Frontier Firms Follow-On Funding Favoured

frontier-firms

The recently published New Zealand Productivity Commission Report on the economic contribution of “frontier firms” predictably rated only a passing mention in local media. However recommendations in the publication could have far reaching impacts if implemented. But is the government listening?

Frontier firms are described as the most productive, profitable and innovative in an economy and generally have scale and global reach. But the report says that New Zealand’s frontier firms lag behind their global peers in terms of productivity. The OECD defines productivity as the ratio of economic output compared to inputs. Nations with highly productive frontier firms have greater competitiveness because of more efficient use of resources such as labour and capital. These nations also benefit from secondary “innovation and knowledge diffusion” within their economies.

Chairperson of the Commission Ganesh Nana, in an interview with Radio New Zealand says New Zealand is already well behind other small developed economies in the OECD in terms of productivity and the gap is growing every year. He says part of the reason is because we do not have many so-called frontier firms to which smaller innovation based companies can anchor. One of the key findings of the report is that the government must invest in developing a deeper innovation ecosystem, including supporting more commercialisation of research, science and technology.

But will the government take on board this message? Many of us currently working within the New Zealand innovation ecosystem have lobbied in the past for vastly increased resourcing and for setting greater aspirations as a nation. But such pleas have largely fallen upon deaf ears over the years. There are sadly also actors within our ecosystem that are philosophically opposed to any kind of government investment on the basis that only wealthy and well-connected players should be allowed in the game. This is despite the fact that our neighbours (and competitors) in places like Australia, South Korea and Singapore identified the value many years ago and have literally invested hundreds of millions of dollars into building out their own innovation ecosystems.

Developing more frontiers firms is not about growing more “unicorns” as some have mistakenly claimed. But it is about building a more interconnected economy that has research, science and technology at the heart of the beast. That’s a big ask for a small nation for which there are many competing priorities and challenges to face such as health, housing and climate change. But the key to motivating the decision-makers involves grasping the reality that having a powerful innovation ecosystem is actually part of the solution to those challenges.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest, advisor at ThincLab within the University of Canterbury Centre for Entrepreneurship and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.

The Commercialisation Imperative

Oxford

Blue Skies Thinking Needed

Competing and surviving in a highly technological, fast changing and globalised economy increasingly dictates that universities and institutes step up and generate economic returns on their research. But although there have been a few notable exceptions at New Zealand universities, we continue to underperform in the commercialisation of new scientific knowledge into value generating products and services that drive economic growth. So if disruptive innovation lies at the core of economic development, how can we better reconcile commercialisation with the core purpose of our institutions?

Firstly, there are some valid arguments in favour of the separation of commerce from academia. Normative, collectivist elements of academic science as a social system, along with the autonomous nature of university culture, seem to sit uncomfortably with the motivations of profit seeking firms that wish to take ownership of intellectual property. Claims of IP ownership can lead to fears of diminishing the scientific commons, which would be detrimental to the collegial and collaborative nature of science and therefore hinder the very process that will drive future discoveries.

Furthermore, commercialising technology research is risky and accommodating new and developing fields of commercially focused science takes up resources that might be used for other teaching and research, impacting the core mission of universities. We have already witnessed closures and staff reductions within arts and humanities faculties where commercial outcomes are less of a focus. There’s also a danger that high tech institutes established in emergent fields become impenetrable and elitist silos of specialist knowledge open to only a few, at a time when we should be striving for greater equity. Are there other societal factors at play that dampen success?

Patent filings data is sometimes quoted as an indicator of “innovativeness” in the context of economic development. New Zealand sits at the lower end of the table, but not because it is a small economy. Countries with relatively small populations such as Finland, Switzerland and Israel lead the pack. In New Zealand total expenditure on research and development as a proportion of GDP has been increasing in recent years, but continues to lag behind other developed countries. Investment rose to 1.37% in 2018. This compares to an average research intensity figure of 2.38% across all OECD countries, ranking New Zealand 21st out of 34 nations [Statistics NZ — 2018]. So whilst the size of an economy does not fully explain the innovativeness of a nation, the level of commitment to research and development investment certainly plays a part.

Approximately half of that R&D investment originates from publicly funded sources. With government investment comes an expectation that tax payer funded academic research will provide a “return on science” or economic and social benefits to society. The challenge then is to generate meaningful commercial outcomes, that do not undermine the core missions of teaching and research. There are a great many reasons to do so, not the least of which is our ability to fund future health, education and welfare needs. As a nation heavily reliant upon commodity based income we must gravitate towards higher added value goods and services to ensure the future economic wellbeing of our society. Developing an ecosystem approach to cultivating innovation is a key part of this journey.

