SUBMISSION TO THE HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON INNOVATION INQUIRY: “PATHWAYS TO INNOTION” DEPARTMENT OF COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS’ ROLE IN INNOVATION IN AUSTRALIA The Department of Communications, Information Technology and the Arts (DCITA) has responsibility for a wide range of issues which impinge heavily on innovation in, and the efficiency of, the Australian economy. One of this Department’s major objectives is to contribute to the establishment of efficient and effective communications infrastructure through its responsibilities for postal and telecommunications services, management ofthe electromagnetic spectrum, and broadcasting services. This infrastructure plays a critical role in underpinning efficiency across the economy and providing opportunities for innovation. Coupled with these responsibilities, the Department has a range of other responsibilities concerned with national policy issues coming under the heading of the ‘information economy’ and for information and communications technology (ICT) p industry development. These go directly to the contribution that the information economy and ICT can make to innovation and efficiency of the national economy. In addition through its cultural affairs responsibilities the Department has interests that impinge on opportunities for innovation arising from the increasing digitalisation of content. These opportunities are being encouraged through the Government’s Digital Content Industry Action Agenda. Developments in each of these areas are being heavily influenced by rapid technological change, particularly in ICT. As a result the department has a strong interest in the rapid development, and pervasive influence, of ICT as a general purpose technology in enabling economic and social development. Because of these responsibilities, and because of the long-term significance of the information economy, DCITA has been an active contributor to deliberations on innovation policy. In particular, DCITA has undertaken substantial research into the nature of the innovation system and the impact of ICT on productivity and economic growth in Australia. To assist the Committee in its deliberations, a brief overview on the process of innovation is in Attachment 1. DCITA has also contributed to the two Backing Australia ~ Ability packages and to the associated report on the Mapping Australia ‘s Science and Innovation. DCITA is one of five portfolios involved in the implementation and delivery ofmeasures under the BAA packages. DCITA was also a major contributor to the Government’s development of a world class investment vehicle (the Venture Capital Limited Partnership model) for the Australian venture industry and retains a critical interest in the availability of finance for innovative Australian companies. ICT AS A SOURCE OF INNOVATION AND PRODUCTIVITY GROWTH ICT, broadly defined, plays a central role underpinning economic activity in general K and in enabling innovation in particular. ICT plays this central role because it is radically improving our capacity to collect, analyse, utilise, distribute and exchange
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SUBMISSION TO THEHOUSE OF REPRESENTATIVES STANDING COMMITTEE
ON INNOVATION INQUIRY: “PATHWAYS TOINNOTION”
DEPARTMENT OF COMMUNICATIONS, INFORMATION TECHNOLOGYAND THE ARTS’ ROLE IN INNOVATION IN AUSTRALIA
The Departmentof Communications,InformationTechnologyandtheArts (DCITA)hasresponsibilityfor awiderangeofissueswhich impingeheavilyon innovationin,andthe efficiencyof, theAustralianeconomy.OneofthisDepartment’smajorobjectivesis to contributeto theestablishmentof efficient andeffectivecommunicationsinfrastructurethroughits responsibilitiesforpostalandtelecommunicationsservices,managementoftheelectromagneticspectrum,andbroadcastingservices.This infrastructureplaysacritical rolein underpinningefficiencyacrosstheeconomyandprovidingopportunitiesfor innovation.
Developmentsin eachoftheseareasarebeingheavilyinfluencedby rapidtechnologicalchange,particularlyin ICT. As aresultthedepartmenthasa stronginterestin therapiddevelopment,andpervasiveinfluence,ofICT asageneralpurposetechnologyin enablingeconomicand socialdevelopment.Becauseoftheseresponsibilities,andbecauseofthe long-termsignificanceoftheinformationeconomy,DCITA hasbeenanactivecontributorto deliberationson innovationpolicy. In particular,DCITA hasundertakensubstantialresearchinto thenatureofthe innovationsystemandtheimpactofICT on productivityandeconomicgrowthinAustralia. To assisttheCommitteein its deliberations,abriefoverviewon theprocessofinnovationis in Attachment1.
DCITA hasalsocontributedto thetwo BackingAustralia~ Ability packagesandtotheassociatedreporton theMappingAustralia‘s ScienceandInnovation. DCITA isoneof five portfolios involved in theimplementationanddeliveryofmeasuresundertheBAApackages.DCITA wasalsoamajorcontributorto theGovernment’sdevelopmentofaworld classinvestmentvehicle(theVentureCapitalLimitedPartnershipmodel) for theAustralianventureindustryandretainsacritical interestinthe availabilityoffinancefor innovativeAustraliancompanies.
ICT AS A SOURCE OF INNOVATION AND PRODUCTIVITY GROWTH
ICT, broadlydefined,playsacentralrole underpinningeconomicactivity in general Kandin enablinginnovationin particular. ICT playsthis centralrole becauseit isradicallyimprovingourcapacityto collect,analyse,utilise, distributeandexchange
informationandto organiseeconomicandsocialactivities,abilities thatunderlieallhumanactivity. ICT is notonly changingthewaywe communicate,it isrevolutionisingthewaykeyservicesaredeliveredin theprivateandpublic sectors,thewaydefenceservicesandnationalsecurityarrangementsareorganised,business,thewayscientificresearchis undertaken,thewayhealthandeducationservicesare•delivered,thewaypeoplecarefor eachotherandthewaypeopleplay. Importantly,this technologyalsohaswidescopefor furthersignificantimprovementandelaboration.In addition,ICT is applicableacrossaverybroadrangeofuses,it hasthepotentialfor usein awidevarietyofproductsandprocesses,and it hasstrongcomplementaritieswith existingandpotentialnewtechnologies.
