Why Australia should aim to become a “centre of excellence” for entrepreneurship by 2020

We all agree that Australia must transform to deliver growth, jobs and prosperity, and innovation is central to that transformation. Let’s talk about entrepreneurship, the process that catalyses innovation, says Tony Surtees.

2016 in Australia will be all about Innovation. PWC’s recently released Global CEO Survey indicated that 61% of CEO’s see more opportunities and more risks than three years ago. The source of most of that change comes from digital disruption.

“Globally, business leaders are also keenly aware that fundamental forces of change will impact their industries over the long term. Megatrends such as shifts in global economic power, technological advances and demographic changes – and the interplay between them – are transforming the macroeconomic landscape. As businesses respond to these shifts, the competitive environment across a broad range of industries is being disrupted” according to the PWC survey.

It is simply not possible to overestimate the importance of the Australian National Innovation and Science Agenda. It’s a big, big step in the right direction. Everyone agrees that our country must transform to deliver growth, jobs and prosperity. But how does the “Ideas Boom” create economic growth? How does research lead to innovation and business success? How do big companies facing tepid growth at best and disruption at worst, play a role?

Innovation terminology is clumsy. Some of the common words are used interchangeably and sometimes the meanings get confused because of fuzzy definitions.

Let’s talk about entrepreneurship, the process that catalyses innovation. It’s not the same thing. Entrepreneurship relies on the behaviours, attitudes, expectations, the community, the rewards, the risks and the social bargain between people that make the difference between developing a serious career as an entrepreneur or a foolhardy distraction from a sober and sensible job.

I want to suggest a way to simplify the language and make the steps to success easier to understand and communicate. I have one simple vision…

Australia should aim to become a “centre of excellence” for entrepreneurship by 2020.

Let’s explore 4 simple principles.

1. Innovation is not the same as entrepreneurship
2. Entrepreneurship catalyses innovation
3. Entrepreneurship is a profession and is practised better in some places
4. Entrepreneurship ecosystems have their own hardware and software

1. Innovation is not the same as Entrepreneurship

Innovation has been studied, debated and measured possibly more than any other single element in management science. Why? Because it is essential to the process of growth and wealth creation for any economy. It is an ongoing process and a way of working, not an ideology. It is time to move from innovation as an ideology to innovation as a process that depends on entrepreneurship in order to produce economic outcomes.

2. Entrepreneurship catalyses Innovation

Entrepreneurship delivers movement. Its’s about action because Action Changes Things. The entrepreneur is biased toward action and manages risk better moving than waiting for permission. She doesn’t wait for an innovation to appear. The empowered, opportunistic and motivated entrepreneur will combine old elements with new ones, apply these to changes in industry economics or customer demand, or take advantage of timing or other circumstances to make something happen.

Without adding entrepreneurship, all the inputs into an ecosystem (what we call the “hardware” alone) just leaves you with possibility and capability but no movement. The ecosystem stays “inert”. You may get some direct employment but no second order economic impact that drives economic growth. It’s a little like walking into a wonderful kitchen with a great chef who has all the ingredients for a cake but is too scared or not motivated to break the eggs or fire up the oven.

3. Entrepreneurship is a profession and practised better in some places

Entrepreneurship is practised better in some places than others and the best places regard entrepreneurship as a profession. Australia needs to make being a serial entrepreneur a viable and sensible career option.

Entrepreneurship has its own form of management science. It’s specialised and has become very particular depending on the vertical (e.g. Mass, Niche, B2C, B2B, growth hacking, network effect, scaling, etc.). Demand for capital and talent is global. People and money will go where they are best treated.

What sort of entrepreneurs do we want to help create?

Australia needs entrepreneurs who have been professional managers in big markets, who understand the unique challenges of managing a big customer base and helped grow a world-leading brand from small beginnings. We need for these people to convey their learnings to Australian investors, who can consider supporting a new generation of Australian industry with similar aspirations. Organisations like Advance helps access these hard to find people.

We need people who will think big. We want people to aspire to work at different times in the big enterprise and the small, the public and private. There needs to more of a revolving door in Australia, where our best and brightest build careers in business, in research, in start-ups and on boards.

We need investors who will support the proposition that money spent in academic research is consistent with having a commercial focus.

We need entrepreneurs who know how to hire and partner with people but encourage others to get the lion’s share of the credit.

Being an entrepreneur means working through the delays, frustrations and challenges that inevitably come with starting or accelerating something new. It means you need to respond to ambiguity with unrelenting focus, respond to complexity with decisiveness, to be able to reflexively move between work styles which may demand granular detailed focus on some days and being able to think “big picture” on others.

Why do Israel, China, Singapore, Boston, London, the Bay Area, New York and others do better as “innovation ecosystems” outperforming others on every measure of economic value creation? Both their hardware and software settings are fit for purpose.

4. Entrepreneurship ecosystems have both hardware and software elements

Hardware = institutions or things you can see = “rules & tools”
(tax breaks, universities, visa laws, employee share options, grants, VCs, incubators, research funding, IP regulations, trade agreements, etc.)

and

Software = programming operating systems = “behavioural & attitudinal”
(Behaviours, attitudes, expectations, the community, the rewards, the risks and the “social bargain” between people who fail and start use their experience as IP in their next business. It’s a community that blends audacious behaviour with humility, greed with generosity, compete vigorously yet collaborate and give their time generously. People who know that nothing meaningful ever succeeded on plan “A”, who don’t personalise failure, who never give up but know when it’s time to pivot.)

How is Australia going so far?

OECD ranks Australia 10th for innovation inputs but 81st in the world for innovation efficiency and bottom of the OECD for collaboration between business and research.  Australia is also lowest in the world for digital and tech experienced PhDs and STEM graduates on company boards.

Just for comparison, let’s look at some other places:

Boston

Roughly 20% of graduates of MIT in Boston started their own businesses in the last ten years. The aggregate value of the sales generated by just these young MIT Alumni businesses alone totals over $2 trillion USD or equivalent to all the sales from the world’s 9th largest economy, India!

Israel

• has the largest number of start-up companies in the world per capita
• is ranked #2 in the world for venture capital funds behind the U.S.
• has more NASDAQ listed companies than any country, besides US and China
• has the world’s 3rd highest rate of entrepreneurship and the highest rate among women and among people over 55.

Then there is a long, long list of the best in the world and the good. When it comes to commercialisation outcomes, Australia is 81st in the OECD.

National Innovation and Science Statement

Our Federal Government has now sent a clear signal. The National Innovation and Science Statement is a wide-ranging, powerful, sophisticated, nuanced set of measures that are designed to address so many the challenges that have confounded and frustrated Australian commercialisation. It’s a mix of funding and tax and regulatory reforms targeting four main areas:

• Talent and skills
• Culture, startups and capital
• Collaboration and commercialisation, and
• Government as an exemplar.

NISA is a great step whose importance cannot be overstated.

Now let’s get entrepreneurship right.