Saturday, September 26, 2009

Commercializing Technology - Strategies for Australian Corporates

Are Australia's major industrial firms aggressive enough with their strategies for commercializing their R&D internationally?

I have had two recent interactions with academics who have both caused me to ponder whether Australian corporate R&D is maximizing returns to innovation.

In a Working Paper from the Centre for Governance of Knowledge and Development, Regulatory Institutions Network (RegNet), College of Asia and the Pacific, ANU, Dr Hazel Moir questions: "Who Benefits? An empirical analysis of Australian and US patent ownership"
(http://cgkd.anu.edu.au/menus/workingpapers.php) (October 2008)

Firstly, there are several positive observations which can be made such as:
  • Australia is in the top 10 countries holding patents in the US (not bad considering that the Australian economy is only 6% of the US economy).
  • A large proportion of the patents held by foreign companies in Australia are in the biotech and pharmaceutical sectors. (Perhaps this is because of the value of the investment in a patent because the lead times and costs involved in bringing these products to market is so significant but perhaps it also implies strong R&D credentials in those sectors in Australia.)
However, one of the most striking points made by Moir is that 92% of all patent applications in Australia are made by corporates, yet there is only 1 company in the top 100 companies that own patents in Australia which is headquartered in Australia! This means that all of the 'royalty payments and knowledge spillovers' flow overseas!

Considering the phenominal technological advancements in such industries as mining and the extractive industries and our strong agricultural reseach and development, two industries for which Australian technology is world renowned, I wonder whether Australia's largest companies are sufficiently engaged in extracting rents from the global market for our knowledge and innovation?

The other academic interaction I had which has also been contributing to my thinking in this area a seminar I attended by Dr Richard Dasher, Consulting Professor and Director of the US-Asia Technology Management Center at Stanford University, entitled "Technology Strategies in Silicon Valley and Asia: Contrasting Patterns of Open Innovation"
http://www.stanford.edu/group/us-atmc/cgi-bin/us-atmc/wp-content/uploads/2009/09/090924-402a-flyer.pdf

Dasher made several very useful points comparing and contrasting the open style of innovation for which Silicon Valley is synonymous with the closed and incremental style of innovation typical of Japanese corporates.
I was particularly motivated by a comparison of strategies which major corporations could employ to develop innovation as a tactical advantage, both offensively as well as defensively.
According to Dasher, the requirements for successful open innovation are:
  • an ability to evaluate external knowledge
  • an ability to integrate external knowledge (both tacit and explicit)
  • a clear vision of the direction and strengths of the company
  • brilliant understanding of market psychology and potential new markets (unmet needs)
  • flexibility in business planning
  • strategies to hedge risk
  • strong external sources of knowledge who will cooperate.
Australian corporates need to look at connecting with global technology markets as a source for new technologies to develop internally and for possible avenues for spinning off their own technologies in a global market.