Four innovation habits to drive growth

Not every company is an Atlassian or Google, but directors can learn much from the R&D habits of highly innovative companies, according to the latest CSIRO-BCA research.

According to Australian Bureau of Statistics (Characteristics of Australian Business 2018–19) research, organisations that are “innovation active” are twice as likely to report increased productivity than non-innovating companies, regardless of whether they are small, medium or large enterprises. As a result, almost all can point to tangible benefits such as improved customer service or increased revenue.

It is also revealing that most innovations that are adopted already existed in the domestic Australian market, which indicates that companies are not looking beyond borders to collaborate on innovation.

CSIRO/BCA partnership

CSIRO, Australia’s national science agency, and the Business Council of Australia (BCA), representing Australia’s largest employers, joined forces to produce a research report identifying practical steps to overcome barriers to innovation. The report, released in late 2021, focuses on the innovation challenges at the research-industry nexus and the role of large companies in pursuing a technology-led recovery from the COVID-19 pandemic.

To achieve this recovery, Australia needs to improve its translation of commercial outputs from science and technology — and Australian companies play an important role in making this happen. The report offers a practical guide to high-level discussions among senior leaders about evidence-based, implementable steps Australia can pursue to realise this recovery.

The findings combine desktop research with insights from consultations with targeted BCA members, whose success stories are highlighted to demonstrate practical actions companies can take to achieve greater commercial outputs from science and technology.

The report draws on interviews and case studies from executives at some of Australia’s largest businesses, including Atlassian, Boeing, CBA, Cochlear, Coles, Dow, DuluxGroup, General Electric, Google, Incitec Pivot, Microsoft, NAB, Rio Tinto, Telstra, Wesfarmers and Woodside.

Four effective habits

CSIRO and BCA outline four common themes along with key questions for directors and management to help activate their innovation culture. While many of the barriers to innovation cannot be addressed directly by companies alone, there is still much that companies can leverage to progress along the commercialisation pathway more effectively and efficiently. Collaboration, long-term strategy, alignment of incentives and capability building are initial requirements.

1. Collaboration

Building the habit of collaboration helps to support early-stage research, commercialise and translate emerging science and technology and to increase adoption. It also shares risk among innovation partners and builds capabilities.

The 2020 CSIRO-UQ Thriving through innovation survey found that top-performing companies collaborate broadly. This breadth of collaboration was identified as the single clearest driver of performance when compared to other process-related variables. Collaboration was 11 times higher for the top-performing companies compared to average-performing companies.

Boeing

Boeing designed, developed and manufactured the Loyal Wingman aircraft in partnership with the Royal Australian Air Force. This is Boeing’s largest investment in an uncrewed aircraft outside of the US, and the first aircraft to be designed, engineered and manufactured in Australia in more than 50 years. The aircraft not only flies like a fighter jet, but can also perform other roles including electronic warfare, intelligence, surveillance and reconnaissance, alongside crewed aircraft.

Boeing collaborated with more than 35 Australian-based companies, which was key to the program’s rapid development. These included BAE Systems Australia, which delivered flight control computers and navigation equipment; RUAG Australia, which built the landing gear system; Ferra Engineering, which provided the precision machine components and sub-assemblies to support the program; and AME Systems, which delivered wiring looms. Much of the development of the technology, from concept to commercial application, occurred in the virtual space, with Boeing utilising the “digital twin” concept — a highly detailed virtual model of the aircraft — for testing, development and training.

Michael Edwards, senior director of Boeing Research and Technology Asia Pacific and a member of the Boeing Australia executive leadership team, says having long-term objectives and cultivating enduring partnerships is key. “We’ve taken an approach to bring our trusted partners in close. We share key proprietary information — the more they know, the more they can help us”. Partners have their “swim lanes” and are accountable for delivering on objectives.

Boeing’s spending on R&D and innovation in Australia topped $75m in 2020 — the company’s largest investment in R&D outside the US.

Edwards says budgets are always challenged by events. ”Innovation we recognise is central to our business unit recovery and shaping for the future. It’s my view that the best-placed innovators who invest in this period will recover faster and will sprint away faster from their competitors than others.”

