everywhere.

What there isn't, however, is cohesiveness in that. We are essentially quite weak in NSW and I suspect, in Australia, in what's called translational research. In other words, people have bright ideas and while there's quite a well-developed market to take a developed idea to market, in between there's a gap. There are wonderful people all over the place, but they're not coordinating.

So in terms of boards,  I believe we need to look to the long term. And inherent in looking to the long term is, in my opinion, a focus on developing things that might be good in the longer term. The short-term approach, which we often take in business, does not allow for the development of innovative thinking, doesn't give the time for translational research and development. If you're looking in the long term, you have the ability to take ideas to fruition.

The second point I'd make is the question of risk. I've been in business for 44 years, and I have noted that there is a danger, particularly in big companies, that we often don't take calculated and necessary risks on innovation because we're scared it might  give rise to a big write off in the short term. But when you look at companies like Cochlear, ResMed and these sorts of companies, they've taken a punt on new technologies and they've built the most amazing business from that.

The third point is that boards often don't have the expertise around the board table to understand where innovation can go. Often we're much better at marketing, risk, accounting, law and so on, rather than having people who understand the translation of ideas and innovative thinking. It doesn't mean you have to put [these people] on the board, but it means that we should be looking at how we get that input to the board.

The fourth thing I would say to boards is that we are very fortunate. In NSW alone, we have 11 top universities. In Australia, we've got 40. And these universities, together with the likes of CSIRO, are making incredible developments which are seldom tapped by big companies. And I think boards should be encouraging management to look outwards to some of these jewels that exist either within their city, within their state, or within their country.

If boards are tasking themselves with recalibrating risk tolerance and setting strategic direction that embraces and prioritises R&D and innovation, how do they tap into the right expertise?

I may be wrong, but my feeling is that our young and brilliant innovators are unlikely to be particularly interested in sitting on the board of a wide and diverse company – I don’t here include the board of their own company, so other ways have to be found to tap into the right expertise. Some companies are doing this with board committees; it's quite common for audit committees to have non-directors - experts in audit and accounting - join them. In other organisations, technology committees have had members who are not directors, who are technologists, advise that committee. So in my view, if you are interested as a board in new and innovative thinking, why wouldn't you take an existing board committee or set up a separate committee and get input from technologists etc in the area of interest to the company and work on that?

And do you see that happening?

I think it will happen. I believe very strongly in board committees and I've watched them develop over many years. When I first started as a director more than 35 years ago, the only board committees were audit committees, and not every company had an audit committee. Now all boards have committees. Boards have split audit and risk. Boards have set up technology committees. And companies like ANZ, for example, even have an EESG (Ethics, Environment, Social and Governance) committee. I don't see why a technology committee in a big company shouldn't have input, not just from technologists focused on a new IT set up, but also on developments in innovative technologies that are good for the company or are the next step in the company’s development.

How do you see the implementation of the action plan helping business better collaborate with government and academia on R&D?

The first thing I would say is we are seeking to familiarise the business community with the fact that there are these jewels such as research at universities and research institutes very close to them. Quite often there is a view that universities are locked away and not commercial. That is yesterday's thinking. They're not necessarily experts on the commerce side, but they understand commerce and they're very short of funding for their ideas and welcome the input of the commercial side. So I would say that if, as a board, you’re looking to extend your thinking, remember these jewels.

The second thing we've suggested is the establishment of an R&D matching platform. It’s been done before, but we think it could be done better. And we think that, using the appropriate IT technologies, we should be able to bring together those who are looking for technological investment and improvement of their businesses, with the innovators.

Lastly is the concept we put forward of precincts. Everybody quotes the example of Sheffield in the UK where companies, particularly industrial companies and service providing companies, are on an estate together with appropriate technology, and it works very well. Meeting people at the ‘water cooler’ produces ideas. People start to work together. They become confident in each other and are prepared to put money and time at risk.

We know from our Driving Innovation: the boardroom gap study, as well as our Director Sentiment Index surveys, that directors feel excessive government regulation is holding back calculated risk taking. What is the advisory council’s perspective on this?

All of us know our liability as directors. While we criticise ourselves sometimes for not being bigger risk takers, we know that taking too much risk can be a personal problem as well as a corporate problem. But leaving that aside, I'm not totally convinced that the regulatory conditions are making it difficult for the commercial backing – the translational backing – of innovation. The advisory committee is not suggesting boards bet the farm on this; we're suggesting that organisations should put something into it, and the question of how much is up to the board. But to say it’s risky to take calculated risks, I say it’s equally risky to ignore innovation, particularly for established businesses.

What is the advisory council’s perspective on the role of non-R&D innovation? What initiatives might be contemplated to support non-R&D activities and investment in NSW as part of the council's priority actions?

As examples, we looked at open data. This is a concept where there would be a release of new NSW government data sets, which would in turn allow people in a non-R&D space to see what's going on and to come up with ideas and improvements that rely on that data. We also felt that if we could give small business, as the backbone of Australia, a research injection or innovation research fund/program, these would also instigate good thinking in that regard.

You talked about the research jewels that exist in our society, do you have any advice for directors of smaller or private businesses, who may not necessarily have the expertise or ability to tap into it these pockets of innovation?

Why not look for jewels in your own past? The university that taught you, the TAFE that taught you, they present an opportunity to tap into research. Many ignore this option because perhaps they taught you one thing and you set up a business in another.

But my advice to the smaller businesses would be that they know their business backwards, they know what innovation in their business would damage them and what innovation would repair them. So in my view, if they have that sense and don't have the means or ability to do it themselves, why not either search for where the strengths are in that industry, or look backwards at where you were educated. And consult your staff, consult your customers, as they will generally give you a good steer on where things are happening.

When consulting with industry on the action plan, was there anything that surprised you?

If anything, what surprised us was how keen industry was. If you look at what we're actually advocating in terms of translational research, i.e. taking ideas to an end opportunity, we're not really doing something revolutionary. And yet when you talk to business, they're very interested and don’t see it readily happening. So, what we diagnosed is there is something missing in between. And that's why we made the five recommendations and other supporting actions that you see in the report, which we hope will help. But in essence, if businesses are interested and can diagnose what they want, they should then – either through existing relationships or through our R&D matchmaking platform, be able to take it further.

What would success of the action plan ultimately look like to you and the advisory panel?

Firstly, we are very keen on seeing the five items that we advocated put into action, and I hope that will happen. Success for us would be that we actually get the translational research model going, and that as a state we achieve more coordination with the jewels that are there. And that's why we suggested strategic support for NSW universities. The concept is, you've got all these wonderful research people – why don't we bring them together with those who are involved in the industry side, to turbocharge the rate of research translating to future industries and jobs. So we have less duplication and a better chance of securing the available funding, both locally and further afield.

Is there anything else you’d like to share with our members about this report?

I think that getting this right is very important. We're living in interesting times and what is hopefully going to solve the pandemic is the vaccines. Whichever brand you look at,  the existence of that vaccine is based on research.  This is translational research which is going to save lives. And in my opinion, that should justify boards and indeed smaller businesses looking right into this.

The Advisory Council was chaired by David Gonski AC with members including Maxine Brenner, Jillian Broadbent AC, Phil Marcus Clark AO, Professor Hugh Durrant-Whyte, Professor Barney Glover AO, Professor Brigid Heywood, Catherine Livingstone AO, Professor Mary O’Kane AC, Daniel Petre AO, Professor Michelle Simmons AO, and Jennifer Westacott AO.