Australia has the potential to be a hub for STEM start-ups, but reform is needed to ensure the right structures are in place to allow innovation to thrive.
This is the message in Engineers Australia’s new discussion paper Commercialisation of Engineering Innovation. Developed by the organisation’s Technology and Industry Workstream as part of the External Voice Project, the paper sets out the challenges and opportunities of developing Australia’s start-up ecosystem.
It identifies three core areas where a policy shift is required to improve Australia’s capacity to commercialise STEM innovation:
- Improving models of collaboration and ecosystem development;
- Reforming grants processes and tendering for government contracts;
- Reducing regulation and incentivising investment in STEM start-ups in line with global best practice.
“The commercialisation of engineering innovation is how you turn a great idea into a business,” Engineers Australia Senior Policy Advisor Philip Longley, the author of the discussion paper, told create.
“A great example is the Cochlear implant. That’s an Australian innovation, and a brilliant piece of technology, but it’s one of very few [that was commercialised in Australia].”
Started in 1981, Cochlear was the result of a collaboration between inventor Professor Graeme Clark and medical device group Nucleus. Today, it employs about 1600 people in Australia, maintains a manufacturing site at Sydney’s Lane Cove and is headquartered at Macquarie University.
Contrast this with another wildly successful Australian innovation.
“The famous story is WiFi,” Longley said. “It was developed in Australia but basically just went overseas, as did all the jobs and so on that could’ve flowed out of that, and which Australia could have benefited from, but didn’t.
“Why didn’t we? Because it’s easier to go overseas, particularly to the United States, to commercialise there.”
Why is Australia underperforming on STEM innovation?
One reason Australian engineers take their innovations overseas is to escape the regulatory and compliance burden they face at home.
This burden is “frequently higher than for start-ups in other sectors due to the regulated nature of the industry”, according to the discussion paper.
“In contrast, pure technology firms often have little regulation, which enables them to scale rapidly and reduces the capital investment required. STEM start-ups that are at the nexus of innovative technology and traditional engineering practice are frequently mired in regulatory or legal uncertainty.”
Couple this with an “uncompetitive tax regime, which is unfit for STEM start-ups and innovation”, and moving abroad begins to look very inviting.
“The regulation isn’t there [to support a successful start-up ecosystem],” Longley said. “The tax incentivisation that’s in London, that’s in Silicon Valley in the United States, that’s in Tel Aviv — it’s just not there in Australia. That’s a key problem.
“And the research and development grants that the government does have are notoriously not suited for start-ups.”
Start-up support required
For Australia to develop a vibrant start-up ecosystem it must be easy for large businesses, start-ups, venture capital, academia and government to collaborate.
One way to do this is through physical innovation hubs, such as South Australia’s Lot Fourteen precinct. This is an initiative of the state government that aims to grow jobs and the economy by bringing together research, education, industry and government at a site in the middle of Adelaide.
While much of Lot Fourteen is still in development, if successful, it might provide a blueprint that could be easily replicated across other Australian cities.
Engineers Australia Chief Engineer Jane MacMaster FIEAust CPEng said it was vital that entrepreneurial engineers find the support they need in Australia.
“If we don’t support highly skilled and qualified innovators, the rest of the world will, and these engineers will seek out bigger and better opportunities abroad if they can’t access them at home,” she said.
“This is likely to have direct negative impacts on specific industries as well as a detrimental effect on Australia’s overall reputation as an innovative nation.”
While policy change is important, Young Engineers Australia Sydney Division Chair, KPMG’s Tuan Nguyen MIEAust told create he believes fostering a culture of innovation among engineers needs to start at university.
He said there was currently little incentive or support for young engineers to break away from the traditional career path.
“We’re lucky in Australia. We have a very rigid career path in terms of coming out of uni and getting engineering jobs with respectable salaries straightaway — for local students at least,” he said.
“So there’s not much incentive for young engineers to actually go out there and start their own companies … And there’s not a lot of encouragement from universities to pursue that career path.”
Pointing to his own university experience, Nguyen said while there were a few commercialisation and entrepreneurial subjects on offer, there was little in the way of soft skills.
“It’s important that students actually come out of university with the training and courage to start their own company,” he said.
“And that’s more than just technical skills. It’s also about interpersonal skills and business acumen.”
Why does it matter?
The benefits of supporting STEM start-ups and developing Australia’s innovation ecosystem are manifold, Longley said.
“If we want the Australian economy to essentially pivot to being a ‘green’ economy, we’ll need innovation and rapid technological adaptation to get there,” he said.
“There’s also the issue of wage growth … This isn’t just about job creation; it’s actually about making sure the living standards of Australians continue to improve.
“Finally, it’s about the jobs of the future. We’re talking about keeping skills that are relevant and will keep adding value in Australia.”
As engineering is “arguably the most important skill set for applying scientific breakthroughs to the real world”, MacMaster said it was vital Australia develops a better STEM start-up culture.
“A recent CSIRO study has shown that every dollar invested in research and development returns $3.50 to the wider economy. Innovation is a key driver in the improvement of our prosperity and quality of life,” she said.
“Commercialising engineering innovation drives improvements in our standard of living, and other societal objectives such as net-zero emissions, and commercialisation is the means by which new and valuable ideas translate at scale to the real world so the community can access the benefits of engineering innovation.”