The Innovation Statement and manufacturing: what should the industry expect in 2016 and beyond?

When Malcolm Turnbull outlined the National Innovation and Science Agenda in December last year, he got people in industry talking – from big businesses to budding entrepreneurs. 

The statement signalled a shift in focus at the federal level – one that is expected to resonate across Australian state governments, industries, communities and cultures. The Agenda is essentially encouraging businesses to take risks, and to innovate. It outlines the promise of some serious funding to support this.

The Government should certainly be commended for this forward-looking approach and for this first step in encouraging innovation in Australia. Now that industry has had a couple of months to digest the detail, it’s time to ask: what’s in it for manufacturers?

Below, we outline some of the key points in the Agenda and assess them based on how they might impact manufacturing.

More women in manufacturing

The Innovation Agenda’s push to get more women involved in Science, Technology, Engineering, and Mathematics (STEM) should open many new doors for manufacturing – an industry where men currently outnumber women 3 to 1. As part of the Agenda, the government has committed $13 million to boosting the participation of girls and women in STEM.

While we’re yet to see the detail of how exactly this funding will be spent, the development of initiatives prioritising women is an indication that we’re at least heading in the right direction.

However, as businesses, it is vital that we don’t see this as the only element of the solution. We need to be part of the solution by also supporting initiatives that promote equality in the workplace. For example, departing from traditional workplace practices and considering flexible manufacturing workplace arrangements. At Cook Medical, we’ve found it helps us to maintain and grow our talented employees through various life stages.

The Innovation Agenda will hopefully mean more women qualify, but it’s up to us to also support successful participation in the workplace.

Greater research-industry collaboration and overseas networks

The Agenda includes an increased focus on collaboration between industry and universities over the next five years, aiming to propel industrial and technological research to the forefront of the Australian economy.

This is a necessary step, but one that may sound a bit familiar to those of us who have been in the industry for long enough.

Further, the Agenda outlines the aim to strengthen connections between Australian companies and potential international investors or partners. The Global Innovation Strategy, in particular, has been developed to create more of an open-market approach for Australian businesses.

The Government has committed to investing $36million in this global approach over the next five years, and also aims to set up ‘landing pads’ for Australian entrepreneurs in innovation hotspots like Silicon Valley and Tel Aviv.

This should mean Australian manufacturers can more easily establish networks of contacts with overseas companies, which will ideally result in the development of more businesses and more opportunities for Australian manufacturers to rise to prominence. It’s an idea with merit, but it also encourages the movement of innovation offshore. What are we doing to help ensure that commercialisation is still viable here in Australia?

Getting ideas off the ground  

Another key part of the Innovation Agenda outlines the new means of support being planned for upcoming Australian businesses, dubbed the ‘Incubator Support Program’. The program commences 1 July and aims to give startups a head start, with greater access to research and mentorship programs.

Startups are known to work better when they are given opportunities to collaborate, as well as give and receive support from peers. This government-provided support for startups entering the manufacturing space will hopefully assist the future of the manufacturing industry, as today’s startups develop and innovate for tomorrow.

We think there is merit in this sort of idea as long as the recipients are carefully identified. At Cook Medical, we’re running an incubator-style initiative for innovation within the industry in the form of the Australia’s Asia-Pacific New Technologies Team (ANTT). ANTT is made up of engineers, senior management and business directors tasked with identifying medical device innovations from across the entire region with potential for commercialisation that can further enhance patient care worldwide. The program is focused on taking new ideas from the infancy stage and turning them into commercially viable manufactured products.

The Government’s Incubator Support program will need similar industry experts in relevant fields to ensure that commercially viable ideas receive support.

Leaving the big players behind  

While the Innovation Agenda focuses on providing the building blocks for future businesses, it appears to leave Australia’s own internationally successful manufacturers behind. The bulk of the statement only prioritises the early stages of business development, missing an opportunity to support existing established manufacturers – those established businesses that won’t necessarily benefit from a hub in Tel Aviv or an incubator support program.

In all the excitement around startups, the government should not lose sight of the manufacturers that are beyond the initial stages of development, yet still require support for continued growth and to safeguard their future in Australia.

Next step for manufacturers 

Australia has one of the world’s highest company tax rates. Intellectual property (IP) is highly mobile and with such a high tax rate, IP developed in Australia is vulnerable to being exported to another jurisdiction for commercialising and manufacturing. Once a manufacturing operation has been set up overseas, it is much harder to reverse that decision and bring the production back to Australia than it is to preserve and and grow operations in Australia in the first place.

This is a missed opportunity in the Innovation Agenda. A report by the Australian Advanced Manufacturing Council (AAMC), released in December last year, found that Australia is losing ground in manufacturing to escalating international competition. The report states that Australia must dramatically change its corporate tax and innovation incentives landscapes in order to stay internationally competitive.

The Australian Innovation and Manufacturing (AIM) Incentive, which is based on the UK’s Patent Box system, has been put forward as a potential model. It has been developed by Cook Medical Australia together with other industry bodies including AusBiotech, Export Council of Australia, and Medical Technologies Association of Australia. The Incentive, which fits with the OECD’s recently released recommendations regarding base erosion and profit shifting, recommends that qualifying IP profit be taxed at a lower rate (10% is suggested) in order to retain innovation for commercialisation here in Australia.

While the Government’s Innovation Agenda is a solid first step towards fostering innovation and improving the outlook for industry in Australia, there is still more to be done to boost manufacturing. I look forward to seeing innovation be converted from a buzz word into tangible changes in the industry.

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