Theprofoundeconomicandsocialchangesbeingeffectedby ICT arewidelyseenasbeingcomparableto the ‘disruptive’ effectsofthe industrialrevolution. This‘disruptive’ transformationhasbeendescribedin Australiaby thetermtheinformationeconomy’andothershavecalledthe ‘knowledgeeconomy’orthe‘networkedsociety’. An informationeconomyis not aseparate‘new~ economy— it isaneconomyin which therapiddevelopmentanddiffusionofICT-basedinnovationistransformingall sectorsandaspectsof society. This is a long-termtransformationandoneofthemostimportantinnovationsin historicaltimes. It hasonlyjustbegun.
Australiahasbegunthetransformationto aninformationeconomywell. In particular,ICT hassignificantlyenhancedourproductivitygrowth in recentdecades(seeCaseStudy1 on ICT-basedinnovationin theAustralianmanufacturingsector). Australia’scontinuedability to harnessthepoweroftheinformationeconomywill significantlyinfluenceits long-termeconomicprosperity,internationalcompetitiveness,nationalsecurity,socialcohesion,culturalrichnessandthe ability to innovate. Australia’sStrategicframeworkfor theInformationEconomy2004-2006providesthepolicyplatformneededto addressthesechallenges.This Frameworkseeksto:
With thefall in pricesfor computingpowerandincreasingsophisticationofsoftwareandcommunicationssystems,ICT hasbeenadoptedwidelyacrosseconomies.Countriesareinvestingheavilyin ICT-basedinnovationsandICT R&D, andnewwavesofICT-basedtechnologiesarewidelyanticipated.
Digital technologieshavealsotransformedthewayin whichtext, data,audiovisualandothercontentis created,managed,storedanddistributed. Theprocessofdigitisationandtheassociatedintegrationoftechnologieshasled to thetransformationof the information,communicationsandentertainmentsectorsandtheemergenceofnewclustersoftechnologies,products,industriesandusers.
ICT is also acritical partoftheinnovationprocessitself. ComputermodellinghasincreasedR&D efficienciesandICThasprovidedthefoundationandsupportfor thecreationofnewtools. Thebiological sciences,for example,arecurrentlyundergoinga profoundrevolution,basedlargely on theuseofgenomicsdataandIT advances.
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ICT is alsoenablingamajorinnovationin thewayin whichscientificresearchisconducted.e-Research,asit is calledin Australia1,involvesagreatlyenhancedcapacityfor large-scale,distributed,global collaborationin research,providinganewlevel ofscope,scaleanddetail. It includesaccessto verylargedatacollections,complexsimulations,highperformancevisualisation,andvirtual researchorganisationsamonggeographicallydistributedresearchers.
While relativelynewasastructuredconcept,e-Researchis startingto underpinallscientificdisciplinesincluding thesocialsciencesandhumanities.Becausescientificandtechnologicalresearchunderpinsmuchinnovationandourability to absorbnewtechnologies,this enhancedcapacityfor researchhasthepotentialto createavirtuouscycleof innovativeactivity. It is also emergingasa significantelementin advancingtheInformationEconomymorebroadlybecauseofthestrongsymbioticrelationshipbetweene-Researchandtheinformationeconomymoregenerally.
Australia’sICT industryalsohasarole to play in meetingthosechallengesandasasourceofhighvalueaddedproductsand services.Thoughsmallby global standardsthis industryremainsavery importantpartoftheAustralianeconomy.ICTproductioncapabilitycreatesa symbioticrelationshipbetweenusersandproducerssuchthatthe level ofsophisticationofusersis enhancedby thepresenceofproducersofICT goodsandservices. Indeed,thedevelopmentofmajorapplicationsin userindustriesis a significantform ofICT productionin its ownright. Thesedevelopmentsarebluffing thedistinctionbetweenICT productionanduse,adistinctionthatis yetto beadequatelyreflectedin standardstatisticalmeasures(seeCaseStudy 2 onSME ICT InnovationandProduction).
Nevertheless,theAustralianICT industryfacessignificantchallengesundertheinfluenceofglobalisationandtheriseofChinaandIndiaassignificantICTproducers.Thedevelopmentofaworld-classpublic andprivateICT researchbasewith critical massis an essentialcomponent,notonly ofourability to effectivelydeploythis technologyashighly effectiveusers,butalsoashighly competitiveproducersofICT goodsand services.
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AUSTRALIA’S INVESTMENT IN ICT R&D AND INNOVATION
In 2002-03businessinvested$2.15billion in ICT R&D (36.4%oftotalprivatesectorR&D)2 — onethirdofthis wasinvestedby non-ICTbusinessesandtwo thirdsbyspecialistICT firms. Australiahasbeenamongtheleadingcountriesin businessuptakeofICT. Mostbusinessesusecomputers.In 2003-04,74%ofbusinessesusedtheInternet,25%hadawebpresenceand 12%receivedordersvia theInternet.
While mostoftheICT usedwasimportedtechnology,Australiancapabilityin ICThasbeenimportantto achievingsignificantproductivitygainsandgeneratingnewICT-basedproducts,servicesandmethodsofproduction.
Publicsectorinvestmentin R&D was$0.35billion in 2002-03. SomeofAustralia’sICT centreshaveestablishedinternationalreputationsandtherehavebeensome
While theterm is usedinterchangeablywith“e-science”,theuseof”e-research”emphasisesitsbroaderapplication.2 ABS cat8126.0
The Government’sstrategyfor theICT industrybuilds on the 1997InvestingforGrowthstrategywhich targetstheenvironmentfor ICT industrygrowth,emphasisingtheimportanceof strongleadership,attendingto fiscal andcompetitionseffings,gettingAustraliaonline, andaddressingmarketfailuresthroughgeneralprograms(egtheInnovationInvestmentFundandR&D startprogramsadministeredby DITR).
