Ian Maxwell

Forget STEM – Australia Needs A Chief Technology Officer

Commercial innovation in the 21st century is very focused on IT engineering and much less so on science. By way of example, I would suggest that over 90% of Silicon Valley’s investments over the last decade have gone into IT start-ups. At the moment, science is considered very ‘20th century’ in the tech investment world. The reason is that the comparative financial rewards for investments in IT are much higher, and with lower risks. It will take some time before this equation changes – we have a mountain of IT opportunities to work through and it will take decades before science once again becomes a primary focus of tech investment.

The comparative problem with a science outcome as a focus of technology investment is the long time to market and the corresponding heavy capital investment required in the development phase. Investment in technology is measured by internal rate of return, which is ruined by large investments that have long periods before profits are returned. And this problem is even further exacerbated by the fact that IT solutions are returning higher ‘multiples’ – the perceived value of a working IT solution usually has a much higher relative value compared to a working solution based on a science outcome.

Australia’s well-publicised poor performance in innovation has very little do with science and everything to do with our corporate sector being users of IT technologies, and not vendors and exporters of IT technologies. They can afford to be so because of the implicit oligarchical environment in which they operate (e.g. four large banks, two large supermarket chains, etc) which to a large degree protects them from foreign competitors. Essentially they have no strong driving force to become global technology vendors because there are easier profits to made serving their protected Australian markets with off-the-shelf technology solutions.

If history is a measure, any solution to an innovation ‘problem’ that has an Australian government at its core is almost certainly going to fail. We have had program after program over the last three decades focused on innovation, knowledge nation, and various other catch-cries. And yet our high tech exports continue to fall as a percentage of our GDP. The reason is that government expenditure, focused on technology innovation usually starts with a misdiagnosis of the ‘problem’ followed by what could only be called a perversion of the process of remedy, i.e. it gets muddied by pork-barrelling and self-serving parties looking for government funding.

Contrary to oft-repeated pronouncements, Australia is not a risk-adverse nation. Indeed in mining exploration and other areas we are more than happy to invest in risky venture because we have been doing so for a century and a half and there is an investor class that fully understands the risks.

What we don’t have is large investment in tech-sector innovation because the return on investment into the tech sector in Australia, which has historically eked out a small existence usually with government support, has traditionally been very negative. This will not change unless our large corporations start becoming global vendors of technology solutions; without this driving force to create a local market for innovation assets, most of our high-value technology ideas (and their progenitors) will continue to disappear overseas and we will be left with the rump that ensures a negative return on investment. In this scenario our investors are not ‘risk adverse’ but ‘loss adverse’, i.e. very sensible indeed.

So do we actually have a problem? The only one that I perceive is that less than 1.5% of our exports can be considered as high tech, and this number is shrinking. We rely heavily on exports of resources and agricultural products, as well as imports of students and tourists. All of these revenue sources are susceptible to profitability and revenue cycles and if they all trend down at the same time we may be in a little strife.

Is there a role for government to fix the ‘problem’? Maybe, but only if the issue is handed over to a modern day Senator John Button; these political characters that can cut through the self-serving noise seem to be few and far between these days. The primary focus of any government-sponsored solution should be incentives, tax and otherwise, that act to get our large corporations into the business of exporting technology solutions to global markets. Short of this focus I can’t see the opportunity for meaningful change.

In terms of other actions, this country badly needs a Chief Technologist. We have a Chief Scientist but this role, absent a large corporate R&D sector, pretty much serves the needs of research institutes and universities. The widely publicised focus on STEM needs to be broken up into IT and SEM; STEM is an unholy grouping that does not recognise that a large fraction of IT innovation occurs in start-ups, SMEs and the corporate sector, and has very little to do with universities (other than training of the graduates that go into this sector). And finally, ‘Innovation and Science Australia’ needs to be supplemented with a body called something like ‘Innovation, Companies and Exports, Australia’.

Finally I would suggest that the success of any investment of public funds into the innovation ‘problem’ needs to measured in the context of high-tech exports. Without a quantitative metric of success it is all too easy for governments to invest in one failed program after another, with no carried-over learning.

Drones, Droids and Robots

The Australian Federal Government’s ‘National Innovation and Science Agenda’ was hosting the school theme of  ‘Drones, Droids and Robots’ last month. The aim of this theme is to ‘embrace [in schools] … real-world application of autonomous technologies in areas including agriculture, mining, manufacturing, medicine and space and deep ocean exploration’.

A robot is pretty much any device that automatically performs physical tasks, sometime repetitively. The border between machines and robots can be quite fuzzy but we can say this; all robots are machines but not all machines are robots. Generally speaking robots include very high levels of computer control, many sensors and in some form or another, they often replicate one or more human functions.

Consider a welding robot in an automotive manufacturing facility. It looks very much like a large and quite intimidating human arm, performing similar functions to a human arm but with much faster speed, higher accuracy and precision, lower overall costs and virtually no occupational health and safety risks.

Droids are a sub-set of robots; those that are mobile and that often have a humanoid form. Until recently droids only existed in science fiction books and movies, but more recently they have become a reality as technology has allowed the productions of autonomous droids for all sorts of functions, such as soccer playing droids created for the Robocup competition and household ‘butler’ droids that have recently popped up on crowd-sourcing funding sites.

Just recently, at a tradeshow in China, I noticed that one of the neighbouring booths had a little droid running around combining the functions of vacuuming and drink delivery. The novelty value of such an oddity probably out-weighed the risks of people tripping over the thing.

The autonomy of real-life droids sometimes requires a form of ‘artificial intelligence’ to provide functionality. Today this artificial intelligence is usually developed within an extremely limited physical environments (such as a soccer pitch) and is really just binary software code that is able to make ‘decisions’ in most possible scenarios within such a closed physical environment.

Certainly no machine, droid or otherwise, has completely passed the Turing Test in an open environment. The Turing Test requires that a machine can fool a human into ‘perceiving’ that the machine is a human. Indeed, in order to pass this test in an open environment a machine would probably require, in addition to artificial intelligence, both artificial sentience and artificial consciousness; we are a long way off developing such a machine.

A drone is very different to a robot or a droid. It is a vessel guided by humans using remote control. The ready availability of cheap technologies for wireless communications and high-density electric battery storage, usually containing lithium, have allowed for the introduction of low cost flying drones (unmanned aerial vehicles or UAVs) which have captured the imagination of many large businesses, hobbyists and small business entrepreneurs. In addition to UAVs there are also many ground vehicles and water-borne vehicles that are also drones.

Lithium polymer batteries use lithium ion chemistries but have polymer separators that effectively reduce energy capacities compared to lithium ion batteries but permit higher discharge rates. Lithium polymer batteries can have a flat pack configuration as compared to the cylindrical shape of lithium ion batteries. This ease of packaging combined with higher discharge rates has resulted in a situation where most UAVs are powered by lithium polymer batteries.