Cochlear

Identifying a lack of implant therapies for conditions such as epilepsy and sleep apnoea, medical device company Cochlear saw an opportunity to leverage its deep expertise in implant technologies for hearing impairment by supporting the commercialisation of new implant therapies. Cochlear collaborated with universities and early-stage technology companies on pre- competitive activities to explore and develop these therapies. This included a $3.65m early- stage investment in a breakthrough epilepsy monitoring device produced by the Bionics Institute in collaboration with St Vincent’s Hospital and the University of Melbourne. Cochlear has also invested in a nerve stimulation treatment for sleep apnoea developed by Belgium-based Nyxoah. These investments have the potential to address both clinical and market needs for implant therapies related to medical conditions affecting millions of people.

DuluxGroup

Paint manufacturer DuluxGroup, in collaboration with automation/ digital transformation company Siemens, applied advanced manufacturing principles in developing a high-standard batch control process at their state-of-the-art Merrifield paint factory in Victoria, drawing on pharmaceutical manufacturing techniques and focused on end-to-end digitisation.

Dulux faced the challenge of needing to offer its market varying quantities of paint economically, while further raising its quality standards. The company sought to address this — and to improve its responsiveness to recent trends, create new market opportunities and remain a leader in paint manufacturing — by investing $165m in building the largest automated paint manufacturing facility in Australasia. By building two plants under one roof — one for small batches and one for high-volume paints — Dulux successfully implemented a system that brought together all chemical plant processes within a single, highly-integrated control system.

The project and successful operational launch of the plant was a result of close collaboration between Dulux and several industry partners. Siemens was the main automation and electrical vendor, acting not only as Dulux’s technology supplier, but also its development partner. Siemens enabled the use of advanced manufacturing techniques, such as the implementation of software that historically had only been used in the pharmaceutical industry.

Engineering consultancy CET Group acted as process and mechanical consultant. DromontGroup provided much of the process equipment, collaborating with Dulux to achieve a fully automated manufacturing process environment. Manufacturing automation company Mescada, Siemens’ solution partner for the project, was critical in digitalising the entire production process.

The plant has created 70 new jobs in advanced manufacturing. With half the employees having no previous manufacturing experience and none having any paint manufacturing experience, a special training program — enabled by the sophisticated digital operating systems — was deployed to skill employees to operate in a fully automated, end-to-end environment.

The investment had significant manufacturing flexibility for Dulux, making it possible to produce a special order for one pallet of paint. The company estimates that for small batches, the end-to-end manufacturing process is now eight times faster than previously possible. Manual interventions have been almost eliminated, allowing repeatability and pinpoint accuracy. The high degree of automation has also significantly reduced operator exposure to hazards, markedly improving workplace safety. The plant helped build local capability and infrastructure by challenging Australian project partners to make state-of-the-art deliveries and upskilling workers in an advanced factory environment.

2. Long-term strategy & targeted investment

The most successful innovating companies have a clear innovation strategy that supports their business strategy and prioritises targeted areas of innovation investment for competitive advantage.

Incitec Pivot

Responding to the challenge posed by the volcanic environment surrounding the Lihir gold mine in Papua New Guinea, chemical and explosives company Incitec Pivot collaborated with Australian mining company Newcrest and researchers from the University of Sydney to develop and produce explosives suited for such environments.

In its consultation, Incitec Pivot noted that University of Sydney research led to world-leading knowledge on how conventional explosives behave in relation to temperature and pyritic materials, which enabled Incitec Pivot to apply the research to solve this industry challenge. This strategic investment helped to solve problems at the Lihir mine, which significantly increased its value and provided the company with a competitive advantage using explosives in volcanic environments.

Coles

Coles has focused on collaborating with several providers on newly available technology solutions to digitally transform its business model and unlock new growth and efficiency opportunities. This includes partnering with e-commerce company Ocado to deliver world- leading order fulfilment for Coles Online with the construction of two automated customer fulfilment centres; and selecting international automation experts WITRON Group to build two automated distribution centres to modernise their supply chain.

