Written by Philippa Lewis
There is constant noise across Australia when it comes to innovation, start-ups and technology especially in healthcare. Blogs abound, meetups and accelerators are in orbit, researchers have never been more inspired, corporates are anxious not to miss out and governments are trying to navigate their methods of contribution and justify their electoral pitches.
In fact, we’re not really witnessing a birth of something new, but rather a fresh focus on “fashionable concepts”; innovation, invention and commercialisation.
With so much energy, will and attention, how can we fail to build the so called, Innovation Nation?
Easily, and that’s the problem. It’s easier to keep doing what we have always done because it seemed to work in the past. Fashion as we know, comes and goes.
Though small changes are emerging, the industry of innovation is still a discombobulated model. Consensus seems to be that we are not really confident that the elusive Innovation Nation is emerging any time soon. One has to assume that what is actually required a is holistic change in thinking.
Starting with the facts; innovation is hard. Innovation is risky and innovation’s middle name is “failure”. Generally, we don’t like hard; we are risk adverse and no one likes failure.
But has anyone actually articulated what success could look like?
We look northward to places like the US longing for our very own Silicon Valley and wondering why we haven’t really embraced or launched the “Stanford model”; perhaps the “Israeli model” might better? Then we try to understand the money trail of investment; what works and what doesn’t. But the well-trodden pathways to venture capital are fundamentally inconsistent with Australian investment models.
In contrast, US investors have pumped over US$10b into bio, medtech and digital start ups this year. It has to be said; US start up investment is extremely energised.
If we are to build a vibrant, innovative country we have to start at the beginning of the innovation food chain. These are the amoebas. The small, uncomplicated organisms who are the first forms of life. Without them, we cannot have the kings of the jungle. But early forms need food, air, security and an ability to reproduce. In particular they must have time if they are to flourish and grow into top predators.
The source of novelty, solutions, science or just good old fashioned ideas has to be the starting point for change. Researchers, universities inventors and young entrepreneurs create the early phase opportunities in their sleep. However, the disconnect between the novelty, science or idea and successful commercialisation is in fact, where true innovation needs to happen.
Yes, it is hard to take an idea and turn it into a commercial success. It’s long hours, requires dedication and a “never say die” attitude. The success stories always have an almost unhealthy level of virtuosity and even religious zealous, underpinning their story.
But the route to commercialisation has a permanent mental scaffolding that is inconsistent with innovation. Advisors, investors and regulators surround the entrepreneur with wagons of gusto, pitching the project’s risk profile to all who will listen. The old saying prevails; if you look hard enough you will find a reason to walk away.
Capital in Australia is generally shy and even averse to failure. The idea of investing in good ideas that will “do good” or provide positive impact on society in the long term whilst accepting in full the fact that 8 out of 10 will ultimately fail (and yes, people, funds and governments will lose their money) is not an acceptable notion here. Nonetheless, it’s the fact.
Feels like a visit to a casino but with worse odds.
This leads to such a weak appetite for risk, whether it’s life science, medtech or digital etc. The base of stakeholders gets diminished over time and the sector becomes too weak from an intellectual perspective to move in any direction with vigour or confidence. It simply hasn’t been fed enough data to make good decisions.
So much for creating top predators!
The first step in building a robust sector is to accept and applaud failure. Creating a base of knowledge underpinned by successes as well as failures is vitally important if we are to change the thinking from casino to value creation. Being prepared to accept that some will work but many will fail, is compulsory.
Know what you are funding. I mean really know what it’s all about! It might seem unconvincingly feeble to say this but over and over again investors are bitterly disappointed in outcomes because they had expectations that were entirely unrealistic or unexplained. They really didn’t understand the IP, or the technology or the risks.
Who can blame them? When things are moving so quickly and you literally have to consume vast quantities of information to keep up, caveat et emptor just doesn’t cut it. “Should have known”, “know unknowns” and the “unknown unknowns’” and so forth aren’t excuses that are welcome in the board room or risk committee meetings.
Where are the analysists I hear you ask? Well, they are struggling because the innovation industry just hasn’t done enough cradle to grave projects to provide the depth of local experience or data to model the risks appropriately. And let’s face it, if your job depends upon making recommendations for investment, the safest place to be in is on the fence.
To turn this around, we must be prepared to wear failures as a badge of honour just as you would the successes. After all, we know that innovation is iterative and the failures often provide the platform of learning for the next big thing. Failing to foster a healthy acceptance of failure is an absolutely sure way to stymie research and innovation.