The future for robots is a given. They have been with us for decades and will continue to get more sophisticated, especially in the manufacturing sector where ever-increasing productivity requires the removal of labour from factories. A similar trend is also going on in the agricultural and mining sectors, where labour is seen as an inhibitor to cost reductions and productivity gains. This trend is underpinned by the fact that robot technology is steadily becoming cheaper and more sophisticated.

Of more interest in the near term is how the specific categories of drones and droids will evolve. Drones and droids, in their modern context, have only just emerged from high-tech laboratories as cost-effective technologies that are available for real-world applications. Previously costs were so high that these technologies were limited to very high value niche applications.

In terms of commercial deployment, drones have gone through a massive non-linear uptake in consumption primarily driven by UAV applications. Droids, although threatening such a leap, have yet to take off in quite the same way.

For UAVs there are five interesting trends:

  • The maximum flight time and distance of UAVs is slowly increasing as battery technologies improve
  • The payload of UAVs is slowly increasing with improved motors, better batteries and higher strength but still light chasses
  • Authorities are limiting the application of UAVs, for safety and privacy reasons, whilst at the same time exploring policies that will allow widespread commercial applications of UAVs
  • The cost of UAVs (per kilometre of flight or per kg of payload per kilometre of flight) is rapidly decreasing
  • Technology groups are developing autonomous flight systems, i.e. fly-by-GPS systems. Strictly speaking, when a UAV flies according to GPS settings it is no longer a drone but more of a flying robot.

 

All of these trends are pointing towards multiple commercial applications of UAVs. In some cases UAVs are replacing what was formerly ground based commerce, such as high value cargo transport. In other cases, such as cinematography, drones are allowing video filming to capture that which previously was not possible. Indeed, in every instance that I talk to an entrepreneur working with UAVs I discover anew and unexpected use of the technology.

Dow Chemical has recently used UAVs to inspect its chemical plants for issues such as cracks in pipes and tanks. Before it could do so however Dow had to apply to the Federal Aviation Administration for approval to fly the UAV’s over Dow’s own property.

This is an area where government regulations can accelerate or hinder technology deployment. For large-scale commercial deployment of UAVs it is critical that standards for flight path systems and guidance systems are developed. What is most needed is international standards in the area so that the same technology can be deployed globally and thus benefit from the greatest economies of scale. In English, this means that costs will come down quicker.

Standing in the way of such efforts is the fact that it may take years for different nations to collaborate on what is currently seen by many as just a nuisance to aviation. In the meantime, many technology groups are busily filing patents in the area, and these will further confound future efforts to standardise technologies in the UAV market.

 

Henry Ford, Lies & Innovation

In an article in the Harvard Business Review, Patrick Vlaskovits has decided that the quote below, attributed to Henry Ford, was actually manufactured by one Jean-Marie Dru in 2002

“If I had asked people what they wanted, they would have said faster horses.”

Often have I heard this quoted by those pedalling consulting services that will miraculously transform your employees into great innovators.

The consultant will generally float the idea that there are just two ways to innovate:

  1. The dull way via customer feedback, or
  2. Through true innovation that is created by gifted visionaries that mostly ignore customer input and instead create innovation based solely on their prophetic vision for the future.

Although why you’d sell this latter message to the masses is a mystery. Very few in the audience would believe that they are the next Steve Jobs, so this message might just act to discourage them.

There is a third option, not usually coached, and that is to copy the new and sexy ideas of others shortly after early market success.

In any case, the use of the supposed Ford quote is as silly as business consulting gets. Imagine for example that Henry did ask that question and the people did say ‘faster horses’.

Had Ford been a true innovator he simply would have done a root cause assessment which assumes that a customer doesn’t know what he or she doesn’t know. In which case ‘faster horses’ is translated to ‘a faster way to get to where I am going in or on my own autonomous mode of transport.’

And then the innovator would ask a bunch more questions as to how much this autonomous mode of transport could cost, and whether there are any other constraints or desires associated with it.

This process is then dove-tailed with an assessment of readily available and potentially available technologies.

Eventually a product development process starts, one that balances risks associated with technology, market and financial factors, as per circumstances.

The irony of the Ford quote is that Ford’s only true business innovation was to make just one model of car for almost two decades, the Model T; one that was very reliable, rugged, and most of all, cheap.

Ironically, his cars were amongst the slowest of the era.

After his initial inspiration to make cheap cars, his capacity for innovation was reserved for engineering which was focused on lowering costs, evermore.

For example, in 1914, a whole 6 years after production began, Ford famously changed the colour of the T-Model to black-only in order to save costs.

Cars had been around for 23 years before the Model T came along but they were still the preserve of the wealthy. The middle classes of America did not desire faster horses, just affordable cars.

What Ford actually did say was:

“I will build a motor car for the great multitude. It will be so low in price that no man will be unable to own one.”

Whether he figured this out on his own or by talking to droves of want-to-be car owners seems to be unrecorded.

In any case it was probably quite obvious at the time that everyone would own a car if only they could. Similarly we would all own private jets and luxury yachts if we could.

The real business challenge for Ford was the creation of a financed plan to achieve this goal, along with the development of all the required novel engineering.

Many, if not most business leaders could develop such a plan but very few would be willing to execute it because the risks of failure are very high. Most business leaders quite rationally prefer lower risk and lower return activities.

For every Henry Ford that is recorded in history there are thousands of similar characters that have been unsuccessful and are long forgotten. The bias in the narrative of the business media towards the adulation of past successful entrepreneurs doesn’t fool too many business leaders. They understand statistics thanks very much!

As a historical note, Ford’s company eventually lost market share because he failed to continually consult his customers as to what they wanted.

Hence he didn’t recognise that his customers had changed; as middle class wealth increased they had started to want genuine choice between models and list options in the cars that they purchased, whereas Ford had just the one standard cheap model with very limited options.

A century later Henry’s company is inflicting Ford Falcons on Sydney’s taxi customers. This doesn’t surprise me one bit; we asked for comfort and space, and Ford brought us rattles, vinyl seats, diff whine and three-quarter rear doors.

So, Jean-Marie Dru;

“If I had asked Sydney’s taxi customers what they wanted, they would have said teleportation.”

And they got Uber instead! You see, business innovation is a tricky, tricky thing.

Today I am at a business forum and the theme is, yet again, innovation in business.

Henry Ford even got misquoted! He is probably turning in his grave.

Speaker after speaker is telling this room full of business leaders that, in these fast changing and disintermediating times, they have to innovate or risk losing their businesses.

To these business leaders I would make one point; successful business innovation isn’t motivated by fear, it is motivated by excitement.

Or to put it another way, excitement is a necessary but not sufficient driver of successful business innovation.

The excitement is needed to motivate the innovator to happily and irrationally ignore the readily-perceivable and overly high risk factors, and probable failure.

So if you are considering some serious business innovation; if your motivation is fear, then don’t bother!

