The Missing Piece

Warning: This uses the word ecosystem. A lot. By all means read ahead, but you’ll probably end up wanting throw your shoe at the computer.

One of the many nuggets of wisdom that Blue Sky’s founder and Queensland’s Chief Entrepreneur, Mark Sowerby passed on to me was that in order to build anything that you need to stand the test of time, you need to know when to grow and when to fortify. Put more simply, its knowing when to focus on optimising strengths and when to focus on plugging weaknesses. It’s actually really hard to do both well, at the same time.

I don’t think we need the CrossRoad’s report to tell us (although it does!) that Australia’s high growth, innovation driven SME economy, has gone from strength to strength over the last decade. Professionally, as someone who has been in this sector for 20 years, its actually pretty cool for me to see stats like Australia being ranked 7th in the world for entrepreneurship, and Sydney being ranked 10th in the world for funding (a previous market failure for Australia).

Personally, as a proud QuAdelaidean, it was absolutely fantastic to see how strong South Australia and Queensland performed in 2017, given these are often thought of as the poor cousin of Sydney and Melbourne, and as such, are ecosystems often neglected by capital providers and partners. South Australia has a dedicated venture fund, and the kernels of new industries with a space agency and in renewable energy. After many years of committed focus from State government, Queensland is now the startup capital of Australia. These two states, hit hard by the decline of resources and manufacturing truly need a robust knowledge economy arguably more so than our artisan-coffee-sipping-head-to-toe-black-wearing-cousins in Victoria, or our coogee-based-boutique-beer-sipping-spray-tanned-brethren in NSW.

The country has done, in my opinion, a good job of setting the foundations for a sustainable knowledge and innovation economy. But, now is the time to start fortifying those strides forward by focussing on our weaknesses or all that progress will be in vain. There is simply no point being average or mediocre in developing a knowledge economy. In order to be competitive, in an increasing era of globalisation, we must be excellent, to be competitive. Why? Because our small population means we don’t really have a sufficient population to support large industry for most sectors, and our isolation means we are not a conduit to anywhere and are simply out of sight out of mind for most export partners. Unless, of course we have a competitive advantage. We therefore, must be leaders, and to do this, we must be excellent, and we must address our weaknesses.

So what did the report reveal to be our weaknesses. Well, talent is clearly one. We have great talent here, however, we just have such a small population that the funnel is small. To really make transformational change (as opposed to small iterative steps forward), we need to address the talent pool issue first.

On talent attraction and generation, education programs and curricula focused on platform technology skills, problem solving and aligned new industry skills is one of the ways to do this. Skilled migration visas is another and I am wholeheartedly supportive of both of these strategies. But they won’t be enough, not in the short to medium term. That will take decades to bear fruit.

Retention is the other side of the talent coin. By retention I mean retaining great talent in Australia OR attracting great talent to/back to Australia after it has conquered the world bringing back all its skills and networks with it. But to do this, we need to ensure there is an intellectual, commercial and entrepreneurial opportunity drawcard other than the better quality of life drawcard, to ensure we attract the best talent. And this, leads me to what I think is actually THE biggest weakness in the Australian knowledge/innovation economy but not specifically addressed in the report.

Lack of industry.

Recently, I went to MIT to learn about how to build the optimal innovation ecosystem and the critical components that are required. The main learning, and of course it is actually obvious, was that a successful, world class ecosystem requires the dedicated participation of five key stakeholders, Universities, Entrepreneurs, Government, Capital and Industry. If one is missing, it’s like trying to build a house without a load bearing wall.

Our lack of Industry — either a critical mass of presence, or its material participation, is Australia’s biggest vulnerability in creating a sustainable innovation economy. Our incumbent industries have a long way to go to be considered a participant in this ecosystem (although some are trying), and we are losing our new industries leaders to other markets which means that we don’t see these companies staying in Australia long enough to achieve sufficient critical mass. The result is an anemic industry presence outside of old industry such as financial services, agriculture and resources which are not particularly innovation centric, and this severely throttles the exchange of innovation talent - the net result being limited knowledge and skills transfer, upskilling, retention and recycling of talent.

To access industry experience, talent goes out, and it rarely comes back — if you are a talented Australian, to get true industry experience, more often than not you need to go elsewhere, and that’s fine, but we have little carrot to draw you back unless you want to work in government, university of finance. And we are way behind the eight ball with respect to retention or attraction of world’s best talent to Australia because we don’t have the industry platform to provide world class intellectual and innovation challenges. And it’s not just talent, there is no industrial hive of sufficient critical mass to be the receptacle or conduit for the next innovation based SME, so they stay small or go offshore.

We can absolutely continue to be an ideas and talent generator for other countries, but that’s not where the jobs or the earnings are. That’s not how we are going to counter the decline of the mining and resources cash cow that has been the platform of our prospserity over the last decades. So, my hope, and one of the things I will hope to focus on in my role on the StartupAus board, is that over the coming years we swill see policy and structural frameworks and initiatives that focus on retention of new industry leaders in Australia for longer as they grow, and encouraging greater participation of existing industry leaders in the innovation ecosystem.