What is the value of breakthrough innovation? One can argue that these innovations are proof that persistence, single-minded devotion, and insane work habits might bring outsized success.  The media and politicians loves the announcement of early stage so-called laboratory scale ‘breakthroughs’ by white-coated begoggled smiling Professors and Doctors at research institutions.  Venture capitalists search for the ‘mythical’ unicorn in a garden of portfolio bets and wait for the sunflower to rise.  Often little more than statistical luck.  The fixation with breakthrough innovation infects everything from how innovation is perceived to how Governments frame grant programs and select ‘winners’ and how entrepreneurs are enticed into action.  Self-reinforcing closed loops are everywhere as Kahnemann and Tversky pointed out.

The uncomfortable reality is that the plodding cadence of incremental innovation underpins the creation of sustainable economic value, knowledge diffusion and jobs growth much more than breakthrough innovations will ever do.  Nick Lee’s new book ‘Innovation for the Masses’ makes this clear.  What is a “breakthrough” technology anyway?  Is it any more than an elegant step jump (however small) in understanding that starts the real work to develop commercial applications that actually make money – incremental innovation.

How can we rid ourselves of this fascination with the shiny and the new in a 4 point plan?

1.  Reward the real SME rock stars that hold the economy together and ensure they grow into international export powerhouses.  Focus on revenue profit and cash flow growth as the drivers of value and remove employment growth as a factor in assessing value for money.  Employment growth is an outdated concept in an era of automation, digitalisation and lower scale cost efficiency.  Remove the need to prove high innovation content as a criteria for eligibility and replace it with evidence of historical innovation and product launches and market/customer  understanding.  This should be a no-brainer.

2.   Remove the idea that applicants should compete for grants.  Selection of grant winners is ultimately subjective.  There is no logic is grant processes that are over-subscribed and take 9 months to get an outcome or in processes that reward only 10% of applicants.  These lucky few are ultimately no more likely to succeed than the next 30%+.   If this is the case there is no reason to ration access to funding.  The challenge is to ensure that grant eligibility criteria are structured to ensure that the grant pool regenerates itself to minimise any on-going call on taxpayer capital.  Too few of our grant programs operate in this way.

3.  Downscale direct grant investment in University spin-outs unless they are attached to an experienced industry partner..  University IP and training academics of post-graduate researchers into business people and expecting them to prosper is an unlikely (although beguiling) recipe for success.  Nurturing University-industry partnerships to incubate applied research to find commercial applications for University IP is the better approach.  This means recognising that strategy and business skills are a learned specialisation just like surgery and that a business requires multidisciplinary skills in a team to succeed.

4.  Report grant investments transparently. Study the value of government support to grow Australian enterprise from start-up to scale and make it public.  Governments spend $1#0Bn++ on industry support but the value of that investment is not transparent to taxpayers.

Lets shift the dial.


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