But what obligation the entrepreneur’s universities and researchers? Surely they must also own some blame for the current less than optimal environment? The answer is “yes” and “no”.
The plethora of obstacles faced by researchers and academics when developing the next big thing needs to be addressed in a practical way. The vesting of intellectual property, funding of each milestone and the ultimate question that many projects reach is “where to now?” do not have a trusted, prescribed process in Australia.
Which means that success can be simply random.
When does the researcher hand the project over; why and to whom? Is the researcher the ultimate entrepreneur who does the commercialisation? If so, how do we equip them to do so? How does funding stage itself and how is the milestone map created?
Because there are no robust, tried and trusted guidelines to help this process, projects lose funding, energy and focus and it can become just too hard. Failure to secure the right kind of money at the right time combined with the relevant strategy creates predicable outcomes.
Invention, investment and commercialisation is a form of “food chain mutualism”. If one is strong, the next will be so, as will the next.
Inventors, entrepreneurs and universities need to take some ownership of where we are and where we can go. Capital is risk averse; that’s a fact. So how do we “talk the talk” and more importantly “walk the walk” with money?
Having empathy; that is to understand the feelings of the other, for the investment community might sound entirely off reservation but if you have ever presented an idea, or pitched a complex technology to some of our US friends you will quickly learn that if you are ill prepared, do not have sound financial modelling, have not developed an firm understanding of the risks, understand fully your IP position or are not able to comment on historical successes and failures in the sector, you will get your ten minute “elevator pitch” but that’s all you’ll get.
Deploying an empathic approach to this conundrum, you will realise that it’s you that must be prepared do the work for the investor. Make it easy. Construct the opportunity in such a way that it is easily understood. Simply put, investors and funders cannot be masters of everything; they don’t have time or resources and things are innovating too quickly for them.
The early stage project must address the need to become truly investor ready because the rigours of this process will shine a light on the genuine risks, the important milestones and create a real definition of what success will look like.
There is a form of interdependence between the inventor and the money when it comes to the evolution from amoeba to top predator. However, survival of the fittest cannot be limited to dependence upon the rules of the jungle but rather it should be based on the combined set of rules developed by the inventors/ entrepreneurs and the “money”. A virtuous circle.
Rule one is keep your creativity on steroids but rule two is simultaneously to expand your thinking into the real world of commerce - day one.
Inventors, researchers and entrepreneurs have an obligation to “think like the money”. Passion, science and energy will get you to base 1 of a 4 base game but it will not create value; it won’t hit it out of the park! Forcing the discipline of investor ready preparation means that those in the early part of the food chain have to discipline their thinking from day one and do the “basic housework” in respect of their business.
In innovation world, basic housework is painful. It’s not that much fun to have to prepare a suite of in depth financial models, cash flows, balance sheets, NPV etc. before you even have an application or therapy. And intellectual property reports seem self-evident but are they? Unless they reflect the overall strategy in respect of the product or application they will become a problem sooner than later.
No point in developing business models that are outdated, inconsistent with custom or contain no commercial data points investors and funders can understand. Competitor examination has to be up front and stringent in its analysis. And by the way, don’t proceed any further if you don’t have well defined exit strategy.
This concept of self-inflicted, commercial tough love has to be embraced because it drives intellectual rigour and quality outcomes.
All this and you are still at the amoeba stage? Well, actually, yes.
Omitting to deal with these elements will come back to haunt if they are ignored. Raising capital or securing grants for the next stage will get harder and harder and the commercialisation pathway will seem like a distant dream.
But investors and funders must also shoulder blame for not demanding a higher level of scrutiny and objective analysis from the applicant. Until the two are working together towards value creation seamlessly and with common guidelines and goals, commercialisation success will remain hit and miss.
We don’t actually have to invent brand new ideas to have research success. We can look to the many examples around the world that already demonstrate it. In reality it’s not a conundrum but rather it requires holistic change in the way of thinking; where true collaboration is engendered from amoeba to top predator in a circular rather than linear fashion by all stakeholders and failure is revered and rather than punished.
If we are to create top predators in the innovation world, we have to have rigour embedded in the process of value creation right from the beginning of life because in innovation world the amoebas can all become top predators if they course through the evolutionary process successfully. Survival of the fittest means being fit enough to survive. Amoeba, top predator and the investment community; they are all in fact, one synergistic organism.