Operatingwithin andbuilding on this context,the2003FrameworkfortheFuturereport,“EnablingourFuture”,wasdevelopedasasharedindustry,government,researchcommunityunderstandingto provideaguidefor thekeyelementswhich arenecessaryto sufport the longertermdevelopmentoftheICT industryandnationalICT capability . In particular,“EnablingourFuture”recognisesthechangingnatureoftheICT industry,whereICT is becomingsointegratedinto productsandservicesacrosstheeconomy,thattraditionalapproachesto descriptionsof theindustryarebeingchallenged.
ICT Centre of Excellence— National ICT Australia Ltd (NICTA)
Researchis a significantcontributorto innovationandis amajorsourceofintellectualpropertythatcanbecommercialised.Also, giventhestrategicimportanceofICT toall sectorsoftheeconomy,a strongnationalcapacityin ICT researchis a foundationto thenationaleconomicgrowth.
TheAustralianGovernmenthascommitted$380mto June2011 for theICT CentreofExcellenceprogram. Theprogramis beingdeliveredby NationalICT AustraliaLtd(NICTA)5, whichsignedafundingdeedwith theAustralianGovernmentin October2002. NICTA is an independent,not-for-profitcompany,with its four foundingmembers- theUniversityofNSW, theAustralianNationalUniversity(ANU) andtheNSW andACT governments- eachcommittingabout$20m in cashandin-kindoverfive yearsto June2006,with furthercontributionsto bedeterminedfor theperiodto 2011.
TheGovernment’sobjectiveforNICTA is thatit will beaworld-class,world-scaleICT researchandresearchtraininginstitutethat takesAustralia’sability to createandexploit informationandcommunicationstechnologyto anewlevel. TheCentre’sfourcoreobjectivesareto:
NICTA’s researchfacilities andeducationprogramhavegrownrapidlysinceitsestablishmentin 2002. At 31 December2004NICTA hadsome155 researchersworking on over30 projectsat four laboratories,andover 130 PhD students.NICTAwill reachfull operationallevel by December2007whenits five laboratories(two in
awarenessacrossNICTA for its researchersand students;• anEntrepreneur-in-Residenceprograminvolving an individual whohasahistory
of successfulventurecapitalbacked,start-upcompanydevelopment,togetherwith extensiveexperienceandconnectionswith investorsandpotentialindustrypartners.NICTA hasalreadyselectedits first EiR,AndreasJonsson,who isworkingto commercialiseGreenPea’stechnology;
• establishmentofawebsitesubscriptionserviceto allow firms to registeraninterestin NICTA’s programsandactivitiesandreceiverelevantonlineupdates;
• regularinteractionswith businessthroughavarietyofforumsto improvemutualunderstandingofactivitiesandneedsofNICTA’s work and SMEs’ requirements;and
• theestablishmentofaRoundtableprocess,in conjunctionwith CSIRO,DSTOandICT CRCs,providingaplatform for improvedcoordinationofresearchandlinkageswith industry.
AdvancedNetworksProgram
As indicatedin theopeningparagraphofthis submissiontheestablishmentofanefficient andeffectivecommunicationsinfrastructureis oneofthis Department’smajorobjectives.TheAustralianGovernment’s$60million AdvancedNetworksProgram(ANP) is directlyintendedto contributeto this goal. It supportsthreeprojects,CeNTIE,GrangeNetandm.Net,to develop,trial anddemonstrateadvancedexperimentalnetworksandto supportR&D using thenetworksastestbedsforinnovativeapplications.
TheGovernment’sinvestmentof$60million is beingsupplementedby over$120million in cashandin-kind contributionsby theconsortiummembersofthethreeprojects. Over$47million is beinginvestedin advancednetworkinfrastructure,includingnearly$25 million ofAustralianGovernmentfunding. Theremainderofthefundingsupportse-Researchandthedevelopmentof newleadingedgebroadbandapplications.
CeNTIEandGrangeNetprovidemulti-gigabitoptic fibrenetworkslinking researchinstitutionsin Perth,Melbourne,Canberra,SydneyandBrisbane.CeNTIEandGrangeNetinterconnectto form anationalresearchbackbonefrom Brisbaneto Perth.
• CeNTIEhasdemonstratedateachingmodelusingnetworkedhaptictechnology(simulatingfeel)for temporalbonedissection(asurgicalprocedurerequiredforcochlearimplants). CeNTIEis collaboratingwith StanfordUniversityMedicalSchoolwith an aim of conductinglong distanceteachingtrials for surgicaltrainingusingthehaptictools;
• GrangeNetandtheAustralianInstituteofSporthavedevelopedasportstraininginitiative usinghigh-speeddigital informationtransfer,which isbeingpilotedattheAIS for swimmingcoaching;
• GrangeNetandthePARADESICproject, acollaborationbetweenthreeuniversitieswhich is digitisingand storingfragilerecordingsofthousandsofendangeredAsia-Pacificlanguagesandmusic,areresearchingmethodsfor
• GrangeNetexperimentalactivitiesincludewavelengthreservation/cloudby-passfor highvolumeprojects(e.g. in astronomy,particlephysics,bioinformaticsandresearchbasedvideodeliverysystems);applicationofnovelprotocols;developmentof distributed,network-attachedstorage;andtheaccessgrid for highqualityvideoanddatasharingbetweenmultiple sites;
• m.Net’sGallery4 initiative is providingrichmediacontentdeveloperswithdevelopmentsupportandfacilities for testingnewapplicationsandservicesforwirelessandmobilebroadbandenvironments.Gallery4 facilitatescommercialoutcomesfor thesubscribingcompaniesandassistswith thecommercialisationofAustralianapplicationsin internationalmarkets;
The$122m(in total) ICT IncubatorsProgramprovidesadirect pathwaytoinnovation. Theprogramis providingfundingof$36 million to 2007-08to eightincubatorsacrossAustraliathroughBackingAustralia‘s Ability — BuildingourFuturethroughScienceandInnovation. This programis anextensionto theBITS IncubatorsProgramwhichprovided$78mto ICT incubatorson mainlandAustraliaandtheBITSIntelligentIslandProgramwhichprovided$8m offundingto anICT incubatorinTasmania.Theseincubatorsprovideseedcapital,businessadviceandmentoringtopromisingICT start-upfirms with theaim ofacceleratingtheirgrowthanddevelopment.
