Innovation, Research & Governments: the Entrepreneur’s Riddle

Following on from my Open Letter to the new Australian government, I wanted to spend some time reflecting on what innovation means in the context of fundamental vs applied research and take a look at what government can do to boost the entrepreneurial ecosystem.

I believe the Labor government and the anticipated Department of Innovation, Industry, Science and Research under Senator Kim Carr has an incredible opportunity to get things right. In effect, given the lack of effective activity in this area of late, they have a blank slate to work on and there is much they can do to ensure Australia takes its rightful place in the innovation pecking order.

Irving Wladawsky-Berger, Chairman Emeritus of the IBM Academy of Technology,  argues that the big issues that need solving are increasingly prevalent in the real world, not as many researchers would have us believe, swanning around their ivory tower labs or exotic location academic conferences. He calls on researchers and innovators to personally (don’t send your PhD students or three admin assistants) step out into the real world and personally get to know these tough problems.

His view is that if they do this they will hopefully be able to come up with not only elegant, innovative solutions to the problems, but also with new ideas that might lead to fundamental advances in science and technology.

In some respects one might think that this is trite. Surely by now researchers and university academics get this. Apparently not. Irving points out that in some of his recent discussions he has encountered resistance to this way of thinking, even within the hallowed halls of MIT:

“…a well-respected MIT professor expressed his feelings that a university should focus pretty much exclusively in inventing new technologies, and leave it to industry and government to worry about how to apply them to problems in business and society at large.”

I have certainly experienced that approach as well, but there are folks out there working at the coal face trying to change stagnant perceptions like these. In some instances there have been great successes. I won’t mention names, but I have personally experienced a similarly senior professor go through a metamorphosis from staunch critic to commercial acolyte.

I agree with Irving’s view though, that the big challenges are above distinctions around applied versus fundamental. As he says:

” these problems are so incredibly complicated, and require such top talent and new knowledge that the distinction between fundamental and applied innovation is practically non-existent.

I like Irving’s take that we are talking about a multi-dimensional spectrum of innovations, a spectrum that requires an all hands on deck approach to solving – we don’t have the luxury of lofty distinctions when it comes to the environment or health care.

Irving’s comments were a response to a special report on innovation in last month’s The Economist. It’s interesting to note the argument made in one of the series of articles that the best thing that governments can do to encourage innovation is get out of the way.

In this article the author looks at how little positive effect government intervention has had on innovation in Europe:

Europe’s innovation malaise is the result of a complex mix of factors. Some places, like Ireland, Finland and parts of Scandinavia, do better than others. And Cambrdige, England, can reasonably claim to have created Europe’s best innovation cluster, albeit one that falls far shaort of Silicon Valley. 

The main thing holding back continental Europe is that it is a lousy place to start a new company…last year, venture capitalists invested only about $9 billion in the EU, while their American counterparts splashed out some $45 billion on new ventures. The link between venture capital and innovation is a strong one.

There are many analogies between Europe and Australia when it comes to government’s approach to supporting innovation. Maybe its our colonial upbringing that inspires an innate desire to suffocate innovation through red tape and market barriers, but the new Australian government has a chance to move beyond this.

I have had a chat with a number of colleagues around the world about the unique position we are in – Australia is at an inflection point. Like Europe, we aspire to have a robust innovation system overflowing with new, thriving businesses.

How do we get there?

As John Wolpert, an evangelist for open innovation, puts it: “Make it cheap and easy to start and run companies. Make risk capital attractive to partake in by low capital gains. And then encourage a culture of giving by removing tall poppy attitudes through a systematic cultural program so that conspicuous giving is accepted.”

I totally disagree with the notion that in a country like Australia, the government should take a hands off approach to innovation. However, we do need to fundamentally break from the past.

There are many areas where the Department of Innovation can assist.

As highlighted in my Open Letter, they have already alluded to removing some of the bureaucratic fervor around such programs as Commercial Ready, but there is one area that is urgently in need of fixing.

I highlighted above in bold the quote about the nexus between venture capital and innovation. The former Australian government, recognising that the country’s venture capital industry is broken had started to introduce support for new VC managers under a follow-on IIF round.

