It is clear that innovation and technological change got us into many of the messes we are in today, but only innovation and technological breakthroughs will get us out of trouble.

My career represents a somewhat schizophrenic split between technology strategy and policy, and varied involvements in the humanities and arts. This schizophrenia, however, has reinforced my enduring interest in cross-disciplinary and trans-disciplinary practice, especially in mission-directed industrial research.

In my service on the boards of both research and cultural agencies, I confront the recurring irony that it is the industrial research agencies such as CSIRO that more actively seek to develop cross-disciplinary capability-building than my colleagues in the humanities or social sciences.

One area of unfinished business in innovation policy and practice is how to secure the greater engagement of the humanities and social sciences around the innovation table. Crudely put, their contribution remains marginal and uninfluential (except, of course, for the negative influence of the neoclassical economists, who simply don’t believe in innovation policy and public investment in it).

Another of my hobby horses is how we promote a greater leadership role from the (learned) academies in setting national priorities, and how the several academies might better coordinate and leverage their potential contributions to public policy.

At one level there has been no shortage of attention to innovation over the past few years.

First we had a Green Paper from an expert panel commissioned by the Government. Venturous Australia was released in September 2008. The Government’s White Paper, Powering Ideas: An Innovation Agenda for the 21st Century, was issued almost nine months later, in conjunction with the Federal Budget. Although there has been considerable attention to the actual measures announced in the Budget, the White Paper itself has largely gone unnoticed. Many people with an interest in innovation still don’t know it exists.

This is a pity, because the innovation agenda must be kept alive. This is all the more important because of the need to draw lessons about innovation in times of recession, and in facing up to global challenges like global warming where the responses need to be more than the sum of national strategies and positions. Many of the challenges we now face call for transnational thinking and approaches.

Looking back over our work in the past few years I now wonder whether the canvases we have been working on were too small, and whether we have sufficiently stepped back to look at a bigger picture of the paradigm shifts and challenges we face in the 21st century.

The White Paper

In assessing Powering Ideas it is important to note that it is more than a response to Venturous Australia, which has become just one report among many on which the White Paper builds. The Government statement claims to also address the 2007 pre-election statement, New Directions for Innovation, Competitiveness and Productivity, the CRC Review, the textile, automotive and pharmaceutical reviews, the review of higher education, the House of Representatives inquiry into research training, and the outcomes of the 2020 Summit.

No wonder then that, apart from the immediate Budget commitments, the White Paper is very general and open to many interpretations. The statement aims to articulate a 10-year strategy for Australia and it does this through setting very broad directions rather than describing pathways to a future.

In considering Powering Ideas I am highly mindful that, with hindsight, there were several blindspots in Venturous Australia and particular areas that I personally would have liked to emphasise more strongly, and I am sure other members of the Review Panel will have similar checklists. This is consistent with the point I made last year in transmitting the Report to Government – that we had not done justice to the depth of issues raised in consultations and that, with a subject like innovation, there is never a ‘final position’.

Innovation, like understanding, is a journey, a process of change, and not a destination. There needs to be a continuing discussion as circumstances change, as our understanding of the innovation challenge deepens, or as new opportunities emerge. The same point needs to be made strongly in considering Powering Ideas – it cannot stand as the last word.

Powering Ideas was released in conjunction with the announcement of Budget measures. There were laudable and very significant innovation measures announced in the Budget, especially given the economic circumstances. These measures are an important first tranche against a longer-term statement of commitment.

However, the word innovation occurs merely five times in the Treasurer’s 2009 Budget speech and strangely it is not part of an overall narrative about the position Australia is in.

Indeed, my one criticism of the Budget speech, as a literary work, is that it does not provide a narrative, a storyline. It talks about recession and the “momentous challenges” of the economic downturn, but does not pause to reflect and elaborate on the actual nature of these challenges so that we could frame our understanding of the appropriateness and scope of the necessary responses.

My biggest disappointment is that there is no echo, in the Budget speech or the accompanying commentary, of the point made strongly two years ago in pre-election statements that innovation is, and must be, a central plank of economic policy.

Innovation was rightly seen then as the glue linking competitiveness, productivity and national economic diversification beyond undue reliance on volatile resources booms.

The Prime Minister rightly highlights the importance and impact of the economic reforms of the Hawke–Keating Government in the 1980s in making industry competitiveness and productivity central issues for this nation. Almost overnight a protectionist, domestically oriented economy was exposed to global forces where, as someone put it during the 2008 innovation review, we lost the alibi that success could be “the survival of the least uncompetitive”.

However, there are several important points about our subsequent national experience over the past two decades that we have not stressed enough or explained sufficiently but which bear on how we think about the business of innovation into the future.

Core R&D and innovation destruction

One unintended, or certainly little discussed, consequence of micro-economic reform in the late 1980s and early 1990s was the destruction of core R&D and innovation capability in basic infrastructure areas of the economy such as telecommunications, water, transport and energy – all now vital in the context of climate change and globalisation.

There were at least three influences at work here.

1. The newly deregulated and privatised entities ceased to be demanding customers with scale.

2. Changes to procurement practices driven by the market and policy reforms saw the wind-back of corporate R&D in Australia, accelerating a more global trend in that direction.

3. The newly privatised utilities came under increasing equity financing and stock market pressures, affecting their capacity for indigenous R&D and reinvestment in infrastructure.