Australia’s High-Tech Start-Up Sector – Who Actually Wants One?

Some time back I wrote a paper outlining one hypothesis as to how the corporations in the Australian services sector could be encouraged by government intervention to require new sources of innovation as developed by a high-tech start-up sector.

In that paper I stated a view shared by many, that the world only needs one Silicon Valley.

The evidence? Firstly, Silicon Valley doesn’t just serve the USA, it is a magnet for entrepreneurs and risk capital from all over the world. Secondly, as Vivek Wadwha noted, “hundreds of regions all over the world [have] collectively spent tens of billions of dollars trying to build their versions of Silicon Valley. I don’t know of a single success.”

Recently I was included in an email conversation that included a small number of Australian high-tech start-up industry veterans. The group had taken it upon themselves to educate the incoming Australian federal Minister for Science (sic) on what is needed to ‘fix’ the local technology start-up sector.

The reason the email train existed at all is that we have never had a sparkling start-up high-tech sector in Australia. At times this sector has shown a little self-promoted promise with the odd moderate success, but that is all. Most people with the required expertise recognise this fact. One trip to Silicon Valley convinces them that over there they have something that we do not.

And yet our local media mostly runs high-tech sector story that are blazingly upbeat. I think this is because the high-tech sector stories are run as ‘feel good’ stories.

For example, a two man start-up might be promoted as the next unicorn and then it will quietly disappear never to be heard of again. Your local medical researcher doing some exploratory effort into determining the cause of Alzheimer’s will win a Eureka prize and the public may think there is a cure and a large Australian medical corporation on the way. It just about never happens.

The experts that can see past the positive media coverage seem to all have a pet hypothesis as to the root cause of the ‘problem’ that haunts the Australian high-tech start-up sector. Variably they will say, not enough skilled entrepreneurs, or not enough quality innovation, or not enough investment capital, or not enough qualified venture capitalists, and the list goes on.

Some of them then start promoting to the government their hypothesised solutions; for example (working through the example list above) creating university courses to up-skill entrepreneurs, or by government investing more into university R&D to create more innovation, or by removing barriers to crowd-funded venture funds, or by giving venture capital at friendly terms to Australian venture capitalists returning from Silicon Valley (and the list goes on).

There is a pattern here:

Firstly the experts announce that there is a problem, the lack of a vibrant tech sector in Australia without ever defining exactly what a vibrant tech sector would look like. To this I would note that it doesn’t make much sense to start looking for a solution to a problem until the problem has been properly defined.

Secondly, the experts propose a solution without ever realising that their idea is just a hypothesis. That is, it could be wrong and it needs to be stress-tested before being implemented. Since different people have different hypotheses you’d think they’d catch on. But no, everyone just thinks that everyone else is wrong.

Thirdly, most of the experts look at the problem in ‘kinetic’ terms. That is, they believe that the lack of vibrancy in the Australian tech sector is caused by certain missing or under-performing elements of a tech start-up food-chain (which comprises of innovation, entrepreneurs, skilled tech employees, risk capital, venture capital managers, investment bankers, corporate acquirers and a tech-friendly public stock markets). Fix the under-performing element they say, and then magically all would be OK despite the evidence to the contrary from past efforts over 35 years of government intervention.

I would assert that the problem is actually ‘thermodynamic’ in nature. By this I mean that there is no actual current need in our economy for a tech sector to exist.

The commodities sectors do not need one; they have their own R&D channels. The oligarchies in the services sector don’t need one; they buy their technology from overseas vendors. The educational exporters don’t need one; they only innovate to reduce costs and improve their marketing. And the list goes on.

Basically there is no major corporate sector in Australia that requires a steady stream of new platform technologies served up by start-ups. They are doing just fine as they are. Without this high level ‘driving force’ no amount of fiddling with the tech start-up food chain will do any good.

Until one of the Australian corporate sectors buys into the idea of buying start-ups and attacking global markets with the so-acquired platform technologies we will never have a thriving tech start-up environment.

To make matters worse, any start-ups that do succeed pretty quickly disappear overseas to serve larger markets with cheaper capital, thus leaving the local environment devoid of their potentially positive influence. This fact underlies the need for local corporate adoption of successful start-up technologies.

Just as a short historical segue, Silicon Valley was built on defence, semiconductor and computer technology companies in the post-war era. After decades of slow developments the VC sector really took off in the 90s (in terms of capital deployed) when three things occurred.

Firstly, the corporate sector in the USA saw Silicon Valley as a reliable and viable source of new platform technologies. The opportunity they saw was to cut much of their under-performing corporate R&D expenses and use those funds to acquire start-ups or listed tech companies; this turned out to be a more cost-efficient way to innovate.

Secondly, Silicon Valley caught the first internet boom and saw an opportunity to seize a once-in-a-millennium IPO market for new global technology companies.

Finally, the 1978 ERISA amendments allowed US pension funds to “prudently” invest in early stage unlisted companies. Before then the VC industry was much smaller and limited by capital supply; these amendments had fixed this issue by the 90s.

As you might imagine, not much of this story aligns to anything we might conjure up in Australia. If we want to have a vibrant high-tech start-up sector then we need to come up with our own need to have one rather than attempt to copy and compete with Silicon Valley, because it won’t work; never has.

Now if we accept all that as gospel (and most of you won’t and good on you for your scepticism) then it seems to me that we have two choices:

1. To create a new export-orientated corporate sector from scratch that needs the technology platforms served up by local start-ups, or

2. Encourage one of our existing corporate sectors to start buying the technology platforms and to start exporting.

Which of these has the highest chance of success do you think?

For the former to succeed we would have to miraculously create both a new export-orientated corporate sector and a thriving start-up community. This takes me back to the 90s when many in the Australian start-up community used to look to Nokia as the template for success. ’Create enough start-ups’ they said ‘and you will eventually get a Nokia.’ Nokia they argued created a new technology-export sector for Finland and it also supported a local technology start-up community. Well after 35 years of trying we haven’t got a Nokia, and neither does Finland for that matter.

My money is on using government incentives  to encourage our plumpish corporates in the services sector to morph from being domestic oligarchies that use third-party off the-shelf technology platforms to global vendors of disintermediating technology platforms in their own sector. They have the capital to execute this plan, if not the management or the culture. I never said it would be easy; I just think this is the higher probability approach of the myriad that I have heard proposed.

 

Prototype of the Black Box Flight Recorder Image care of The Conversation,

Tesla Motors: a most unlikely disintermediation

A couple of weeks back, on the occasion of my daughter’s impending birthday, I was wandering through Westfield Plaza in the city on a shopping expedition. Already dulled senseless by Zara, Seed, & Bardot Junior I was greatly relieved to find a Tesla Motors’ Model S on display right in the middle of the mall. I sent my daughter on her way to the next shop and told her where to find me when she was done.