However, that stalled when the elections were announced. In addition, it is my opinion that the form and quantum involved in this support was completely out of whack with the importance of a robust venture industry to innovation and the Australian economy as a whole.

My thesis is that the Australian government should allocate $1 billion towards kickstarting the Australian Venture Capital industry.

This funding should be placed in the hands of a number of VC managers with a level of oversight from the Future Fund, who would act like a limited partner does in the Silicon Valley style venture model. Allow these funds to build track record and they will, through their very nature, seek to increase funds under management, which they will be able to secure in droves as a result of their success.

A simple, yet bold step, but a big one that would put Australia onto the exciting journey of solving the Entrepreneur’s Riddle.

An open letter to the new Australian Government on creating an Innovation Future

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Firstly let me congratulate Kevin Rudd and his campaign team on their victory and welcome them as the government of this fine country, Australia.

As someone who has been in the innovation trenches for the past decade, I am enthused by Senator Kim Carr’s election message regarding creating “An innovation future for Australian industry”.

The purpose of this open letter is to highlight the initiatives set out in Senator Carr’s statement and give my considered views on what can be done to ensure the new government is able to maximise its impact in this area.

I totally agree with the opening statements put forward by Senator Carr that innovation is a key driver of productivity and economic growth. Yes, rolled out correctly, it can both drive the creation of new businesses and sectors and revitalise existing industries.

In terms of new businesses and sectors I support the focus in the paper on leveraging Australia’s depth of knowledge in clean technologies. Not only can we become world leaders in this arena, but we also stand the most to gain by getting it right. Imagine if you will, a terraformed Australian outback acting as the world’s lung and providing a purpose built, rich source of biodiversity.

In addition, there are two industries that can benefit greatly from an innovation boost. Firstly, as identified in the paper, the manufacturing industry which has long been languishing – think of a revitalisation across the current South Australian/Victorian rust belt as a hub for advanced manufacturing and nanotechnology and what this would do for the people’s of these areas as well as for the economy.

Secondly, Australia has been on the cusp of having a world leading games industry for many years. With a boost and some refocusing we are well set to produce global best practice in the broader gaming and virtual worlds arena – an industry that is set to boom over the next decade and one which many multinationals and countries are taking very seriously.

The paper states that Labor will.

Writing down notes on the paper, I incuded in my wishlist the appointment of a high profile Innovation Ambassador, only to turn the page and find that, after stating that Labor will build a culture of innovation and a national innovation system, Senator Carr had already thought along similar lines.

From my point of view the role of Innovation Ambassador should be a position from which to attract into Australia key entrepreneurial talent, tier one venture capital firms and multinational research undertakings.

The ambassador should also be tasked with connecting Australian business to new global technology in such a way as to incentivise rapid take up of innovations from around the world and position Australian business as thought leaders.

The paper makes the point that an innovative, creative economy requires a wide range of people interacting. One of my key criticisms of how innovation has been supported to date in Australia is the lack of recognition that there are other cogs in the wheel than just researchers. Without support for the entrepreneurs and business builders who take new inventions and productise them many potential products never get to market. It is heartening to see that Labor is cognisant of this.

The paper further supports the creation of a stronger research sector. Widening the ambit beyond scientific and technological disciplines into the social arena is a good move. Many of the most lucrative and disruptive products on the market today have emerged from the social media space. Think  Google, Youtube, Facebook and many others. In Australia we have the capabilities to produce similar products and companies.

Senator Carr calls for the replacement of the Research Quality Framework with a metrics-based research quality assurance system. It is expected this will cause the incumbent research institutes to lift their game and get rid of non impact producing research projects. Impact here being measured in means other than short term commercialisation or academic papers.

The paper talks about revitalising CSIRO and removing the barriers to the CRCs working efficiently. It is my supposition that the new Federal Department of Innovation should also look more closely at international models that have worked exceptionally well in producing both long term economic growth coupled with industry engagement. There are a number of examples, such as the Belgian research institute IMEC, that should be added into the mix.