For example, benefits in cultivating university-industry ties become amplified due to network effects and serendipitous conversations around the humble water cooler (or perhaps kombucha fridge these days). This “innovation ecosystem” approach has benefitted a number of scientific fields. For example the emergence of biotechnology as both a science and business from MIT and other institutions clustered within the Boston area. Commercialisation of new knowledge can also speed up solving complex social, health and environmental problems that might not otherwise be addressed, attracting both government and private sector funding into academia.

The global pandemic has also accelerated the need for scientific innovation. Previous hard won gains against poverty and improvements in social equity have been wiped out by pandemic related economic carnage. In addition, because of growing urgency in relation to addressing environmental challenges, there is forecast to be a vast migration of capital away from polluting industries over the next two or three decades. This green transition will create enormous opportunities for scientific organisations operating at the leading edge of cleantech, renewable energy, low carbon construction and regenerative agriculture, for example.

Embedded within entrepreneurship centres of research, university innovation labs such as ThincLab at the University of Canterbury are important intermediaries in the cycle of innovation and a key part of a vibrant ecosystem that engages with a wide array of supporting players to ensure the success of spin-off companies, whilst at the same time respecting the scholarship that underpins scientific discovery.

This article was first published on the ThincLab blog and formed the basis of my presentation to the Food, Fibre and Agritech Supernode Challenge 2021 cohort.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest, advisor at ThincLab within the University of Canterbury Centre for Entrepreneurship and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.

March For Science Matters

Last weekend’s March For Science may have been largely symbolic, but it was important. When a government appoints a rabid climate change denier to perform a hatchet job on its own environmental agency, you know that somebody has seriously lost the plot and voices need to be heard.

Interestingly even China is now becoming increasingly concerned around problems created by climate change and has committed to refactoring the economy towards green energy. It’s a bit like trying to turn around a super-tanker, but I suppose you have to start somewhere. But it is very difficult to reconcile that technologically adept nations such as the United States are going in the opposite direction to almost everyone else on the globe.

The role of science in economic growth and development has long been established. Science driven technological innovation has been a key contributor to our advancement as a species over the last few hundred years. From health to computing to space exploration, science has been at the base of almost every step forward. We live longer and more fulfilling lives, largely due to scientific discoveries.

Conversely, science has arguably also been responsible for some of our backward steps. Industrialisation, internal combustion engines and nuclear weapons are also products of the science lab. Science therefore is no panacea. The philosophical and morale context around science is ever-changing and what seemed like a good idea 50 years ago might be framed very differently by future generations. Scientific theories also evolve over time as new ideas emerge and get tested and old ideas are discarded.

What we do know is that the scientific method provides a solid basis for exploring and understanding our world. Discarding rational thought in favour of rumour and outright lies may be a successful political strategy, but it will certainly not help us to address the pressing social, health and environmental issues in the world.

Paul Spence originally completed a B.Sc. degree in Applied Geophysics and was previously employed as a support meteorologist in the aviation industry. He is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a mentor with Startup Weekends and Lightning Lab. GeniusNet is working to support global environmental projects through its portfolio companies.

You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

A Special Event For Entrepreneur Researchers

swrschCompared to many OECD nations, New Zealand underperforms at building great global companies based on smart commercialisation of knowledge. That’s a shame, because we have no shortage of intellectual talent and we also enjoy a fantastic natural resource base.
So we are putting on a very special Startup Weekend event here in Wellington focusing on science and research. It’s all part of our efforts to strengthen the entrepreneurial ecosystem in New Zealand and get more people in science and technology thinking about entrepreneurship as a career. Encouraging a culture of entrepreneurialism and building bridges between the research and business communities are important themes in driving value-added economic growth that we need to underpin our future.
It is a fantastic opportunity for young researchers who are interested in research commercialisation to spend a weekend with some very cool mentors as well as investors and people from across the business community. The McDiarmid Institute and Kiwinet are actively supporting this event. It’s mostly about teaching a lean methodology for developing and testing business ideas, as well as networking with potential future collaborators.

Participants can bring a project of their own that they wish to explore or join another team simply for the learning opportunity. We are looking for researchers from any field plus engineers/developers, designers and business gurus to get involved as well. Who knows where it might lead?

This will be a smaller event than usual and spaces are limited. Sign up for Startup Weekend Science & Research today!

