Australia’s innovation challenge is often framed as a lack of capital, a shortage of entrepreneurs or a failure to commercialise research.
But according to Paul Dalby, chief executive of innovation accelerator the Rozetta Institute, that diagnosis misses the real issue. He says the country’s biggest innovation failures are not technical, they are systemic.
Speaking on InnovationAus.com’s Commercial Disco podcast, Mr Dalby argues that the highest-impact innovation investments are not individual startups or discrete technologies, but interventions that remove structural barriers holding whole industries back.
“We’re not interested in taking an invention to market,” he said. “We’re interested in the systemic challenges facing an industry sector and how innovation can overcome them.”
That distinction explains Rozetta’s unusual model. Born out of the former Capital Markets Cooperative Research Centre and now fully self-funded, Rozetta does not take equity, does not run accelerators in the traditional sense and does not chase short-term returns.
Instead, it invests early-stage capital into feasibility studies, business cases and collaborative structures that unlock large-scale public and private investment.
The Capital Markets CRC produced SMARTS, a market surveillance system that detects insider trading and market manipulation. Sold to Nasdaq and now deployed across more than 100 exchanges globally, the technology has delivered tens of billions of dollars in economic impact.
But Mr Dalby is clear that the real achievement was not the software itself — it was the coordinated effort that brought regulators, researchers and market operators together to solve a problem no single actor could address alone.
That same logic underpins Rozetta’s current focus areas.
Mr Dalby identifies artificial intelligence and the energy transition as the two largest innovation opportunities facing Australia, not because of the technologies involved, but because of the coordination failures surrounding them.
AI, he notes, cuts across energy infrastructure, data, compute capacity, skills and regulation. The energy transition is similarly constrained by fragmented supply chains, unclear market signals and misaligned incentives.
Critical minerals sit at the intersection of those challenges. Australia has abundant deposits, but limited processing capability and weak downstream integration.
“There are systemic challenges to bringing all the parties together to create viable supply chains,” Mr Dalby said. Addressing them requires investment not just in technology, but in market design, collaboration and governance — the kinds of problems Rozetta is set up to tackle.
Importantly, Rozetta’s independence allows it to work where others cannot. As a self-funded, not-for-profit organisation, it is not tied to a particular sector, political agenda or investor return profile. Its only performance measure is national impact. That freedom enables it to invest in opportunities that may take years to mature, but which offer outsized returns for Australia as a whole.
That long-term lens also shapes Dalby’s thinking on sovereignty. Or, as Mr Dalby prefers to describe it, agency.
The concern is not protectionism, but the ability for Australia to make meaningful choices. In sectors such as critical metals, reliance on a single global supplier leaves the country exposed.
“If that supplier withdraws, and we have no alternatives, that’s unacceptable,” he said.
Mr Dalby draws on the concept of “industrial statecraft”, pointing to countries such as Japan and South Korea that have deliberately identified and sustained industries essential to economic and national security.
COVID-era supply chain disruptions only reinforced the lesson: pure market efficiency does not always deliver resilience.
To sharpen its focus, Rozetta is commencing a deep, economy-wide analysis with external economists to identify where Australia has capability and potential but is failing to convert either into impact due to systemic barriers.
The goal is to narrow its investment priorities to a small number of high-leverage opportunities and then intervene decisively.
For Mr Dalby, innovation is ultimately a people business. It is about putting the right stakeholders in the room, giving them the resources to collaborate, and removing the friction that prevents good ideas from scaling. Australia does not lack ingenuity.
What it lacks, he suggests, are the structures needed to turn that ingenuity into enduring national advantage.
Do you know more? Contact James Riley via Email.