A numberofincubateesin theprogramhavebeenrecognisedforwinning industryawards,securingongoingventurecapital,achievingexportsuccessesandmakingtechnologicalbreakthroughs.
CaseStudies4 and 5 showhow theICTIP canassistSMEsin theICT sectorachieveapathwayto commercialisation.Furthercasestudiesandinformationon ICT start-upsin theprogramcanbeobtainedthroughtheICTIP webpageon DCITA’s website,DCITA’s DATAmagazine and in previous BITS Incubator Program annual reports.
Information TechnologyOnline (ITOL) Program
TheInformationTechnologyOnline(ITOL) programis anAustralianGovernmentfundingprogramadministeredby DCITA designedto acceleratethenationaladoptionof e-businesssolutions,especiallyby small to mediumenterprises(SMEs).
TheITOL programencouragesindustrygroupsandsmallbusinessto identify andadoptcommercialusesofthe internetto supportproductivityandprofitability. Theprogramis acatalystfor industrygroupsto workcollaborativelyto solvecommonproblemson an industrywidebasis,ratherthanworkingindividually anddevelopingmultiple solutionsandin somecasesunnecessarilyduplicatingefforts. Thepreferrede-businesssolutionsareopenandinclusivefor all participants.
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Since1996, about$12million hasbeenallocatedto 110 projectsacrossadiverserangeofindustrysectorsincludingagriculture,healthandpharmaceutical,buildingandconstruction,automotiveandwelfaregroups. Theseprojectshavebeenlocatedinregionalandmetropolitanareasandin all Australianstatesandterritories.
The project CollaborativeB2Bfor SMEsin theMining Industrywasto addresstheneed for SMEsto be able to trade electronically with boththeirlargertradingpartnerswho were enabled for e-Business already, as well as their trading partners who had nopresent e-Business capability. Theprojectdeliveredtwo (2)products,namelyTradeRouteTMaB2B “middleware”solutionappropriatefor SMEs,andTradeFormsTManadvancedWebservicesbasedsolutionfor electronictradingwith partnerswhopreviouslyusedmanualmethodssuchasfax, emailandpost.
The project was developed by, XMLYes Pty Ltd, in collaboration with MSA(Australia) Limited, PT NewmontMines, QuadremInternational,IBM Australia andMincom.
GlobalElectronicInvoicePresentmentandPayment
The project GlobalElectronicInvoicePresentmentandPaymentwasto developanexport c-commerce service trusted by both exporters and importers that can besecuredsimplyandcost-effectivelyoverthe Internet without paperwork or timedelays. Thesecureserviceprovidesreliablecross-border,multi-currencyinvoicingandpaymentcapabilitiesdesignedfor smallbusinessexportersandimporters.
Only 31,000of 1.1 million AustralianSMEsareexporters.To effectivelybuy andsellgoodsworldwide,importersandexportersmusthavean effective,efficientwaytosendandreceivepayments.Theyneedcost-effectivelogisticsservicesto ship goodsandtrackshipmentsglobally. Theyneedto meetcross-borderregulatoryandcompliancerequirementsandmaketheirbusinessesscalablefor global tradingwithoutlargeupfrontinvestments.
TheMyExportsportal is aplatform to enablebusinessesto rampup theirglobaltradingwithoutincreasingstaffingoranytechnologyinvestment.Allowing overseasbuyersto payfrom theirbankaccountsin theirlocal currencyatno costcanincrease
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salesby makingit simpleandconvenient.Australiansellerscanavoidthehighcostsandrisksofcreditcardpaymentswith aflat AUD$5.50perpaymentreceived.
Theprojectwasdevelopedby PaymentPty Ltd, in partnershipwith AustralianTradeCommissionandDanzasPty Ltd.
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CaseStudy 1 - ICT-based innovation in the Australian manufacturing sector
A recentlycommissionedresearchstudyinto theuseofICT by “non-ICT”manufacturershasrevealedthepowerful influenceICT hasonbusinessinnovation6.Basedon interviewswith managersin industrythereportfoundtherewaspervasiveexploitationofICT throughoutthemanufacturingsectorin all aspectsof thevaluechain— research,productdevelopment,production,supplyanddistribution,customerrelationshipsandpostsalesservice. ICT is alsofoundto beextensivelyusedincorporatemanagementandadministrativesupportfunctions.
A keyfinding is thatinnovationin theapplicationofICT hasasignificantimpactonproductivityandprofitability. ICT is asignificantenablerofproduct,processandbusinessmodel innovationwithin themanufacturingsectorsothatthecleveruseofICT andincorporationofICT becomesaproductandservicedifferentiator.