Paul Spence is a commentator, technology entrepreneur, a co-founder of iwantmyname (a New Zealand based global Internet venture) and an organiser and mentor with Startup Weekends in New Zealand. You can follow him on Twitter @GeniusNet

Shifting The Economic Goalposts

Economist Brian Gaynor’s recent article on why we will never “catch up” to Australia was another sobering reminder of the hard road that New Zealand has ahead. Invoking a sporting analogy by beating Australia may be a popular rally to arms, but it focuses public attention on completely the wrong set of goalposts.

Another sobering occasion was when we sadly learned of the passing of Sir Paul Callaghan, one of New Zealand’s most passionate science communicators and technology entrepreneurs. Sir Paul lived every moment and notably even turned his cancer treatment regime into an experiment. More importantly he was one of the most ardent promoters of science and technology commercialisation as a means of growing New Zealand’s economy.

“Sir Paul was a true public intellectual who earned the respect of everyone, including those who disagreed with him”, stated the government’s sternly worded Ministerial press release reporting news of Sir Paul’s death. Curiously, outside of Cabinet, I can’t name a single (intelligent) person who actually disagreed with his thesis that New Zealand urgently needs to ramp up economic growth through more investment in research, science and technology commercialisation, rather than continuing with an over-reliance on flogging unprocessed, environmentally unsustainable dairy commodities to the world.

To its credit, the government has finally moved to increase research funding and there are more frequent mutterings along the lines of “doing something” about uncovering intellectual property locked up within our many publicly funded institutions. But those of us who looked on frustrated over the last decade as the “Knowledge Wave” withered on the vine, are becoming more and more concerned that the opportunity to fully promote science and technology as an economic driver is disappearing.

Beyond pumping more cash into research, we need a huge cultural shift involving both governmental agencies and the public mindset. As clean-tech entrepreneur Nick Gerritsen stated at a recent seminar, “we need more millionaire scientists and fewer millionaire sportsmen”. With the loss of Professor Callaghan, I’m left wondering who will be brave enough to pick up the mantle.

You can follow the author on Twitter @GeniusNet

100+ Rewiring The Productive Economy

We live in interesting times. Last month I attended a seminar looking at productivity in the New Zealand economy and how we can improve. The most overwhelming aspect of the event however was that most of the attendees were white, male and aged 50 or older. Furthermore, much of the focus was on making changes to macroeconomic settings, rather than making an attitudinal shift. If we are to address this issue in a meaningful way we need to engage with a far broader church, including politicians, scientists, entrepreneurs and investors from across the spectrum who are committed to change – not just economists.

With our over-dependence on high volume, low value food commodities to generate income and an over-investment in non productive assets such as property, we have seen per capita income dropping rapidly over the last decade. The flow-on effect has been a return to net outwards migration at levels unseen in the last thirty years. New Zealand is close to entering a death spiral, in terms of an inability to pay for social services in the future, if we don’t fix this right now! Within the next thirty years we will reach a tipping point at which a minority of the population is working to support the dependent majority.

Each speaker at the seminar was tasked with presenting a simple, yet radical idea that could move the goalposts on productivity, in an effort to stem the flow of emigrants and ensure we can fund our future. Some of the ideas were downright batty, but at least people were thinking and talking – which is more than successive governments have achieved so far. In fact, perhaps the single biggest issue is leadership inaction in the face of political expediency. It will take more than speeches and a cup of tea to solve these problems. So here’s my ten cents worth.

It seems we can easily find $10 million to build a temporary booze hall for rugby patrons on Auckland’s waterfront, yet we continue to struggle to provide a coordinated approach to identifying and commercialising world class science in New Zealand. If the government lacks the gumption to look beyond a three year electoral cycle, then the private sector must take a stronger leadership position on the matter.

There’s plenty of cash sloshing around in superannuation funds, but if it means accessing foreign capital and connections to get on with the job, so be it. Endeavour capital see the opportunity, why not others? We should aim for 100+ Lanzatech or Endace type companies. That requires making project opportunities transparent and going big, whilst retaining a NZ Inc. stake in the intellectual property. It means identifying top talent to lead commercialisation. It will also require a complete change of mindset in some of the more conservative knowledge silos around the country.

 

 

 

Research Week Brings Science Leaders Together

A winter retreat for scientists interested in medical research and biotechnology is bringing some of the world’s finest science researchers together for a week long convocation.

Queenstown has for many years played host to a number of research meetings across a diverse range of topics from molecular biology to neuroscience. Now these meetings are being clustered into a knowledge fest being labelled as Queenstown Research Week. It’s an opportunity for local researchers to mingle with and learn from some of the world’s leading minds from within the medical and biotech arenas.