An interesting approach mentioned in the paper is forming a coalition amongst smaller nations to maximise Australia’s innovation impact. Many countries, including the four mentioned (Chile, Ireland, South Africa and South Korea) have aspirations to become strong innovation centres, but not many have succeeded individually. Australia could benefit immensely from being more closely aligned with Ireland and we have many similarities with South Africa in areas like clean technology and communications.

It is heartening to hear of Labor’s recognition of a key stumbling block – high speed broadband and the lack thereof in Australia. We should be benchmarking ourselves against South Korea in this respect and aiming for an even more pervasive and faster network than they have in place. Forming a coalition that included South Korea, would greatly assist us achieving this.

It is promising that the new Federal government aims to work with the States to produce a consolidated innovation system. By focusing more on the customer of such a system, rather than satisfying bureaucratic instincts will ensure we have a system in place that is a significant improvement. Similarly, the creation of a unified Federal department charged with overseeing innovation, industry, science and research will greatly reduce fragmentation, doubling up and lack of transparency.

For example, the paper mentions reducing the red tape and streamlining the Commercial Ready program. Let entrepreneurs build, let innovators invent and the nation can only benefit.

Bringing innovation stakeholders together to bridge the divide between business and research is an excellent idea.

However, there will need to be incentives in place for them to do so. Blindly funding basic research and rewarding researchers for paying lip service to engaging with industry has been a core failure of the innovation system to date. The proposed Researchers in Business internship project is an excellent way to create more industry awareness amongst the nation’s academics.

Up until now much of the commercialisation funding has been provided in an ad hoc, shotgun style approach. One of the best initiatives announced in the paper is the establishment of a Climate Ready program as part of the new, improved Commercial Ready program. This intentional focus on core areas such as clean technologies is an excellent way to ensure the funding provided produces meaningful results.

Similarly the focus on a Clean Energy Innovation Centre and an Energy Innovation Fund will be well received.

I submit though that Senator Carr should also be looking to new ways of incentivising the creation of breakthrough products. I refer in this regard to the model pioneered by the X Prize Foundation. Australia has a fantastic opportunity to choose various breakthrough challenges and open the playing field to anyone to achieve the goals set and win the prizes being put up. This approach would markedly improve the achievement of results from innovation funding and can kickstart whole new industries.

I have been banging on for a while about the failure of the innovation ecosystem and the need for us to think as a nation about life beyond the mining boom. The creation of an Australia 2.0-capable innovation system appears apparent through many of the initiatives mentioned in Senator Carr’s paper.

The cynical amongst us will almost certainly point out that this paper was released as part of an electoral campaign and therefore we should discount the rhetoric in it. However, I am confident that the sheer depth of thinking in the paper, coupled with hard work and focus from all of us in bringing it to fruition will be a journey worthwhile embarking on.

What’s the KeyPoint of a Facebook Application?

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The KeyPoint Credit Union is reported by Jim Bruene to be the first financial institution to launch full-fledged account access through Facebook.

The application, which was developed by MShift, Inc, provides one-click access to account balance information for KeyPoint CU users. The app stands at 6 daily active users, which is 40% of the Facebook members who have installed it – so it has a whopping 15 person install base.

Checking out your balance on the site you most frequent is useful, but it’s not a gobsmackingly good experience you want to evangelize to all your Facebook friends, nor is it an engaging utility you cannot do with out. Widgets are great – for example, Wesabe has launched an account balance Mac widget which streams real time balance updates.

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However, banking and other enterprise applications on Facebook and other social networks need to go beyond replicating the experience of web solutions. They need to focus on their audience as users, not as banking customers — what engages them, why would they be excited by your app — think brand recognition, think deep engagement and then think again — are you putting up an app because you can or do you have a purpose in mind. In many respects the enterprise Facebook apptivity is analogous to the early corporate approach to virtual worlds – “Woohoo, board members, we have a presence in Second Life…errrm”.

I am sure that Facebook and similar platforms will be an awesome playground for business, but on their users terms.

Has Facebook Jumped the Shark?

Surfers and kayakers frolicking in the water playground around Byron Bay have been terrorised by a great white shark in recent weeks.

