Sponsored by Australia s Digital Ecosystems Written by
Commonwealth Bank viewpoint General manager Innovation Labs at the Commonwealth Bank of Australia, Tiziana Bianco, says although Australia has lagged behind some countries in establishing and investing in its digital ecosystem, there is now significant momentum behind its development. However, she warns that neighbouring cities Singapore and Hong Kong are moving fast. She says that Australia needs to address its digital shortcomings and provide a clear narrative around the advantages it can offer new businesses in order to compete globally. We need to look at the challenges Australia s innovation ecosystem faces, understand the root causes as well as the enablers, and start to develop unique ways to make it easier. That could be attracting or retaining top talent, setting up businesses locally or establishing a second office, or just clearly explaining why people would be attracted to Australia from a business perspective, she says. It s an Australia-wide issue. Everyone needs to play their part and understand their role in the ecosystem. We need to be frank as to where the gaps are and then how each member of the ecosystem can help fill them.
Introduction In the digital age, few if any companies can successfully go it alone. In many parts of the world, ecosystems are forming in which organisations collaborate in one way or another to advance their digital capabilities. They often crystallise within or around a particular sector (fintech or health-tech being examples) but also cross boundaries into technology and other industries. Universities, venture capital (VC) firms and start-up support structures such as accelerators and incubators play important roles in them. North America and Europe have been the focus of most such ecosystems, but in recent years they have also taken firm root in Australia. All the corporate executives, entrepreneurs and academics interviewed for this series of articles describe Australia s digital ecosystems as vibrant and growing in importance. The momentum is palpable, says James Cameron, a partner with AirTree Ventures, a VC firm. Everywhere you look now, you see a tremendous amount of collaborative activity around digital innovation. Entrepreneurial support structures, for example, are mushrooming Mr Cameron counts close to 300 accelerators and incubators operating in the country, a figure that is considerably higher on a per capita basis than in the US or Europe. Big companies play as active a role in these as do small firms and start-ups. According to Max McClaren, who is Australia general manager of Red Hat, a software company, this is because they recognise the need to drive a culture of innovation internally, and thus seek to innovate within their ecosystems, be they with partners, suppliers, customers or others. Big firms are looking to obtain new ideas and improve their own technology capabilities with the help of ecosystem partners, but they are also an important source of innovation themselves, which often benefits their partners. z The Economist Intelligence Unit Limited 2017 1
A nation of networks Collaborative ecosystems are taking root in most of Australia s major cities, not just Sydney and Melbourne. While there are parallels between them, each has distinctive flavours, according to James Hutchin, associate professor (retired) with the University of Technology Sydney (UTS) and an adviser to Flinders University in Adelaide. Collaborative fintech innovation is flourishing in the financial centres of Sydney and Melbourne, while in Adelaide, for example, new accelerators, co-working centres and technology companies are growing up around the city s old manufacturing base and in its universities. In Perth and Brisbane, organisations are coming together around technology innovation in mining, while Queensland s capital is also home to networks developing in creative disciplines such as design and marketing. Everywhere you look now, you see a tremendous amount of collaborative activity around digital innovation. JAMES CAMERON PARTNER, AIRTREE VENTURES Some of these specialities also set Australia s ecosystems apart from those elsewhere in the world. While fintech and health-tech clusters thrive in the US and Europe, Mr Cameron believes that some of Australia s accelerators, universities and innovation labs have unique strengths in mining-tech and agri-tech, for example, due to the country s traditional economic structure. z 2 The Economist Intelligence Unit Limited 2017
Winds of change Three big things have changed in the past five years to inject energy into Australia s ecosystems. One is what Mr Hutchin describes as a tremendous surge in the amount of capital, particularly for early-stage funding of start-ups. The aforementioned accelerators are a major source of this, but international and homegrown VC firms are now investing heavily in technology ventures as well. This was not the case as recently as three years ago, according to Mr Cameron. The other two developments are in the category of cultural shifts. The first is the growth of an intrepid sort of entrepreneurialism amongst young Australian professionals. It s becoming much more common for smart kids coming out of university to choose start-ups over traditional careers, or to spend some time in traditional careers, and then opt out and move into technology, Mr Cameron observes. The second cultural shift is a change of mindset within large businesses. In the financial sector, for example, Australia s banks have shed their inhibitions about sharing data and ideas with start-ups and large technology companies, according to Rocky Scopelliti, who is the global industry executive for financial services at Telstra, the country s largest telecommunications operator. Heads of incubators and innovation labs interviewed for this article series also say that big companies are less controlling than they used to be when it comes to involvement in partnerships and new ventures and their approach to intellectual property protection. According to Cameron Whittfield, partner and head of digital and technology law at PwC Australia, a business advisory firm, Australian companies are more patient than before about their involvement with start-ups and their ecosystems. There is less pressure now on immediate financial returns and more acceptance that strategic objectives may be as or more important. Companies are also in ecosystems to gain exposure to new technologies, to maintain relevance and to learn how to operate in these newer landscapes. Renewed entrepreneurial dynamism on the part of universities has provided additional impetus to the growth of ecosystems. Australia s major tertiary institutions the University of New South Wales, Australian National University, Melbourne University, University of Sydney, University of Queensland, to name a few have long been centres of science and technology innovation. More recently, however, the The Economist Intelligence Unit Limited 2017 3
federal government s National Science Innovation Agenda has made it easier, and created more incentives, for universities, accelerators and incubators, and companies to collaborate in the development of new business ideas. Petra Andren, CEO of Cicada Innovations, a deep technology incubator, calls this a massive shift in the innovation environment. z Growth pains As dynamic as Australia s innovation environment has been in recent years, there are factors that could hem in its ecosystems growth. One is a continuing risk aversion within the corporate sector. Many companies are shedding their inhibitions about genuine collaboration, as discussed, but resistance to technology-led change is extremely difficult to overcome even in innovative companies. Mirroring this at the start-up level is a perceived social cost of failure that continues to weigh down entrepreneurs, says Mr Hutchin. Both he and Mr Cameron also observe that successful start-ups in Australia find it extremely difficult to scale up. Another fly in the ointment, according to one expert interviewed, is the country s restrictive immigration system. This makes it difficult for businesses to recruit overseas talent in emerging digital specialisations where local pools are thin, such as data scientists. A perceived social cost of failure continues to weigh down entrepreneurs. JAMES HUTCHIN ASSOCIATE PROFESSOR (RETIRED), UNIVERSITY OF TECHNOLOGY SYDNEY In the next three articles, we will take a more in-depth look at specific aspects of Australia s collaborative ecosystems touched on above: cultural changes evident in the different categories of participants; the technology capabilities larger ecosystem players are looking to develop; and changing attitudes and approaches toward intellectual property. z 4 The Economist Intelligence Unit Limited 2017
Key takeaways ONE Australia is making up for lost time when it comes to collaborative ecosystems for digital innovation. Their numbers (on per capita basis), scope and vibrancy now rival those in the US and Europe. TWO Australian ecosystems have some unique strengths relative to their global counterparts, for example in mining technology and agricultural technology innovation. THREE The catalysts of recent ecosystem growth are an influx of investment capital, a growing interest in technology entrepreneurship amongst young professionals, and a realisation amongst large companies that participation in such ecosystems can drive their own innovation forward. The Economist Intelligence Unit Limited 2017 5
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