Theavailabilityofdigital informationwasfoundto beoneofthedirectdriversofinnovation. It is enablingnewmanagementarrangementsandthedevelopmentofnewbusinessmodels. Forexample,geographicallydispersedsupplychainscanbemonitoredandcontrolledthroughICT. Overseassuppliedenterprisesoftwareoftenrequiresfurtherdevelopmentsof specialisedproductionfacility basedintelligencesystemsandprocessexecutionsystemsin orderfor to achievethefull potentialofICTin industryandbusinessspecificoperatingenvironments.
Manufacturingfocussedindustry-universitycooperativeresearchcentreswereidentifiedasplaying asignificantrolein supportingthehiddenuseofICT. TheresearchoutputsofmanycentresareICT software,hardware,tools andproductsdesignedfor usein manufacturingprocesses.
Thestudyconcludesthat, asthepervasiveimpactofICT grows,ICT is likely tobecomealesseasilydistinguishablecauseofimprovedproductivityandperformance.Theparadoxwhich arisesis that thestrongertheproductivityimpactofICT, theharderit is to measurethe impact. It alsoimplies thatexistingstudiesunder-estimateICT’s rolein transformingmanufacturing.
6 Digital Factories. the Hidden Revolution in Australian Manufacturing, HowardPartners,(in draft),
April 2005.
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CaseStudy 2- SME ICT Innovation and Production
Therehasbeena significantunderestimateofthewidespreadinnovationin, andproductionof, ICT andothergoodsandserviceswith embeddedICT by Australianfirms.
A recentSensisreportforDCITA on ICT productionin AustralianSMEs7 foundthat16%ofSMEs acrossthe economywereinvolved in oneormorefacetsofproductionofICT goodsorservicesandthat89%offirms involved in ICT productionwerenotspecialisedICT firms. Basedon the sampleof 1800SMEs,Sensisestimatedthat thetotal amount of revenue from the production of ICT goods and services by all SMEsfor sale or for own use was about $15.5billion over the 12 months to April 2004.SMEswerealsoestimatedto becontributingatleast$850million in ICT exports.
The success of Radiata Communications, a high-speed wirelessnetworkingstart-upcompany, is underpinned by excellencein R&D, a long-terminvestmentin basicresearch, inter-personal networks, active business leadership and a groundbreakingtechnologythatreachedthemarketaheadofits competitors.
Radiatawasformedin 1997to commercialisedevelopmentwork thathadbeenundertaken by CSIRO and Macquarie University in wirelesslocalareanetworks(LAN), andin responseto themarketpotentialthathadbeencreatedby anewinternationalstandard(IEEE802.11a) in wirelessLAN. R&D into wirelessLANbeganat CSIROin thelate 1980s,building on theradio-astronomyresearchprogramthathadbeendevelopedoverseveraldecades,andwhich asaresulthadestablishednetworksofresearcherswith stronglinks to industry.
In 1998,Radiataobtainedan AuslndustryR&D Startgrantof $750000that enabledthecompanyto completean early,workingprototypeof its technology. Overthefollowing two years,Radiatadevelopedthe first integratedwirelessLAN chip thatconformedto theIEEE 802.1la standard,andthis achievementgeneratedsignificantinterestfrom anumberoflargeUS companies.
In 2000thecompanywasboughtby CiscoSystemsin adealthenvaluedat$U5295million, aspartofCisco smoveintowirelessnetworking. Themoveresultedin Ciscolocatingits wirelessLAN researchhub in Australiain ordertocapitaliseon thestrengthofRadiata’sresearchcapabilities.At thetime, Radiatawasoneofa smallnumberof companieswith thecapabilityto produceasinglechipsolutionfor 802.11networking,andtheacquisitionenabledCiscoto secureaprominentplacein thewirlessnetworkingarena.However,with thematuringofthemarketforwirelesschipsetsandtheerosionofmargins,Ciscodecidedto wind up theoperationsofRadiatain 2003.
OneofthefoundersofRadiata,Dr Neil Weste,who left Ciscoprior to thewindingdownofRadiata,hasgoneon to form g2 Microsystems,awirelesstechnologyventurefocusedontheRadioFrequencyID (REID) market. Thenewventurehasmanagedto attractsubstantialinterestfrom investors,includingthesuccessfulclosingin 2005ofa$U56million investmentroundwith newinvestorsStarfishVenturesandreturnbackersDB CapitalPartners,theprivateequityandventurecapitalarmofDeutscheAssetManagement(Australia)Ltd.
ThestrongtrackrecordofG2‘5 founders,built up asaresultoftheirinvolvementinRadiata,wasadecidingfactorin securinginvestmentcapital. DB Capitalwasquotedassayingthatit wastheRadiata“pedigree”ofG2’s foundersthatplayeda significantrolein convincingit to investin thestartup at anearlierstagethannormal8. G2Microsystemsdemonstratesthesignificanceofserialentrepreneurship,wheresuccessfulteamsofentrepreneursbuild on theexperienceandknowledgefrompreviouscompaniesto developothersuccesses.
8 AustralianVentureCapitalJournal,June2004,pg 15
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Research being done at the University of Cambridge’s Centre for EntrepreneurialLearning hasshownthehistoricalsignificanceofrelationshipsbetweenresearchers,industryandinvestorsin therapidgrowthofCambridge’shigh techprecinctor“Technopole”,andtheimportanceofcontinuingto encourageandcapitaliseon theserelationshipsif newtechnologiesandnewventuresareto flourish9. ThesuccessofRadiataclearlyillustratestheimportanceofrelationshipsbetweenindividualsin thedevelopmentandgrowthofsuccessfulcompanies,andthepotentialimportanceofthoserelationshipsto newventures.