Sitting in the Tesla I was immediately impressed with the user interface and classy interior of the car. So when asked by the marketing budgie if I wanted to book a test drive, I of course answered in the affirmative.

tesla-interior

Now I don’t drive much these days. For years now I have been cycling to work and also in and around town for social occasions; one of the privileges of living near the CBD. Indeed I no longer own a car because at some point I realised that the true cost of car ownership was equivalent to 2-3 cab rides a day even given the exaggerated taxi fares that we have here in Australia.

The truth is that my decision to go car-less had nothing to do with cost and everything to do with the fact that driving around Sydney is just about the only activity which can make me lose my nut. It’s a combination of factors that gets under my skin; traffic that hardly moves, drivers that are stuck on 40 km/h because they can’t be arsed reading the speed limit signs, cameras and cops at every corner waiting for the next horrendous misdemeanour (oh, a whole 5 km/h over the speed limit, you evil person!), no available parking, and parking with ridiculously painful payment methods and prices.

To make matters worse I can recall a former era when driving was easily the most efficient form of transport in Sydney. I remember a time in my late teens when I drove from Pyrmont to Bondi for a surf without once stopping. Can you imagine?

The only cars that I get to drive these days are GoGets and rental cars when travelling for business. This allows me to experience many different types of cars. Add these experiences to a lifelong interest in both the business and technology of cars and you might say that I am somewhat of a trainspotter when it comes to matters automotive. Ironic this, given that I don’t own a car.

Anyone that has a passing interest in cars will have been reading about Tesla Motors for many years now. I had even seen their cars when they were first released in Silicon Valley; some venture capital colleagues had of course lined up to buy the first batch. But due to sheer chance, prior to my recent test drive, I have never before had an opportunity to drive one or even be a passenger in one.

And to be honest I just assumed that the Silicon Valley venture types were being wankers when they waxed lyrical about the things. Of course they would say nice things because Tesla Motors was a child of Silicon Valley and also because these guys always drink their own collective Kool Aid. It’s their number one job skill in fact. This, combined with the fact that Tesla Motors derives from the USA (more on this below) had caused me to file their cars in my TBD* folio (*most likely crap).

Tesla-interiour

This confidence in matters automotive probably derives from the fact that I grew up in a car mad family. A Ford family to be exact, in an era when there was just three choices; Ford, Holden and Valiant (which was reserved for the eccentrics, the wogs and, unfortunately, me for my first car purchase). By way of example, the Bathurst car race was a religious event at our house. Starting early one October weekend morning it was the one day of the year when no other activity was allowed. The males of the family would be glued to the couch for the whole 500 miles. The same male collective would spend any car trip commenting on each and every car of note that passed our vision.

With this start in life it’s no surprise that I have a strong interest in cars. But another reason that cars appeal to me is that they combine my three professional interests – design, technology and business. In fact there is far more ’embedded’ technology per inch in a car than there is in any other product on the planet, including Intel’s CPUs. After 150 years of continual development and trillions of dollars of collective and cumulative global R&D it is possible today to buy a new car for as low as $12,000. But unlike many other products, cars have these two wonderful R&D constraints that appeal to the professional product developer in me – the cost restrictions inherent in high volume manufacturing, and design; both of which must be optimised within technology constraints in order for the product to be successful.

There was a time when the Americans led the world in car design and engineering. That sort of stopped somewhere in the 1950s when the insular American market got shanghaied by corporate types intent on selling flashy large dinosaurs for profit. The Germans and the Japanese saw the opportunity and developed much better cars for export, which they are still doing to this day.

The poor corporate management of the American automotive industry must have started believing that cars sell solely on price and size, or through a great big distribution channel and lots of marketing, whereas they really sell on brand perception, all-round performance and design. Customers generally have a budget and within that budget they will select the car that they perceive is the most desirable brand, has the most amenable user experience, and that also has the best design or the least objectionable design.

It’s hard enough to manage the design process for any type of consumer product development but for car makers to get it right the decision making process around design has to be supported by management that understands the importance of great design and can recognise it, but not try to run it. That sort of right brain thinking just doesn’t normally come with the left brain requirements required for climbing the corporate ladder of a large American automotive company.

For all of these reasons and for as long as I can remember American cars have pretty much been considered to be agricultural and not terribly desired by the sane. Over the last decade we have seen some American models making inroads back into the Australian market, especially Jeep with their range of SUVs. But even so there are not many souls who place American designed and made cars at the top of their shopping list.

If we were to be honest with ourselves, the American-owned Australian icons, the Falcon and the Commodore/Kingswood, were also built to a low cost point and always a couple of generations behind the latest technologies. Which is why the Japanese and Germans and, more lately, the Koreans have eaten their lunch; these guys have been importing better cars that offer much better value propositions. And the punters have voted with their feet. The Falcon is finally going to the great automotive cemetery in the sky and let’s hope the Commodore follows. I for one will rejoice when I get into my last smelly, rattly Falcon cab. Was there ever a car less suited to the task?

Oddly enough my brother is looking forward to the upcoming Australian release of the Ford Mustang, primarily because he used to watch Allan Moffett race one as a kid and has always had this dream of owning one. In 2015 one can finally buy a Mustang with some sort of multilink independent rear suspension, almost 35 years after Mercedes Benz introduced this technology in the 190E of the day. That’s how far behind the Americans are when it comes to matter automotive.

Intuitively I had placed Tesla Motors in the same bucket as their elder brethren at Ford, GM and Chrysler. That is, from a country incapable of great automotive design and execution. And certainly incapable of great automotive technology. How wrong was I?

I don’t know where to start in singing the praises of Tesla Motors. So I will start in the least obvious place – sales. Prices are advertised online. Option prices are listed. There are no hidden costs and you can order your car online. They own all of their own stores and don’t use distributors. When I was in my twenties I worked at a pub on Parramatta Road where all the car salesmen used to retire after a hard day’s fleecing. The stories they told are indelibly etched in my mind and as a result I have never bought a car in any sales yard, new or used. Tesla Motors seems to have caught onto this distaste and reengineered the customer experience into the 21st century. And all power to them for it.

Yet, and I should mention this, they still do trade-ins. Trade-in pricing is a form of what Douglas Adams called Bistromathics; essentially there is no logic to trade-in pricing and if you attempt to figure it out you will go mad. No matter what deal is being offered a customer always feels ripped off because of the obvious gap between private sales prices and the trade-in offer. My advice to any car company wishing to make it easy for customers to swap a used car (plus cash or debt) for a new car is to sell the used car on commission on behalf of the customer and only take a fixed percentage fee of the sales price. This way the customer would not feel so gamed.

