Innovation and Science Australia chair Andrew Stevens is energised by the community’s re-engagement with both manufacturing and science through the early response to the COVID-19 crisis and is alive with the possibilities for the future.
But he has warned that Australia must not “sleep-walk our way back to the past in the way that we do things.” The reality, he says, is that Australia’s response to the pandemic included more non-R&D business innovation than the nation has seen in decades.
The challenge now will be to maintain that momentum into the relaxation of social restrictions and the opening up of the economy and to harness that existential business drive to find new ways of doing things, to innovate.
In this episode of InnovationAus’ Commercial Disco podcast, Mr Stevens discusses the future of industry policy in Australia and addresses issues from defining sovereign capability to identifying sectors of industrial advantage. You can watch the video here.
He discusses the vexed question of the R&D tax incentive and argues forcefully for the creation of a stimulus program for non-R&D innovation that would better support the building of software-based industries and other intangibles innovation.
“Our view [at Innovation and Science Australia] is certainly that we don’t want to be sleep walking … where we just let things emerge. That is quite different from plotting how it is and what it is that we want to end up with in terms of the nature of our businesses,” Mr Stevens said.
“That’s really the question. Do we just wait, and end up with what we get. Or do we choose and have strategic policy choices,” he said.
Mr Stevens has had a pretty good vantage point to watch the industry response to coronavirus and its economic shocks, as well as the proposed options for the post-COVID environment.
He has sat on at least three of the committee formed by Industry Minister Karen Andrews in the earliest days of the government response – including the manufacturing roundtable, the technology roundtable and the venture capital roundtable.
Having just come off a four-year stint as chair of the Advanced Manufacturing Growth Centre, Mr Stevens had a pretty good view of the issues within the sector and says the re-engagement by Australian communities with manufacturing is a positive to come out of the coronavirus response.
There had been “a renewal of the compact between the community and manufacturing, and people now I think are stepping up and saying ‘we’ve got to fight more for it’,” he said.
It is rather good fortune that the ISA has just completed a deep body of work in the innovation drivers across the economy that culminated in the release of its Stimulating Business Investment in Innovation report that is providing some thinking about how to maintain the momentum of crisis-inspired innovation.
“It is absolutely clear that not enough Australian businesses are investing in innovation – and that is in both R&D and non-R&D areas.”
Mr Stevens pushes the case for the driving industry policy through the better understanding of “industrial advantage”, which he defines as areas of the economy or market niches where we can identify both comparative advantage plus competitiveness.
By understanding where and how Australia has high industrial advantage will help in the looming discussions about sovereign need, and identifying where the nation must build capability and where it should manage sovereign need through other means, like stockpiling and inventory management.
In a perfect market sector where Australia has a high industrial advantage, so that we have comparative advantage and businesses that are highly competitive and where there is a high sovereign need, then you’ll have a strong domestic and export market and it is highly likely that Australia will have businesses that are world leading in that area.
Conversely, where there is low sovereign need and low industrial advantage where we are highly dependent on imports, we won’t have a comparative advantage and unlikely to have globally competitive businesses in these areas.
“In that case, it’s probably like trying to make water run uphill if we try to build sovereign capability in areas where there is no industrial advantage and not much sovereign need,” Mr Stevens said. “So there is actually a two-vector view that we need to look at – sovereign need and industrial advantage.”
“Because post-COVID, while we will move to be less focused purely on efficiency and just-in-time and more toward resilience and just-in-case in terms of supply chains, and less dependence and more self-reliance … It’s a balance.”
While the balance may change, but the key will be an increased investment in intangible value as a the differentiator in terms of competitiveness “and its non-R&D based innovation that is the key.”
“That’s the reason we put to Minister Andrews in our recommendations to put an incentive in place for non-R&D innovation and specifically software,” Mr Stevens said.
“Because if the Prime Minister still has the objective that Australia will be a leading digital economy by 2030, then non-R&D investment in software will be absolutely critical to doing that.”
“We said there was an opportunity for government to consider a non-R&D stimulus through grants for a defined period of say five to ten years.
“We are basically saying let’s give ourselves an accelerator in getting ourselves into the intangible value that today really defines competitiveness.”