The basic stocks of research and innovation capability had been developed within a public-sector environment, but these stocks did not transfer naturally or directly into the successor entities. At the time there was no compensatory public-sector investment or policy focus to preserve capability. Now we are scrambling to rebuild capability in just these areas.

Innovation capability takes a long time to translate into socioeconomic benefit, so that the impact of capability destroyed or undercapitalised can have long-run consequences for competitiveness and our national ability to respond to important national challenges. There are important lessons for us here about always looking out for unintended consequences.

The productivity boom

There are also important lessons to be drawn from a better understanding of the productivity boom in the 1990s. Over the period from 1992 to 2004 the sources of productivity were highly concentrated in agriculture and just three service industries – wholesale trade, communications and finance.

The review panel noted that sustained productivity gains in agriculture were driven off a highly developed sectoral innovation system based on statutory producer levies, matched by the Commonwealth, and well-developed field extension services for technology diffusion.

It also noted two important insights about the forces at play in service markets.

First, Australia was enjoying the fruits of its first ‘education revolution’ of the 1970s – the entry into the workforce of a new cohort of ‘bright young things’, including an influx of women graduates into the workforce, increasingly IT literate and technology savvy. There is a salutary reminder here that there is a generational lag for benefits to accrue from an education revolution and that changing skills and attitudes within the workforce make a difference.

Second, most of the productivity growth in services was enabled by the deployment of ICT platforms, which supported innovative changes to business models and business processes. This highlights the crucial importance of enabling the adoption and adaptation of technology platforms in a small-country economy, where 98 per cent of the world’s innovation and technology is not invented here. It also reminds us that innovation, like knowledge, is cumulative – innovation builds on innovation.

The important follow-on question, of course, is why we have not seen comparable productivity gains in so many other sectors of the economy, especially the service industries like health, education and community services largely controlled by government. Not enough critical attention has been applied to this question.

The global recession has been a wake-up call. In our enthusiasm we tend to forget that innovation is not morally neutral – it can lead to bad outcomes as well as good. It was dazzlingly innovative financial instruments that eventually undermined the global financial system. This breakdown is now threatening to hollow out the crucial innovation pipeline of technology start-ups, as these start-ups find it increasingly difficult to find equity capital for growth or survival.

Also, we would not be debating emission trading schemes and global warming if it were not for 200 years of breakneck technological change and innovation. Accelerating technological change has changed the way we live and dramatically lengthened our life spans. But on the other side of the ledger has been the collateral damage to our planet and the prospects for sustainability and resilience.

We need to step back and look at a bigger picture. Research and science – broadly defined (in its original sense) as the domain of knowledge – is arguably going through its greatest transformation in 200 years.

Two centuries ago we saw the beginnings of the teaching and research knowledge paradigm we know today. Today a number of factors challenge old paradigms and create pressures for finding new ways of doing things, which include:

• the growing focus on life sciences and the built and natural environments as policy and research domains affecting society fundamentally (in place of the prior emphasis on natural and material sciences, and manufacturing industries;
• the emergence of a digital, networked information and communications infrastructure, which changes the dynamics of market capitalism and introduces new dimensions into the business of ‘doing’ science and research;
• the emergence of ‘open source’ and open innovation models of collaboration and collective action;
• the seemingly exponential growth of knowledge, and its underlying information and data pools, which calls for new approaches to information management; and
• the growing prominence and criticality of complex, wicked problems that are not amenable to traditional and linear problem-solving approaches.

New levels of effort

There is an increasing recognition that responding to complex societal problems such as climate change, population health, future energy resources and global food security requires new levels of trans-disciplinary, trans-sectoral and trans-national effort.

I am not sure that either the green or white papers on innovation adequately addressed these global trends or examined whether our current innovation programs and funding models might actually act as barriers to addressing them.

Thus the big piece of unfinished business – or rather business we have scarcely started – is how we act as global innovators to address the large-scale innovation needed to tackle trans-national and societal challenges beyond the reach or remit of stand-alone national innovation strategies or the ‘micro-innovation’ at a firm or industry level.

In early June 2009 I joined a group of innovation advocates from 11 countries, which met to canvas the formation of an i20 Group – an innovation 20 to mirror the G20 Group – to address the failure of current institutional frameworks to adequately address the custody and the mobilisation of large-scale, collective efforts around ‘innovation for society’.

This group has committed to work together to promote and advocate a global agenda. One extreme example of a transnational, large-scale challenge that has no natural owner or custodian is geo-engineering as a fallback, desperate response to global warming.

It is clear that innovation and technological change got us into many of the messes we are in today, but only innovation and technological breakthroughs will get us out of trouble.

As Hillary Clinton keeps remarking, let us not waste a good crisis. With unfinished business, and now pressing new business, we must keep the dialogue on innovation alive and urgent.

(This is an edited version of a recent address to the Victorian Division of ATSE.)
 
Dr Terry Cutler FTSE is an industry consultant and strategy adviser in the information and communication technology sector, and the principal of Cutler & Company. He is also the Deputy Chairman of CSIRO. Dr Cutler has held numerous important advisory and decision-making positions with Australian government agencies, including roles as Chair of the Review of the National Innovation System, the Information Policy Advisory Council, the Industry Research and Development Board, the Australia Council and the Australasian Cooperative Research Centre for Interaction Design.