At Tesla Motors’ sales headquarters in Sydney they have an example of the chassis and drivetrain of their cars. I took a photo for those of you that haven’t seen it before. The compactness of the skateboard-like guts of the Tesla is remarkable. No gearboxes and one or two tiny electric motors depending on how much power you want. The batteries are hidden under the passenger floor with all that weight down nice and low for good driving dynamics. With a chassis and drivetrain like this it’s pretty clear that Tesla Motors could put any vehicle they wanted on this skateboard, and indeed they are now floating around an SUV concept vehicle. As their development budget allows I would expect them to fill every vehicle category (and there are now dozens of sub-niches exemplified by BMW’s maddening collection of models).

Tesla-chassis

And then there is the driver interface. I won’t carry on much here but a good analogy to make is that of Nokia Symbian (being your normal car) and the iPhone (Tesla Motors). The controls on this car are startling good and different to your normal experience. Just about everything is controlled through the enormous touch screen, apart from the steering wheel controls and the voice controls, neither of which I played with. Even the rear view mirrors are effectively redundant because of the fantastically large and clear rear-view camera display. The Google maps display is so big that it is actually useful.

Tesla-dash

One feature I love is that you are always shown the current speed limit. This is useful for folks like me that don’t believe that our constitution includes a clause making the reading of every sign a compulsory activity.

I asked if I could use that speed limit information to set a speed governing function so that I would never incur a speeding fine. Apparently not as yet. But my sales guys suggested that this might come in a future over-the-air software upgrade. And this is one of the technical features of the Tesla you have to get comfortable with; there’s a lot of software between you and the road. Some part of me still prefers old-school direct mechanical systems which are not susceptible to being fatally screwed by bugs. However all Tesla Motors has done is go to the endpoint on day one whereas most other car makers are still using hybrid mechanical and software controlled features. Let’s just hope that their software testing is sufficiently high-class or that someone else finds the terminal bugs.

The car has lane identification technology and smart cruise control which slows the car down when there is a slower car ahead in the lane. Apparently these features combined allow you to take your hands off the steering wheel whilst cruising down the Hume Highway. I can assure you this is one feature that I would never test. But I can imagine Gen Y’s giving it a go; they seem to trust that the world is the very safe place that it is advertised to be. And it would give them more time for social media.

Tesla-autopilot-graphic-rhd

The Tesla has gas shocks that can be raised to go over steep kerbs. In my last car (a certain German thingy) I was forever scraping the front plastic and ended up simply not driving places where I thought I might do further damage. In the Tesla, once you have raised the car at a certain position this is recorded by GPS and the car always raises itself when you get the near the same spot. Simple really, and it is little features like that which makes this such a special car.

And how does it drive? Smoothly and quietly and with plenty of grunt. Way too much grunt in fact unless you live in the Northern Territory (where the idea of an electric car would be beyond silly). While I am on the subject, open speed limits were abolished by the Northern Territory Government in 2006 and replaced by a maximum limit of 130 km/h. More people died on Territory roads (307) in the six years after the change than in the six years before (292) when speed limits were not restricted. Seriously folks, driving down the Hume Highway at 110 km/h is a recipe for boredom and inattention unless you can take your hands of the wheel and have a snooze.

Despite that fact that we live in a Nanny State (that term is a bit harsh on Nannies me-thinks; it’s more like the Mum & Dad State) where any speed over 110 km/h is considered to lead to instant death, most car folks can’t help themselves. They like the idea of a car that can get to 100 km/h in 3 seconds and has a top speed of 250 km/h. This desire comes from the same part of the brain that lusts after a diving watch that can go down to 1000 feet and survive inter-stellar radiation; that is, the part of the neocortex that drives one to have more money than sense and a leaning towards caring about the perceptions of oneself by like-minded insecure folks. On such psychologies are all luxury products sold.

The biggest part of the sales pitch was of course ‘range’. Unlike a hydrocarbon-powered car this thing takes hours to recharge, subject to the specifications of the source of power. Tesla Motors has DC charging stations which they are rolling out up and down the East Coast. But even these only provide 270 km of range for half an hour’s worth of charging. The home charger they provide will give you less than a 100 km for each hour of charging. So realistically the use of Tesla’s cars is limited to round trips of less than the maximum range of somewhere between 300-500 km (subject to how hard the car is driven), or a one way trip of the same distance with an overnight stop. The primary reason that this car is selling though is that the people that buy it only use it for city commuting.

Tesla-supercharger-hero@2x

Tesla Motors do make a point of saying that electricity is much cheaper than fuel. True as that is, you could buy a fleet of Suzuki Alto hatchbacks and run them on petrol and still have money in your pocket compared to purchasing a single Tesla. The people that buy these things aren’t going to be swayed by the cost savings, if you know what I mean.

However, the price of Tesla Motors’ cars is on par or even cheaper than similar quality sports sedans. Product positioning at the luxury end of the market is really subjective and the truth is that pricing is a matter of what a car maker can get away with and still hit target volumes or revenue figures. And that is entirely down to marketing and brand perception.

To my eye, Tesla Motors’ cars look as good as the best of them with a design aesthetic shared with the Jaguar XF, the Aston Martin Rapide, the Porsche Panamera and many other four door sports cars that can do 250 km/h (if only they weren’t registered in Australia). That’s not surprising because the design constraints are exactly the same; safety, low coefficient of drag, four people, sports car etc. My favourite design feature on the Tesla is the exterior door handles that retract when in motion. Another is the charging cap which is hidden behind the tail light; thus there is no ugly filler cap ruining the rear quarter of the car’s design. This thing is very well designed.

Tesla-charging

Tesla Motors’ cars come with the added benefit of ‘green’ social credits. On my test drive we were forced to wind down the window by an elderly Chinese-Australian gent in a Toyota hybrid. He wanted to know if the Tesla was electric and, once confirmed, he gave us a very cheery thumbs up. Case closed apparently.

But beware the noddy-level thinking of the masses; a careful analysis of the carbon footprint of Tesla’s cars, which takes into account all the carbon impacts made during the manufacturing of the car and its components, and spread out over the likely useful service life, shows that the Tesla is pretty much on par with most other cars with respect to carbon footprint. This uncomfortable truth is probably a little complex and won’t deter the buying public. One other green benefit of the electric car is that there is no pollution generated at the point of driving. The pollution is all back at the electricity generator and that is good for our city lungs. Indeed Tesla Motors is now promoting a solar charging system to even further improve their green credentials.

Another ‘social’ selling point of Tesla Motors was Elon Musk’s recent announcement that ‘Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.’ This well publicised act got the chattering classes all excited about the generosity of spirit at Tesla. In this context, a couple of conferences back I was chatting to the global head of Intellectual Property at Hyundai who explained to me that, although car companies have zillion of patents, they don’t enforce them against each other. Given this lack of enforcement, when pressed as to why they have patents at all, he answered that (and this is paraphrasing) it’s a Mutually Assured Destruction (MAD) strategy just in case anyone breaks the unwritten rules of the club. In addition the patents work to document their ‘prior art’ in the instance that a small company or a patent troll goes after them; this documented prior art can be used to invalidate many patents. If Tesla Motors ever decided to attempt to enforce their patents against the big guys they would very likely find themselves the subject of a shit-storm of patent enforcement cases. So the so-called generosity of Tesla Motors in this regards shouldn’t be taken too seriously by all you consumers.

