Innovation: The great Aussie fail

Photograph by Nic Walker

INNOVATION: THE GREAT AUSSIE FAIL

The trend towards more protectionist policies globally is just one factor impacting Australian R&D.

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ECONOMY: As many industry-leading companies globally invest in their future success, Australian organisations are being left behind.

PwC Strategy&’s 14th Global Innovation 1000 study found that only four Australian companies – CSL, Cochlear, Telstra and Aristocrat Leisure – made 2017’s list of the world’s top 1000 R&D investors.

Dominik Baumeister, Strategy& partner, says it continues a disturbing trend of falling Australian representation and raises important questions.

“Where is our next CSL or Cochlear coming from? And how do we create an environment where the next Atlassian wants to remain an Australian company once they start to achieve global success?”

Andrew Cuthbertson, CSL’s chief scientific officer and R&D director, can’t stress enough the importance of R&D to the organisation.

R&D investment is absolutely central to CSL’s success. We invested $US650 million in R&D last year and have about 1300 scientists in R&D globally.

Andrew Cuthbertson

“R&D investment is absolutely central to CSL’s success. We invested $US650 million in R&D last year and have about 1300 scientists in R&D globally.” Cuthbertson says taking a macro view of R&D’s role in CSL’s strategy has been crucial.

“It’s dangerous for us to simply focus on creating a molecule, without considering patient needs and its commercial viability. Where’s the unmet medical need and what are you ultimately going to do for the patient? What will medical practice and patients need in 10 years’ time, because that’s how long it takes to go from research to commercial reality in our industry.”

The composition of the 2017 list’s top 10 compared to 2004 shows a changing global landscape. The automotive sector has ceded its dominance to software and technology, and the fresh faces of Amazon and Alphabet (parent of Google) topped the list this year.

Baumeister says Australia has an opportunity to be a bigger player in this change.

“There’s a general realisation that innovation is moving away from products and towards software.

How can we be leaders in this space? “We already have some of the building blocks such as a world-class education system and local presence of global leaders such as Google. But we need a clearer vision and to invest more strategically to focus our comparatively limited resources where they can have the most impact.”

R&D also stands to suffer from a global move to more protectionist policies, particularly in smaller countries like Australia.

“The need for agile local and global collaboration is ever more apparent in today’s start-up environments – we need to lead that collaboration rather than prevent it,” says Baumeister.

Recent changes floated for 457 visas are a case in point and would have inhibited local organisations in bringing out global talent to spearhead projects.

Cuthbertson says CSL made its feelings on the issue well known.

“It was also a threat to the university and research sector, who are our partners, and I credit the government for listening and modifying the 457-visa program to take the needs of industries such as biotech into account,’’ he says.

 “It would have been madness to close our borders like that.” According to Baumeister both the public and private sectors have a role to play in helping Australia play a bigger R&D game.

“Australia, in general, is nascent in its R&D spend and innovation culture. We need to take inspiration from how the Amazons built highly successful businesses quickly off the back of R&D,’’ he says.

Jan Janssen, Cochlear’s chief technology officer, says look to the home of the world’s top three R&D investors. “Government support and regulatory framework can play important roles. There’s a greater willingness to invest in early-stage ventures in the US than here.”

Baumeister says government needs to provide the vision and long-term innovation strategy that identifies sectors where Australia can win, and encourage R&D spending in those sectors.

“We then need to align policies, grants and funding programs with this strategy and, critically, direct our education system to support the required skill base.

 

LEADERS OF THE PACK

Top 10 R&D investors
(2004)

Microsoft
Pfizer
Ford
DaimlerChrysler
Toyota
General Motors
Siemens
Matsushita Electric
IBM
Johnson & Johnson

Top 10 R&D investors
(2017)

Amazon
Alphabet
Intel Corporation
Samsung
Volkswagen Aktien-
gesellschaft
Microsoft
Roche
Merck & Co
Apple
Novartis

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