Zentronix developed intellectual property in data miniaturisation technology (DMT)usinginformal sourcesofcapital— family friends and personal savings. DMTis aninnovativeanduniquedataminiaturisationtechniqueandencodingalgorithmthathasbeenprovento dramaticallyimprovethespeedofaccessto text files, databasesandvector-basedimages,andsignificantlyminimisetheelectronicstoragerequirementsofdataonstoragedevices.
BlueFireconsideredthatZentronixhadagenuinebreak-throughin the field ofcompressionandthatDMT wasaunique(andpatented)techniqueforthereductionoflosslessdatain datastreams.It alsoconsideredthattherewasa significantneedin theinternationalmarketfor lowerstoragecostsandhigherspeedtransmissionfor themassivedatarepositoriesbeingbuilt by organisationsaroundtheworld. Zenotrinx’sWindspringwasableto provideworkingdemonstrationsoforder-of-magnitudejumpsin this area.
Havingappointeda CEO andachairmanwith significantexperiencein technologycommercialisation,BlueFiredecidedto leadacapitalfundraisingroundof$900 000to fundits migrationto theUnitedStates.
Onthere-launchofthebusinessin SanJose,California,furthercapitalfundraisingwasundertakenthatnettedafurtherUS $2.8million (AUD $4.2million) at avaluationuplift of about80 percentwithin threemonthsofZentronixreachingtheUnitedStates.
In 2004,ZentronixrenameditselfWindspring,accomplishingsignificantmilestones,filling out its managementteam,releasingits first fully commercialproduct,andengagingMotorola,Microsoft, andQualcommin partnershipanddistributionrelationships.
Further information onWindspring can be found at www.windsvrinzcom
TheMPEGdigital videomarketis growingrapidly.MediaWare’ssoftwaredevelopmentresultedfrom an increasingcustomerdemandfor accessto MPEGvideoovertheInternetandintranet.ThevolumeofMPEG-i andMPEG-2contentavailableon theInternetis constantlyincreasing—tomakethedatausefultheend-userrequiredtechnologythat enabledthisdatato be sorted,editedandaccessedthroughexistingbrowsertechnology.TheMediaWaresolutionsareadaptableto networksandofferboth localanddistributedsolutionsfor mediaaccess.Thesoftwareallows asignificant level of interactive media manipulation regardless of the bandwidthavailableto thecustomer.
MediaWare Solutions was accepted into the Epicorp incubator in February 2002 andgraduatedin June2003.BITS fundingof$450000 wasprovidedoveraperiodofsixmonthson themeetingofestablishedmilestones.
MediaWareSolutionshassuppliedits technologyto anumberofmajordefenceandbroadcastcompaniesincludingtheAustralianDepartmentofDefence,Raytheon(UnitedStates),GeneralDynamics,Thomson,LockheedMartin,CBS,CNN, SBSandABC (US). MediaWareSolutionsalso sells to digital videoOEMssuchasN2BBandPathfireandhascompetedfor anumberofmajoroverseas-basedtenderswhileupdatingits rangeofproducts.Todayover95%ofits revenueis sourcedfrom theUS.
In April 2005,MediaWareSolutionsannouncedthatit wasexpandingits recentlyopenedofficein WashingtonDC on thebackofwinninga significantcontractwiththeUS navyto supplyvideoprocessingsoftwarefor UnmannedAerial Vehicles(UAVs). Its technologyis usedby theUS forcesto capture,downloadandmanipulatevideowhile still in acompressedform providingsavingsin timeandbandwidthresources.
MediaWare’stechnologyhasalsobeenincludedaspartofaconsortiumwhich iscurrentlytenderingto supply theAustralianArmy with pilotlessaircraft.
Further information on MedjaWare Solutions can be found atwww.mediawaresolutions.com.
In the contextofrapidchange,therising importanceofknowledgeandskills,globalisation,andincreasingcustomersophistication,othercountriesareusinginnovationpolicy, includinginformationeconomypolicy, to positiontheireconomiesalonghighergrowthtrajectories.
Competitiveadvantageresidesnotonly within thefirm but is shapedby theexternalenvironment.Improvingcompetitiveness,therefore,becomesacollaborativeprocessinvolvingmultiple levelsofgovernment,companies,educationalinstitutionsandinstitutionsof collaboration.
Theincreasingeffortsof ourcompetitorsmeansthatover-relianceon a fastfollowerstrategyis unlikely to closethis gap.
In suchanenvironment,policy leamingbecomesimportantparticularlyaspolicyactorsaresignificantin innovationsystems,andpolicy interventionsfacehigh levelsofuncertainty.
What is Innovation?
Innovationis acomplex,creative,adaptive,symbiotic,leamingprocesswherebyknowledgeandnewwaysofgeneratingadditionalvaluearedevelopedandappliedeitherthroughproduct,processandorganisationalinnovation. It is acomplex,interactive,andinterdependentsocialprocess,characterisedby continuousfeedbacksratherthanlineartransitions. It is alsocontinuousratherthanintermittent,in whichcapabilityandperformancedevelopscumulativelyovertime.
Becauseinnovationis theresultofacomplex,emergentsystem,it cannotbemodelledin areductionistway. Thus,while elementsofthe systemarenecessarilydescribedina serialfashion,it is importantnot to takethesedescriptionsasimplying linearcausalrelationships.Inparticular,it is notgenerallytruethatthe linesofcausalityflow fromscienceto technology,to commercialisation,andthento use,thoughit canbe true inparticularcases.TheOECDhasusedthefollow diagramto illustratethecomplexinteractionsinvolvedin the innovationsystem.