In summary, there are many, many reasons why Australian car buyers should consider the cars from Tesla Motors. My suspicion is that they will be quite successful in Australia. I am sure they will also slowly and surely improve the driving range and decrease the charging times, thus attracting more customers. The platform may be licensed to other brands and we may see more reasonably priced electric cars running around with Tesla’s technology. Of course the incumbent auto-makers also have hybrid and electric cars in their portfolio but I can’t help but think that they are too wedded to their hydrocarbon past to put the effort needed into the electric car infrastructure. Tesla Motors is the automaker that is currently installing charger stations between Sydney, Melbourne and Brisbane. They have to – it’s their only business. And for this reason alone I suspect they will stay ahead in the race towards electric cars.

Back to the USA. They do say that the darkest day is just before dawn. As the incumbent US automakers became more and more morbid an opportunity for change emerged. Combined with the rare opportunity of a complete platform technology shift from liquid fuel to electricity, this has enabled a Silicon Valley technology company to jump into this high-tech commodity business (which is surely one of the biggest challenges in all of the business world). They have shown just how good that Americans can be when their best minds and access to excessive risk capital can be combined with serious intent to disintermediate a very old-school industry. All power to them too; we in Australia cannot but admire from afar.

And finally, would I buy a car from Tesla Motors? No, but only because I don’t want a car. Having said that if a gun was put to my head and budget wasn’t an issue the Tesla would be first pick, hands down. It’s that good.

Tesla-Ian-Maxwell

Entrepreneur Launches Global Mentorship Platform

Studies and anecdotal reports suggest that having a mentor is crucial in developing your career. The state of British Columbia in Canada recently acted on this, funding an online platform that lists mentorship programs, so that businesspeople can search for mentorship that matches their industry needs

It’s equally true, however, that acting as a mentor has a positive impact on one’s career. In fact, Forbes magazine recently ran an article “Why You Should Be A Mentor” about how mentors earn more and learn better leadership skills through mentoring others. 

Enter Kindred Global Mentorship

CEO Michelle Dixon founded Kindred Global Mentorship after she realised that a network of mentors would have helped her through her toughest days when she launched her first business.

What she needed most, was guidance about various matters ranging from marketing, to finance and budget, to décor, to tips for dealing with clients–but not generic advice.

She needed help and advice from people who knew her industry well and had solved similar problems.

After speaking with numerous other business owners and doing some research, she concluded that an oDesk-style matching platform to make finding mentors easy was long overdue.

She wanted mentorship to be accessible across many industries – especially for those business owners traditionally excluded from a mentorship like therapists and tradespeople.

In the English language market, 53.3 million people are engaged in early stage entrepreneurship, and 25.8 million people have sole proprietorships – an abundant number of potential mentees and experts who can guide them.

She chose the name Kindred because it means “of the same family,” and refers to how human connectedness transcends nationality. Kinship implicates a certain responsibility for mutual support, and this aspect of the business is one that particularly motivates Michelle.

Users of Kindred’s online platform are automatically contributing to solutions to global poverty: 15% of company profits will be allocated to charities funding independent business growth in developing countries. Kindred is currently partnered with microloan charity Kiva.

Whether you’re a consultant, a plumber, a massage therapist, a dentist, a graphic designer, or anything else, Kindred gives potential mentors and mentees access to people in their industry for giving or receiving guidance.

It’s free to register, you can set up a profile at KindredMentorship.

Mentors set prices for mentorship sessions based on their own self-assessment, and sessions can be organized via Skype. Mentors and mentees are responsible for creating user profiles to attract the best match.

Mentees can give mentors ratings and feedback which can then be used to enhance their professional reputations.

The website is due to complete development in August, and will be launched then.

You Can Help Launch Kindred

Kindred has just launched a Mentor Platform Crowdfunding campaign at Indigogo to get the word out, gain some traction, and raise enough money to fund two months’ costs while raising a seed round.

Kindred’s goal is to acquire 3000 users in its first six months, matched by the platform’s improvements and adjustments based on qualitative feedback.

Within a year, the hope is to be bringing in a sufficient profit to begin donations to charities, to be the go-to site for finding tailored mentorship, as well as a resource base for entrepreneurs and mentors everywhere.

Over time, as the charitable portion of the business grows, Kindred aims to explore expanded opportunities for collaboration and support of vulnerable populations.

Larry & The Science Factory – New CEO for CSIRO a Pleasant Surprise

Ian A. Maxwell is a veteran Technology Entrepreneur and Venture Capitalist. He is currently CEO ofBT Imaging, Chair of Instrument Works and Co-Founder of Accordia IP as well as a partner at Zetta Research and an Adjunct Professor at RMIT. He has a PhD in Chemistry and has either founded or worked at Memtec, Allen & Buckeridge, Redfern Photonics, Sydney University Polymer Centre, James Hardie, Viva Blu, Enikos, Wriota, RPO and Instrument Works. You can connect with him on Linkedin au.linkedin.com/in/maxwellian

CSIRO is Australia’s Federally funded Commonwealth Scientific and Industrial Research Organisation which was founded in 1926 and employs 5000 people across more than 50 establishments.

“I’d wind back government-funded research in a heartbeat; it’s hard to justify in a climate of big deficits.” Federal Senator, David Leyonhjelm.

Larry Marshall is an old colleague from the world of start-ups and venture capital. Along with others that know Larry and have had dealings with CSIRO , I was quite surprised late last year when Larry was announced as the new CEO of CSIRO. However, not unpleasantly surprised.

Larry Marshall

Larry Marshall

CSIRO has a history of unusual CEO appointments. By way example let’s have a look at the three prior appointments; Megan Clark had previously been the Vice President, Health, Safety, Environment, Community and Sustainability at BHP; Geoff Garrett was head of the South African CSIR, the South African equivalent to CSIRO; and Colin Adam had been the head of commercialisation in CSIRO prior to becoming CEO but before that had been out in the corporate sector.

These are ‘unusual’ appointments because none are internal appointments of candidates with long term history within CSIRO. An organization which is performing strongly tends to have processes to identify and groom internal CEO candidates. Often a candidate that does become CEO has been employed in the organization for decades, in many different roles. Some current well-known examples would be Tim Cook of Apple who has been there since 1998, and Jeffrey Immelt of GE who has been at the company since 1982. These internal CEO candidates carry the culture and vision of the organisation with them into their CEO roles in a way that an external candidates cannot. The very choice of an external CEO candidate is often a tacit recognition that the organisation needs a new culture and vision.