It is also an opportunity for investors to hear about opportunities within biotech and to promote science commercialisation in general. No doubt there will also be some quiet analysis during the coffee breaks on whether or not there is any substance to Craig Venter’s recent pronouncement that life had been created in a test-tube.

Irrespective of one’s position on that particular topic, one thing is certain. Medical and biotechnological science is advancing at a rapid rate and such fields create wonderful opportunities to improve human quality of life, address environmental problems and deliver economic gains – provided these technologies are viewed with a robust ethical overlay.

More CRI Babies Needed

The government’s recent report examining funding and strategic governance of New Zealand’s Crown Research Institutes (CRI) echoes what has been known for years by most participants in the nation’s technology innovation system. The existing funding model is broken and there are too many stakeholders, resulting in inefficiencies. But restructuring the bureaucracy alone will not be sufficient to ensure better returns from State investment in science.

The CRIs are tasked with a variety of social and economic objectives that range from enhancing and protecting the value of our primary sector through to identifying and managing environmental risks. A profit based model and traditional business metrics clearly does not work. The convoluted bidding process for funding of limited duration also does not ensure good science gets done; in some cases it actually impedes the process.

 There is certainly no shortage of excellent scientific research being done within these institutions right now and there remains potential to spin off more baby companies in the future. Here’s a few examples.

  • There are two existing spin-offs involved in high temperature semi-conductors and cable technology, an area that has huge economic returns and is largely untapped.
  • Last year’s New Zealand young scientist of the year (and W2W event  speaker) John Watt is working with CRI staff to look at the commercial applications of nano-particles in reducing motor vehicle emissions.
  • Government owned companies are sitting on huge amounts of seismic data that has the potential to attract oil and mineral prospecting, with comcomitant economic benefits.

But the CRIs encountered problems in the past through attempting to self fund the commercialisation of new science. Attracting smart money and building linkages offshore  must surely be the key to growing our knowledge based companies faster. The CRIs will have to find a new business model that reaches out globally, whilst balancing the need to retain some control of intellectual property and return value to NZ. They also need to make this process happen a lot quicker than in the past.

You can follow us on Twitter @GeniusNet

Social Web Could Drive RS&T Value

The New Zealand Prime Minister’s chief science advisor, Professor Peter Gluckman, recently released his report into the challenges facing the nation’s science innovation system. Addressing technology transfer is one of the most important tasks that lies ahead, he says.

For many years we’ve been hearing about the intellectual property that remains “locked up” within the Crown Research Institues (CRI) and universities. But precious little work has been done to actually identify and illuminate such material. Gluckman alludes to a dysfunctional national research environment in his report that pits researchers against one another and discourages collaboration.

But the pathway to real transformation will most likely arise from creating better business models early in the innovation process. That requires change agents with the skills to identify and extract marketable technologies and build sufficient value that will attract investment. It also requires strong linkages into the capital and consumer markets of the Northern Hemisphere, without which we cannot rapidly scale new technologies.

Intuitively these seem like very sensible ideas, so why do we appear to struggle to enact them? Until we recognise that building social capital is a critical part of the technology innovation and commercialisation process, it is likely that we will continue to fall short. Teens and online game junkies have highly resourced virtual spaces to connect and collaborate, surely we can do the same for scientists, entrepreneurs and investors.

Science Funding Fix Obscures ICT Opportunity

It has taken almost a year, but the government is finally addressing the mechanisms and priorities around the funding of research, science and technology in New Zealand.

The government’s policy approach to funding science research hinges on maximising the economic and social benefits, building international linkages whilst protecting the natural environment. Better utilising the “scientific value chain” seems to be the chief driver behind the funding shake-up. Science leaders have long complained that they spend too much time doing paperwork and competing for funding, when their time is better spent doing actual science.

The draft policy document indicates that sectorial funding priorities will largely be governed by the interests of existing Crown Research Institutes (CRIs). That is not a bad thing, but it underlines what we have suspected for quite some time – ICT is no longer seen as a primary driver of value-added economic growth, despite its obvious importance as an enabler.

ICT is now bundled within “high technology industries”, although it is not clear what proportion of this funding will be dedicated to information technology. In fact “transformational manufacturing” seems rather to be the focus for this area. It seems odd that the government would allocate $1.5 billion to a broadband rollout without a simultaneous commitment to strengthening ICT research and commercialisation in order to capitalise on the opportunity.

You can read about and make submissions on the proposed policy here.