While across the web questions are emerging about Facebook‘s intentions and its role in the attentionsphere. It would seem that the social networking phenomenon that could do no wrong a fortnite ago has jumped the shark – or has it?

Let’s analyse the situation. Firstly, one of the more scathing articles has surfaced in Australia — particularly predatory waters for social networking and anything social media related. The press in this country seems to savor taking bites out of players in this arena.

The latest Australian attack has come, yet again, from Asher Moses and tries to out Facebook for seeking world domination. C’mon guys, get real! This is sensationalism at its most banale. It’s about as exciting as the Aussie government wanting to sue Google a few months back.

Next up we have the rantings of a rejected blogger. Om Malik isn’t used to his requests for information being ignored – I mean he is after all, at least as far as he is concerned, one of the industry insiders and who is this upstart (Facebook) to not get back to him pronto. He starts his post with:

It has been 48 hours since I asked Facebook to clarify the point about whether a user’s data  is still being passed to them from their web partners even after the user chooses to opt out of Beacon.

How could young Zuckerberg do that??!!

Heh – I’m starting to sound like Nick Denton or one of his staff at Valleywag 🙂 . Seriously though, it is interesting to see sharks, albeit small reef sharks, circling the growing Facebook whale. Let’s hope it doesn’t end up like the one in this picture.

Moore’s Law 2.0

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Speaking at an Early Stage Investing Conference in San Francisco last month, Geoffrey Moore espoused what may become the latest iteration of his famous Moore’s Law:

Venture Capitalists are mystified by cool and therefore are unable to invest successfully in Web 2.0 user-generated ventures.

It’s an interesting take, and I’m sure one that has been hotly debated at Mohr Davidow, the Silicon Valley VC firm at which Moore is a partner.

His take is that while some VCs have been able to invest profitably in such ventures it is more through luck than skill – their success as investors being akin to a blind squirrel finding an acorn.

Personally I think he is being a bit harsh on the venture guys. Sure there are some opinionated fools out there who have no clue, but the same can be said in any industry.

Just because they don’t teach cool in business school doesn’t mean some folks don’t have a nose for it. That said, it is worth doing that extra bit of due diligence on the venture firms you are thinking of spending time with to make sure they do ‘get it’.

[Photo courtesy of law_keven]

Always On Virtual Worlds: Mobiles to increase presence

Chris Sherman Joey Seiler over at Virtual Worlds News has written an insightful piece about how the virtual world arena will intersect with the world of mobiles.

The vision of always on, ubiquitous virtual worlds is a compelling one and will make itself known through what I call the QuadPlay — web+mobile+virtual+real world. Think real world map overlays, sensor networks and embedded systems and you will begin to see the future in this area.

For now though, I point to Google’s move onto the mobile stack and the interest being shown by companies like Alcatel, Cisco, Qualcomm and IBM and as I commented on Chris’s article: it’s not too much of a stretch to see these guys making a play for embedded virtual world/gaming capabilities on mobile handsets in the next now.

Enterprise Goes Social: Write Once, Run Anywhere

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A lot has already been written about Google’s Open Social initiative, which you can read elsewhere. Besides the boon for developers in general, the other big winners out of this write once, run anywhere approach will be enterprise. In many respects business has been lagging consumer adoption of the 2.0 phenomena, but no more.

Open social also means open enterprise as evidenced by the way in which Theiko‘s AppFactor is tapping into Salesforce (per Scott Blodgett) :

Our application, which will be free, is meant for customer facing professionals to visualize how their organization has touched a given customer. All of the raw data is available in Salesforce.com but is generally only available through reports. More importantly it’s not very easy to figure out who knows the customer best. OpenSocial makes it possible to visualize and drill into the nature of customer relationships.

Using the OpenSocial APIs we’ve built a tag cloud representing interactions between a given customer (Salesforce.com Contact) and a given organization.

Terence Russell has echoed this sentiment, pointing out that Open Social may give rise to the advent of an era of maturity for business apps.

It will indeed be interesting to see how quickly other SaaS players pick up on this.