CSRIO Headquarters

CSRIO Headquarters

From an outsider’s perspective it appears that CSIRO has struggled to find relevance after the deregulation of the Australian economy in the 1980s and the subsequent changes therein. Since this period there has been a dramatic shift in our economy towards the (science-agnostic) services sector which now generates 68% of our GDP. CSIRO, with its primary focus on science, is primarily left serving the resources and agricultural sectors, plus some other sectors at the fringes of economic importance in Australia.

Another change that we saw in the late 1980s was the deregulation of the Australian university sector which led to these organisations becoming willing and able to work with the Australian private sector. Before this they had, for various reasons, been less interested in doing so. In fact, the federal government, through the Linkage grant scheme, the CRC program and other schemes, actively encouraged university and ‘industry’ engagement. The expanding university sector effectively began to compete with CSIRO in what was a shrinking market for outsourced scientific services in Australia.

Any perusal of the CSIRO website, or any article written by CSIRO strategists, quickly reveals that CSIRO sees itself as a purveyor of scientific services and science-derived outcomes. That is, the ‘S’ and ‘R’ in CSIRO dominate their thinking. For example, at the CSIRO website the ‘about us’ by-line reads ‘At CSIRO we shape the future. We do this by using science to solve real issues.’

This focus on science is at a time when the global high-growth technology business sectors (in which Australia is seriously lagging) are increasingly being driven by engineering and IT technologies, and less so by science. With CSIRO’s focus on ‘scientific services and outcomes’ in Australia their TAM (total available market) is even further reduced compared to a scenario in which they also had a serious focus on IT and engineering.

Little wonder that with a reliance on over three quarter of a billion dollars in federal funding per annum that the CSIRO leadership has been desperate to find a role that is either more profitable or at least generates enough positive publicity such that government funding is secure. However, despite over two decades of restructuring and unusual CEO appointments, it could be plausibly argued that the organization is no closer to finding a secure place in the Australian economy.

CSRIO-Ship

CSRIO Research Ship “The Franklin”

The organisation has had decades of constant organizational restructures, a matrix management structure that few believe in, and an oversupply of ‘managerialism’ emanating from head office. Recent cuts have culled $111m off the CSIRO budget over four years and resulted in the loss of around 700 jobs. In 1996, CSIRO employed 7,400 people, and by 2015 the number is closer to 5,000.

CSIRO, rather confusingly, variably focuses on nine National Flagships, Science Excellence and Preparedness, Deep Collaboration and Connection, being an Innovation Organisation and a Trusted Advisor. CSIRO also operates three lines of business; the ‘National Facilities and Collections’, CSIRO services, and the aforementioned nine National Flagships, which are Agriculture, Biosecurity, Digital Productivity, Energy, Food and Nutrition, Land and Water, Manufacturing, Mineral Resources, and Oceans and Atmosphere. It is arguable whether all of these activities are world class, but more importantly it is also arguable whether a local capability deep in the science of all these areas has relevance to Australia in 2015.

Repurposing Science

It is worthwhile considering what happens when the management of CSIRO announced these nine Flagships for the very first time. Every scientist in the organisation simply chose which Flagship they were in, or the choice was made for them or against them. However, scientists cannot simply adopt a new discipline at the drop of a hat; whatever choices were made they remained as chemists, physicists or mathematicians with a primary focus in a very specific sub-field within their discipline. In the modern era it takes a scientist decades to build up a portfolio of publications and a reputation within a specific and tight field of activity. It can be very inconvenient to have an employer like CSIRO suggest to the chemist that she abandons, say, a life-long focus on a specific new type of radical chemistry where she is a world expert, in order to chase some unrelated agricultural chemistry challenge that will likely be a victim of the next restructure.

CSRIO Solar Array

CSRIO Solar Array

The point I am making is that an organisation with science as its primary focus is the single most unlikely candidate for successful repurposing. Efforts to do so, as have been seen at CSIRO since the 1980s, just make the scientists unnecessarily stressed and sometimes also passively uncooperative, and as a result the organisation is even less likely to be successful in an innovative or entrepreneurial sense.

The New CEO

Enter Dr Larry R. Marshall. Larry is a serial entrepreneur credited with many successful start-ups in areas as diverse as biotechnology, photonics, & semiconductors. Some of these companies have been successfully sold to larger operating companies and one went onto an Initial Public Offering. Larry has also been a venture capitalist and a private investor. He has had significant business dealings in China and the USA, and in both countries he is extraordinarily well connected to leaders in the tech sectors. He is a serial inventor named on around 20 patent families and has somehow managed to find the time to be an author on over 100 research publications. This is a non-trivial set of polymath achievements, quite rare in its breadth and depth. However, none of it speaks directly to the skills needed to turn around a large and unprofitable organization that is in need of something dramatic just to survive.

CSRIO - WIFI Patent - Arguably one of the most valuable patents in Australia's history

Image from CSRIO – WIFI Patent – Arguably one of the most valuable patents in Australia’s history which has been criticised as a NPE play  and nothing to do with inventing WIFI

CSIRO generally has five year plans and they are due for a new one right now. I suspect that this federal government, or any federal government, would like to define success for CSIRO as zero federal funding requirements. I find it quite remarkable that CSIRO already attracts about one third of its operating costs from commercial activities; they should be applauded for this achievement. However, given the size of the market for ‘scientific services and outcomes’ in Australia I would suggest that any attempts to grow this market with today’s pricing structure may be up against the Pareto rule, i.e. the cost of acquiring new customers will become higher and higher, to the point of unprofitability, as their market share becomes even more dominant.

In this context, and assuming continued pressure on their public funding, CSIRO has two stark options; to reduce in size, commensurate with their genuine market revenues, or to find entirely new sources of revenues.

Looking at Larry’s entrepreneurial background it’s not rocket science to suggest that he would rather attempt to achieve great success at CSIRO as opposed to overseeing a transition to a much smaller and more secure scientific services provider.

Larry himself has signalled that the sources of new revenue might be involve a more entrepreneurial focus; “… I can’t promise that change is now over … We’ve got to focus our efforts … We’ve got to be more entrepreneurial and agile … We’ve got to get our overheads down … we’ve got to create some more headroom for exploration … I have learned a lot about lean innovation and focussing on where we are unique”

It was in this context that Larry and I shared a beer in mid-March of this year. He told me that he is still in the process of formulating his thinking on his role as CEO of CSIRO. His big priority is to oversee the new five year strategic plan that is due by June this year. Rather than report on our discussion, which would be a little unfair to Larry given the early stage of his engagement, this article has become more of an opinion piece, as you may have noticed.

Assuming that CSIRO will maintain its current services activities and in addition adopt a more entrepreneurial focus, here is my input into the process of developing a strategy around this.

The People

Very few scientists are innovators; this is because scientists often have an opposing personality type to innovators, and in Australia our tertiary education and research system seems to make sure of that distinction by almost completely failing to offer any rewards for scientists that are also innovators. I would also note that some of the most successful innovators are bower-birds; they aggregate and morph the ideas of others – a concept that might be quite against the ‘ethical’ code of many scientists.