Coles noted in its consultation that it also moved to an entirely online recruitment process during COVID-19, which enabled the company to recruit thousands of people from hundreds of thousands of applications in a matter of weeks. These partnerships and pandemic-induced digital transformations have allowed Coles to innovate in the face of uncertainty and improve its resilience to external shocks.

Decarbonisation

Wesfarmers has signalled its commitment to decarbonise its operations, with its retail divisions aspiring towards net-zero emissions by 2030 and its Chemicals, Energy & Fertilisers, and Coregas divisions aiming at net zero by 2050. The strategy to reduce the emissions of the retail division involved collaborations with several providers offering off-the-shelf technologies, including LED lighting, energy management systems and the widespread rollout of solar panels and battery installations.

In 2020, Microsoft committed to being carbon-negative by 2030 and has been seeking collaborative partnerships with carbon credit providers, including in Australia. The tech giant has partnered with NSW beef operation Wilmot Cattle Co to purchase approximately $500,000 worth of carbon credits.

Microsoft also collaborated with Regen Network — a blockchain startup focused on ecological data and built on the Cosmos blockchain — where Microsoft purchased carbon credits that measure soil sequestration as well as animal welfare, soil health and general ecosystem health through remote-sensing technology. In engaging with these solution providers, Microsoft leveraged their internal and external data infrastructure and blockchain technology expertise to help them meet their net-zero emissions target.

Wesfarmers’ activities are meeting shareholder expectations related to emission reductions and the company hopes to eventually save on energy costs. For Microsoft, these investments also help position the Australian agriculture industry as part of the climate change solution on an international scale.

FutureFeed

FutureFeed is a cost-effective seaweed supplement that can reduce the production of methane from beef and dairy cattle by more than 80 per cent at low-inclusion rates. In 2020, CSIRO established FutureFeed to commercialise the technology, with co-investment support from Woolworths, GrainCorp, Harvest Road and AGP Sustainable Real Assets-Sparklabs Cultiv8 Joint Venture. In addition to producing a significant reduction in methane emissions from livestock, FutureFeed also has a potential economic benefit to producers, with studies suggesting the ingredient improves feed efficiency conversion and average daily weight gain through the conversion of energy otherwise lost in methane emissions. It has been estimated that if 10 per cent of global ruminant producers adopted FutureFeed, it would have the same climate impact as removing 50 million cars — and potential increases in livestock productivity could create enough food to feed an additional 23 million people.

In recognition of its potential impact and contribution to sustainable and resilient food systems, the FutureFeed company has been awarded the US$1m Food Planet Prize, the largest monetary reward in the global food arena.

Through co-investment support from companies such as Woolworths and GrainCorp, FutureFeed is building an entire industry around the technology by licensing seaweed growers, investing in further R&D, quality assurance, certification, marketing and carbon credit methodology. It expects to see initial commercial volumes for early adopters of the supplement supplied into the domestic beef market by mid- 2021, with international markets to follow.

3. Incentives alignment, culture & risk sharing

Innovation starts at the top with boards and senior executives championing innovation. Companies openly addressing the cultural aspects of innovation projects — including the allocation of risks and intellectual property (IP), as well as the alignment of incentives — are more likely to see their projects progress through the innovation cycle.

Woodside

The Woodside Monash Energy Partnership was launched in July 2019 as a multi-year research program to drive Australia’s next generation of sustainable energy technologies and carbon solutions. Woodside is jointly investing $40m over seven years to support six cross-disciplinary and cross-organisational projects in new energy technologies; carbon capture, conversion and utilisation; and energy leadership.

A core team comprising three Woodside leaders and six Monash University researchers is leading the projects, with support from Woodside and Monash staff. The partnership builds on a prior successful Woodside-Monash relationship, the 2016 Woodside FutureLab at Monash.

In its consultation, Woodside noted that the geographical proximity of Monash University Clayton to a local innovation ecosystem, including other local research organisations such as CSIRO Clayton, was a drawcard for the partnership as the ecosystem enables deliberate and accidental IP creation, which is key to an ongoing innovation culture.