Consequently,innovationcannotbeimmediatelyidentifiedwith particularinputssuchasthelevel ofR&D (thoughit is agreedthatthe level ofR&D is importantto thesystem)orwith particularoutputmeasuressuchasMFP growth. Forthesestrongconceptualreasons,the innovationsystemandpoliciesimpactingon it, haveto beconsideredin aholistic fashion. Firms do not innovatealone,butby interactingwithcustomers,suppliers,competitors,consultingcompanies,technologicalinstitutesanduniversitiesin waysthatarecomplexanduncertainbutwhich seeksto exploitknowledgeandreducerisk. Therelevantknowledgeis distributedacrossmanysectorsand agents.
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Australiaseemsto showarelativelyhigh-levelofpath-dependency,which is onlyslowly generatingsustainablenewpathsoftechnologicalaccumulation.While wehaveemergingnewfirms andniches,therearefew majornewtrajectories.
Commercialisationis only oneimportantmethodof extractingeconomicbenefitfrominnovation. TheOECDhasmodelledthecomplexinteractions
What doescreatinga competitive innovation systeminvolve?
It is acceptedthatknowledgeandinnovationarecharacterisedby significantmarketfailures,justifying governmentactionto createacompetitivesystemwhichappropriatesthebenefitsfor Australia. An effective,competitivesystemrequireseachofthefollowing elements,andafailure in anyoneelementcandegradetheperformanceofthewhole system:1. A cultural environmentsupportiveofcreativity,gooddesign,quality
o particularlybybuildinggeographicalconcentrationsoftheabovecompetencies,technology-basedfirms andtheinstitutionssupportingknowledgecreationandtransfer.- spatialproximity is importantin promotingcompetitionpressures,
interactivecollectivelearningandtrustamongnetworksoffirms and
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other knowledge producers, and creates the capacity to assemblefragmentedandtacit knowledge,maximisingknowledgespillovers.
- clustersincreasethe level ofproductivityofconstituentfirms, thecapacityfor innovationandproductivitygrowth,andstimulateandenablenewbusinessformation— all in a virtuouscycle.
- theyofteninvolve direct foreigninvestment.o aninnovativebusinesssectoremphasisingrapidtechnologyuptake,
businessprocessimprovementsandknowledgeassetsandmanagement.o asufficientnumberofinnovativelargeandsmall firms to capturethe
benefitsofinnovation.- alackofinnovatingAustralian—basedfirms, particularlyin areas
matchingourpublic researchefforts,hasbeenamajorweaknessin theAustralianinnovationsystem. In particular,wehavefew largeR&Dintensivefirms.
- while mostSMEsarenot innovators,innovatingSMEsplayamajorrole undertakingmoreintensiveandoriginal innovations.
- direct foreigninvestmentby TNCsprovidesapossiblemechanismfortechnologytransferintoAustraliaand afocusfor newAustralian-basedinnovation.
o Without stronglinkagesscientificandtechnicaladvancescandiffusetoothercountriesfasterthanthey canbeexploitedathome.
o Stronglinkagesto the innovationsystemsofothercountriesarealsoimportant.
4. Specialisationin selectedareas.o Australiahasarelativelylow level of technologicalspecialisationfor a
small economy.o Australia’sexistingspecialisationis in agriculture,primarymetals,mining
andoil & gaso small countrieslike Australiahavelittle choicebut to focustheir
innovationefforts if theyareto achieveanycritical massin anyarea.o this will happeneitherby accidentorby deliberatechoice.o it makessensethereforeto coordinateresearchprioritiesand industrial
o theexistenceofeconomiesof scalein innovationeffortsimplies thatAustralianfirms musteitherspecialise,ordevelopstronginternationallinks,orboth.
5. Creating,appropriatinganddiffusingtechnologieso aresearchsectorthatunderstandsthetechnologynecessaryto produce
knowledgeandinnovationsrelevantto Australianconditions,resourcesandopportunities,andlink to newknowledgedevelopedoverseas;
o 98% oftechnologicalinnovationoccursoverseasandmuchis importedin capitalgoodsor throughdirect foreign investment.
o small economiesbenefitstronglyfrom capturingoverseasknowledgeandinnovation.
6. A robustknowledgebase,with highereducationandresearchbodiesthathaveastrongcommitmentto excellenceandagoodunderstandingofthe significanceoftheknowledgebaseto the innovationsystem.
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7. A globally competitiveinnovationinfrastructurein universities,researchorganisationsetc.
o appropriateselectionproceduresareneededto ensurethequalityofresearchandafocuson theareasofgreatestvalue.
o thereareoftenlong timelagsinvolvedbetweeninvestmentin scienceandresearchandtherealisationofdirectlyrelatedeconomicbenefits
o investmentin thecreationofhighqualityhumancapital8. PromotingtheapplicationofICT becauseofits particularrole asageneral
o TheDepartmentofCommunications,InformationTechnologyandthe pArts (DCITA) andtheformerNationalOffice for theInformationEconomy(NOIE) havecompletedanumberofstudiesindicatingthesignificantimpactthat ICT hason productivityandeconomicgrowth.
o ThepromotionofICT throughstudiesandGovernmentprogramsis animportantfactorin advancingtheICT agendain Australia.
anddevelopandurgentlyimplementstrategiesto harnessICT to achievebroadnationalobjectivesin areassuchashealth,educationandsecurity,andimprove coordinationof programs.• A meetingof theOnlineCouncil(OC) shouldbe convenedby theCommonwealthwithin the
next threemonthsto discusstheoutcomesandrecommendationsof this Report,andtaketheReport’sagendaforward, includingaddressingissuesofcoordinationof ICT strategiesandprioritiesbetweenjurisdictions.