CSRIO-Growing-SemiconductorsInnovation and entrepreneurship are rarely skills possessed by a single person. For example, I have seen many start-ups where the core concepts are provided by a very innovative technology founder who had zero entrepreneurial skills. And then the investors inevitably parachute in a high quality entrepreneur who couldn’t innovate his or her way out of a brown paper bag. All an entrepreneur needs to be able to do is recognise the innovation of others. In fact, it’s probably better that entrepreneurs don’t innovate themselves because we all unduly weight the importance of our own ideas.

In this context, if CSIRO has thousands of scientists it is very likely that they are short of three things; innovators, entrepreneurs and risk-happy investors that will follow the innovators and entrepreneurs. So the challenge for Larry is how to attract these three elements to the organization. One thing is for sure, if one was going to create a large national innovation centre, in the ideal world one would not start from where CSIRO is today.

The question as to whether CSIRO is a source of innovation or a source of technical skills is paramount. CSIRO has spent a small fortune on advertising its rare commercial outcomes and may be trapped in the thinking that it can be a viable source of innovative concepts. I have said it before, it is far more cost effective for an organization to simply borrow or buy innovative concepts from elsewhere and make these successful. The only logical reason why an organisation would solely promote investment in its own concepts is pride.

A proposed merger between CSIRO and NICTA could arguably bring in much need ITC skills into CSIRO. However NICTA is also somewhat afflicted by its roots in academia when it comes to innovation and entrepreneurship. In this context it’s actually quite hard to guess whether the presence of NICTA would help or hinder CSIRO. What NICTA’s short history does highlight though is the challenges ahead for CSIRO. NICTA, a cleansheet organization in 2003, has valiantly struggled to escape from the entitlement vice of academic researchers but they can’t reasonably claim success in these endeavours.

The Focus of Activities

Anyone that has used CSIRO’s scientific services can attest to their relatively high costs compared to equivalent services offered by universities or third party research providers. The primary cause of these high costs can be attributed to the (arguably) bloated head office which adds a high burden of overhead on all pricing as well as what can only be described as an incredible self-belief in the high value of the services that are being offered, which seems to further inflate prices. I have often wondered as to the elasticity of the market for scientific services in Australia; for example, at half the price is the market five times as big? My gut feeling is that CSIRO over-prices its services and the best way to address this is to create a very small footprint at head office with minimal influence over the operating groups.

CSRIO-Drone

As stated above CSIRO’s current nine focus areas are somewhat artificial. Within the organisations there are groups that pay their own way by providing scientific services and then there are others that provide public good outcomes that are so valuable that they obviously should be supported. For the rest, they will need to show how their efforts and skills can be part of a program to support innovation with demonstrable commercial outcomes. In order to achieve this they will need to engage with third parties such as innovators, entrepreneurs and investors in technology. This is a new paradigm for the CSIRO staff and the organisation (a reformatted one) will need to lead them very gently on the journey.

SMEs within the dominant services sector in Australia rarely have formal innovation processes or R&D budgets. Positive changes to their services and prices typically result from their front-line people working with their technology vendors to provide innovation. In a practical sense, the biggest commercial opportunity for CSIRO in Australia is with the SMEs in the services sector. The challenge of course is to find the relevance of science to SMEs in the service sector; the alternative for CSIRO is to become more driven by IT and engineering. The less attractive alternatives would be the oligarchical big-end of the ASX, the virtually defunct Australian venture capital sector, or the garagistas of the IT incubator world.

Stakeholders

The office of Australia’s Chief Scientist appears to be a lobby group for the university sector which should be viewed as direct competition to CSIRO for both market share of scientific services and public funding. Personally I do not believe this situation is in Australia’s best interest and my personal opinion is that Australia needs a Chief Technologist that is not a former Vice Chancellor nor a former head of R&D for a resources company or any large ASX entity, but is in fact someone like Larry Marshall. This is the 21st century and the ITC sector is driving one of the greatest technological and social changes in human history; we would be foolish to ignore this by continuing to appoint old-guard types to such senior posts.

In the private sector, companies have a very simple metric for success and it’s called dollars. CSIRO has no such simple metric since its sole ‘shareholder’, the federal government, seems to sometimes also value other less tangible outcomes such as public good. The problem with this is that the organisation is exposed to changes in the mood in Canberra especially when budgets go into structural deficit. The challenge for CSIRO in developing a new technology-driven five-year strategy is the lack of vision in Canberra as to what a different Australia might look like. The evidence for this assertion is that the profits from the last resources boom were not substantially invested in a developing a new high-tech version of the Australian economy. Lacking a clear vision from their ‘shareholder’ CSIRO has to develop its own strategy and metrics of success in a partial vacuum.

Time is of the Essence

Whatever changes Larry Marshall is planning for CSIRO, these have to happen quickly. Time is critical and further budget cuts are very possible. CSIRO is a large single line item in the budget and that makes it very exposed.

To the employees of CSIRO I would implore you to get behind Larry.

I believe that he is exactly what you need right now and whether you accept this or not, as an organisation this may very well be one of the last chances that you have.

Images CC courtesy of CSRIO – ScienceImage

A Better Model For Crowd Equity Funding?

Ian Maxwell has a slightly tongue in cheek proposal for Crowdfunding originally published on his blog.

In its current form Australia’s proposed Crowdfunding Legislation, with its limits of $10,000 per non sophisticated investor per year and maximum of $2500 per company per investor, looks pretty bloody useless.

My guess is the feds are working hard to protect small investors from losing their money on an investment that they can’t do a proper risk assessment on.

The fear? That the same small investors, after they lose their money, will cry foul and blame the government for not protecting them from their own ignorance.

I have a solution!

Put all the relevant companies into a pool (say a specific exchange) and when an investor puts their money in they are assigned a randomly picked stock.

Given that the pool will without doubt lose money and that there will only be a small fraction of companies that make money, this then creates a ‘lottery’ situation. Most importantly the mean return for all money going will be negative, just like any good tote scheme.

Since this is without doubt just a pure gamble, the investors gains would not be taxable as income.

And their losses? Well, bad luck – it would be like losing your money on a horse or a lottery ticket.

I would also create a PIPE (Private Investment Public Equity) scheme, where these same companies could sell stock directly to private investors (at the same price) which would be treated under capital gains tax rules.

 

ED: The feature image in Ian’s original article reminds me of the original Crowdfunding Schemes in England in the 1500-1600’s.

The Queen who understood how important it was to establish and fund international trade and the development of new technology to support that (think Ships, Armaments, Agriculture and later steam) got their wealthy gentry and supporters together to fund worthy exploration and trade in foreign goods, often funding a particular voyage or mission and forming companies to continue the trade.

This later led to the formation of the original Royal Exchange.

Developing technology, rallying the gentry to help fund ambitious missions and entrepreneurs.

Sounds like a head of state with amazing vision and foresight…..

You can read more about it here.