The partnership has been established so that Monash University owns the IP created — except for a few strategic areas where Woodside retains the rights. This arrangement ensures that both parties’ needs are met. Through strong ties with Monash startups and students, Woodside can also avail itself of early access to promising ideas and talent.

Telstra

By collaborating with multinational corporations, Telstra is accelerating technology development and uptake. This is exemplified by a shared mindset on the mutual benefits of technology development and acceleration, and a willingness to share the risks of technology adoption.

Partnerships with communications and tech companies Qualcomm and Ericsson are setting industry standards in 5G download speeds. Telstra has partnered with Amazon Web Services (AWS) to bring cloud services to Australian enterprises. And with Microsoft Azure, Telstra is leveraging the Telstra Data Hub and developing solutions in asset tracking and supply chain management.

Telstra is also collaborating with Microsoft and AWS to deliver edge computing-enabled, highly reliable and low-latency (a computer network optimised to process a high volume of data messages with minimal delay, or latency) use cases. It plans to repurpose 650 Australian sites for edge computing.

These partnerships strengthen Telstra’s position as an industry leader, but also invite more global companies to use Australia as a testing ground for telecommunication tech, helping accelerate technology development at a national level.

4. Skills, talent & capability building

These are all required to successfully develop and deliver an innovation project. Companies need to decide whether to develop these in‐house or source them through an external partner.

Quantum computing research

Quantum computing enables an entirely new form of computation. CSIRO’s Quantum Roadmap was developed collaboratively with industry, research and government to support the coordination and growth of the Australian quantum ecosystem. Industry and government are now investing in quantum technologies. Most recently, the federal government announced a $111m investment in the quantum industry.

The Silicon Quantum Computing company at University of NSW was launched in 2017 to combine the research and expertise of more than 40 Australian researchers, with over $83m of funding from federal and state governments, and the university — with Commonwealth Bank of Australia and Telstra as industry partners.

In parallel, Microsoft recently signed a multi‐ year partnership with the University of Sydney for quantum research and IBM partnered with Adelaide‐based Archer Materials to build a quantum computing qubit processor. These companies can leverage Australia’s world‐leading quantum computing research talent, giving its quantum computing ecosystem an international presence and providing the emerging industry with the investment, direction and global connectivity needed for successful growth.

Google

Google has partnered with Microba — an early‐ stage Australian biotech company establishing itself as a world leader in gut microbiome analysis — to help it more efficiently manage its data volumes and processing requirements by migrating to a public cloud service. Microba selected Google Cloud due to the availability and level of technical support and expertise from Google, as well as its cloud capabilities, such as high throughput networking, and Kubernetes (an open‐source container orchestration platform that assists with cloud applications). This allowed Microba to invest more time in research, analysis and product development while expanding its gut microbiome database.

Google’s investment in building internal expertise in genomics data, as well as its extensive digital capabilities, have enabled it to partner with Microba to build the company’s cloud capabilities and data infrastructure. This has provided Google with a competitive advantage in cloud services and migration for biotech companies in Australia and abroad dealing with genomics and biomedical data.

In addition, Google Australia recently launched the Digital Future Initiative, a $1b investment in Australian infrastructure, research and partnerships that aims to strengthen local capabilities, support jobs and help build Australia’s digital economy. Through this initiative Google is expanding its Australian collaborations, which include a research partnership with CSIRO to tackle some of Australia’s greatest challenges through innovation.

Boards play a crucial role

Several BCA members noted that innovation “starts at the top” with senior executives and the boards of successful innovating companies — often the most enduring part of companies — championing innovation, embracing a “growth through innovation” culture and actively working to improve their company’s capacity to innovate. Likewise, they noted a company’s innovation strategy should be owned and supported by the leadership team and board, and clearly communicated across the company to ensure sustained innovation performance.

Although the Unlocking the innovation potential of Australian companies report does not address every question in the realm of innovation and commercialisation, it illuminates practical, evidence‐based and implementable steps for companies. By adopting these steps, Australian companies can partner with domestic and international companies, governments and research organisations such as universities and CSIRO, to bridge the commercialisation gap and unleash technology‐led economic growth.