2. A forumof industryleadersshouldtakeplacewithin thenext threemonthsto:• discusspracticalways in whichindustrycantakeforwardtherecommendationsin this report
3. Governmentsandleadersin industry,educationandtheresearchcommunityshould:• recognisethecritical enablingroleof ICT in improvingproductivity,driving business
efficienciesandsupportinginnovation,andtheimportanceof a strategicinformationcapabilityto achievingbroadnationaleconomicandsocialgoals;
• explicitlyreflectthis role in thedevelopmentof their organisationalstrategiesandpolicies,andtheimplementationof programsto achievethosestrategies;and
7. NICTA, CSIROandDSTO shouldprovidenationalresearchleadershipby developingthemselvesashubsof ICT researchactivity, withcloselinks to otherICT researchteams,andstronglinks to industry.
• Thesethreeorganisationsshouldcoordinatetheestablishmentof a regularround-tableofmajorpublicly-fundedICT researchgroups,includingtheICT-relatedCRCsandappropriatelargergroupsin universities,to:o developanimplementationplansettingoutactionsto respondto recommendationsin this
Reportin a coordinatedfashion;o shareinformationonICT R&D, includinginternationaldevelopments,andbuild
relationships;o explorewaysof moreeffectivelycommercialisingR&D andlinking with industry;o coordinateresearcheffortsandpriority settingactivities;ando assistin efforts to build andcoordinateICT R&D infrastructure.
An annualreportonround-tableactivitiesshouldbeprovidedto theMinisterfor CITA.
8. Commercialisationof ICT researchshouldbea majorfocusof all publiclyfundedresearchorganisations,andresearchfundingbodies,in their strategicresearchplanning,andcommercialgoalsshouldbebuilt into all stagesof theirICT researchactivities. Businessesandindustryassociationsshouldtakeactionto communicatetheir R&D needseffectivelyto public sectorresearchorganisations,andengageandpartnerwith thoseorganisationsin thedevelopmentoftheircommercialisationstrategiesandtheconductoftheir ICT R&D.
16. TheCommonwealthGovernment’sreviewof its Digital Agendalegislationshouldexaminethebalanceofrights betweencreatorsandusersin a digitalenvironment,in thecontextofAustralia’sfutureasaninformationeconomy,andfocusonensuringthatAustralia’scopyrightregimedoesnothinderinnovationandinvestment.• ICT businessleadersandindustryassociationsshouldensurethattheperspectivesoftheICT
industryareconsideredduring that review.
17. In relationto governmentownershipanduseof intellectualproperty(IP):• theCommonwealthshouldadoptandpromulgatemanagementpracticesfor its IP which
encourageandmaximiseindustrydevelopment,consistentwith themanagementofgovernmentIP asa public asset,andshouldregularlyaudittheir IP to reviewopportunitiesforits commercialdevelopment;
• DCITA, andAG’s shouldensurethat theCommonwealth’sinformationtechnologyIPguidelinesareup to date,encouragetheirwidespreadadoptionanduse,anddisseminatebestpracticeexamplesof IP management;
• theCommonwealthshouldwork with StateandTerritorygovernmentsto achieveuniformpoliciesin theuseof CrownIF.
Recommendation16(c)of theBroadbandAdvisory Group,that theCommonwealthshouldensurethat its IP policiesdo notactas abarrierto thedevelopmentof digital contentindustries,issupported.
• developcoursesandcurriculato ensurethatstudentsstudyingin areasotherthanICT developthebroaderconceptualandpracticalskills to beICT-fluent in their ownprofession;
• link ICT andotherscienceandengineeringcoursesat bothundergraduateandpostgraduatelevel,so thatICT studentsareexposedto issuesinotherdisciplines;and
• give greateremphasisto thedevelopmentofbusiness,projectmanagementandentrepreneurialskills in ICT studentsandstaff.
20. Tertiaryeducationinstitutions,individualbusinesses,andindustryassociationsshouldworktogetherto:• developanddesignmore flexible, responsiveandtargetedcoursesin ICT to providefor
specific industryneeds;and• morecloselyinvolve industryin educationprograms,for examplethroughsponsorship,direct
involvementin teaching,supportfor staffexchangesandsecondmentsbetweenindustryandeducationinstitutions,andtheprovisionof work experiencefor students.
21. Universitiesshouldfully examinethesignificantstructuralissuesrelatingto ICT teaching,includingthe substantialgrowthin thestudent-staffratiosandthedifficulties in attractingandsecuringteachingstaff ina competitivemarket,andtakeactionto redressthem.
Thereshouldbe a particularfocusonprojectswhich wouldincreaseAustralia’sinnovationcapacityandbuildstronglinks into ourR&D infrastructure.
23. Australiangovernmentsshouldwork with eachotherandwithpeakindustrybodiesto:• adoptwell-coordinated,aggressiveinvestmentattractionandembeddingstrategies,which
focusonmaximisingthelinkagesofMNCsinto theAustralianeconomy,to obtainthegreatestpossibleflow throughinto Australianfirms in termsof skills, knowledgeandaccessto globallinkagesandnetworks;and
• undertakecoordinatedandsustainedefforts to promoteAustralia’sICT strengthsinternationally.
24. LocalbranchesofMNCs shouldexpandanddeveloptheir role in investmentattractionandretentionincludingthrough: