Therese Raft
Welcome to Navigating the New Normal – Grant Thornton’s podcast exploring trends in business and the marketplace.
I’m Therese Raft and today I am joined by Sandie Boswell, a Partner in our Innovation & Incentives team. Today we are talking about how clever ideas can be turned into commercial success stories.
Welcome Sandie!
Sandie Boswell
Thanks, Therese. It’s great to be here.
Therese Raft
Sandie, you have been working in this space for over 20 years. How has COVID changed the landscape for innovation in Australia – if it has changed it at all?
Sandie Boswell
Firstly, I think we need to recognise that COVID is a health crisis and not an economic one. And I think we've seen that play itself out over the last 12 months – if you think back to March last year where we thought “what's going to happen?”. We've been amazingly resilient over the past 12 – 18 months, but it has led to an increase in acceleration in technological change. And it's definitely created challenges, and I mean we're seeing that right here in Australia right now; for economies at the macro level and also for businesses every day.
I mean, Australia's been an amazing innovator for many, many years. We developed the black box in 1958, ultrasound in the 1960s. Cochlear implants in the seventies. WiFi in the nineties. Polymer money notes. Things like the cervical cancer vaccine in 2013. And we're even hearing our own government talking about that they've done some research and discovered that 44% of Australian businesses are innovation active.
So where are we today and what's been the impact for COVID? Well, I think we've seen the economy refocus on our ability here in Australia to develop and to be resilient in terms of our supply chain and manufacturing. And it's led to a lot of fast tracking of some great ideas and concepts. And I'm also seeing a lot of businesses pivoting to survive. So there's been a lot happening over the last 12 months. A really good example: I've seen companies pivot their research and development. If we think back to March last year at the beginning of the pandemic, we saw this big influx of technology into hand sanitizer and face masks and PPE. So you know, the distilleries going from making gin to making hand sanitizer, really…and doing that very quickly.
I'm working with a corporate at the moment, who's moved from developing some amazing travel IP. It's software that helps people navigate around their trips – which, of course, can't happen during COVID for Australians – to a COVID passport application. So really innovative and really quite different. And they're doing that, obviously to pivot, to survive.
It's also been a really exciting year here about the Government supporting innovation, and it's a real area of focus for the Government. Firstly, the Government's done… there’s so much to go through… but they've put $2 billion into this Innovation programme. As an advanced economy, we often see our innovation occur in a few key sectors. IT, health, infrastructure.
And pleasingly, the regulators are now saying and reaffirming the support of these sectors to do R&D and innovate here in Australia. So, for example, software has been given some really firm guidance around what is eligible to get support from the Government. Direct grant funding’s really exploded, so we've seen the establishment of the Modern Manufacturing Initiative, which replaces the Modern Manufacturing Fund. And the Government has put $1.5 billion into this fund and they've picked some national manufacturing priorities. And two of those national manufacturing priorities are being given funding in the last sort of few weeks – so Space and Medical Products. And we've seen four Space companies given $14 million to develop things like satellites and rocket engines. In the Medical Products space, there's a great story about a South Australian company called Noumed who develop drugs and manufacture drugs. But they do it all offshore. They're going to build now an onshore facility in Australia for $85 million and the Government has committed $20 million to that project. So I think it's showing that we're, you know, wanting to reduce our reliance on overseas supply chains here – now COVID's really fast tracked that – and really wanting us to be self-resilient. It's really an exciting time for innovation in Australia, despite the challenges that COVID has created.
Therese Raft
Australia has a brilliant pedigree in innovation. So, I guess a question for you, then, is are companies or individuals jumping on a particular bandwagon or a challenge to solve?
Sandie Boswell
Great question. And I think we are seeing a big push into manufacturing because of the MMI, because of this need that we now know that COVID has created, which is a challenge around our supply chains and being resilient. But I think we're seeing sort of that whole… I've seen a lot of jumping onto the bandwagon around Medical Products and knowing that we can be self-resilient in that space. Production of the vaccine onshore is a great example of this. We're now…we are making some of the vaccines here, and I think that's great. So very much a focus on our Medical self-resilience is something that's coming out of this at the moment.
Therese Raft
Now, on the flip side, Australia has a history of losing some of its most innovative companies and ideas to overseas jurisdictions. So with closed borders to the rest of the world, are we now more successfully nurturing innovation here at home?
Sandie Boswell
I think the Government is hoping that that's the case, and certainly businesses as well. But it's hard yet to see that in the medium to long term. You know, we're a year to 18 months into the pandemic and we're seeing all these waves, so it's hard to know. But what was really pleasing in the most recent Budget was the announcement of a Patent Box here in Australia, so that's great. I mean, I think it's going to allow businesses that are eligible to tax income derive from certain patents at a concessional rate of 17%. But it…really at the moment they've announced that for the biotech sector… and it really, I think, has to be much broader than that. It starts from 1 July 2022 so it's still a ways off. There's some talk that will also cover clean tech. But it'll be great to see it cover many more industries. So that, I think, is an example where the Government is really trying to make sure our IP doesn't disappear offshore, that we will keep it here in Australia because it's so valuable. And this happens now globally. We see this… I think the UK last year pumped £22 billion into their innovation strategy in order – you know, they had other challenges as well, of course – but in order to keep innovation within the UK. So we're seeing those sort of principles flow out around the world around this whole: “don't let it flow offshore” because it just doesn't come back. And it's not a whole company moving offshore, Therese. It's projects or ideas. It's a…and that's quite sad for us because it doesn't come back once we lose it. It's lost forever. So great to see that the Government is really now thinking ahead on this. But I think it's going to have…be much broader to have any real impact.
Therese Raft
So, it sounds as if the landscape at the moment seems to be providing the right foundations for innovation – which is fantastic and very much needed – but as we know, not all great ideas turn into commercial successes.
Sandie Boswell
Yeah, I think that's true. And how do you make something successful? You know, I often see companies that they'll get right to the end, and then they have the struggle of “well, how do I price this product that I've developed?” What does that look like? You know, I've worked with the company recently where they had a hardware and a software component, and here at Grant Thornton, we actually developed a pricing strategy with them, how to launch that in the market, and to price it appropriately so it gets taken up and it’s successfully commercialised. So it's a really hard one. But the success that I see is being able to get onto the growth trajectory and move through that cycle of innovation. So at GT, we've developed really an IP centric model. We talk to companies around this cycle of innovation. Some people…I love to call it a growth trajectory, you know, some people call it a Valley of Death…but it's how do you get out and get growth quite quickly from your novel idea?
So we focus on the preliminary idea. How to commit your money and spend it. Where should you spend it? Conducting your innovation activities? So your R&D. How do you protect your IP? So how do you actually register it? There's so much intangible assets being developed now, and I think it's a real blind spot for corporates around how to value and protect those really valuable assets. And then it's about commercialising. So how do you get it out to the market? How do you have a strategy to launch it? And then ultimately, what's your exit strategy or where is your growth strategy? So you have this whole cycle around the innovation landscape, and you've really got to talk to companies around the whole…holistically, not just on piecemeal. And I find those companies that look at that holistically are the ones that really successfully commercialise an idea.
Therese Raft
You may have just answered my next question, but I am going to ask it anyway. If we do look at those great ideas that make it through to commercialisation, in addition to looking at things holistically, is there anything else they might have in common that helps them to succeed?
Sandie Boswell
Absolutely. I think it's two things, and we see the lot here at Grant Thornton. Um, it's a passion and a good business strategy. So you know, I love talking to corporates and to people when they're launching or developing an idea, because you can just see they live and breathe it. But behind that, they need a really good structure. They need to understand all the issues that they've got to face. So I find those companies that can periodically raise out of the everyday challenge and foster and innovative culture are those succeed and remain. So, you think about technology companies now – and they're all the big winners, really – and they've developed some amazing intangible assets and they seem to have embraced that by having a good business platform underneath it. I mean, that's sort of my view of the two key things. I mean, there's so many things that businesses have to tackle and embrace, but definitely those two things you can't beat.
Therese Raft
And on the flip side, in your experience is there something that tends to catch people out or surprises them when they are developing their ideas?
Sandie Boswell
Great question, because, actually, I really think companies need to be alert to disruptors in their sector. Most corporate’s I'll go out and talk to will say, “look, I've investigated this. Nothing like this exists. I've looked around, I've gone on a trip and we can't do that at the moment”, of course, but you know, you'll hear how they've researched it. But you'll be surprised how many developments are out there that are going on at the same time. And people are not really looking around and going: “how do I absolutely check that what I've got is unique and innovative and different”.
There's a really good thing to think about here, which is doing a Freedom to Operate search, and we don't see that being done by as many Australian businesses as what I'd like, because if they don't check to see if there's a disruptor behind them developing something very similar, who's already protected that technology, they then launch their product or service – they can get litigated. That doesn't get a lot of press, but it happens. And that's the last thing you want when you've invested so much money into a new product or process to then getting a cease and desist letter as soon as you launch it. So companies here, the blind spot for them is that IP protection strategy – in my view. They think they don't need one, and that's simply just not correct. I just don't mean patents here. It could be an embedded trade secret framework. It could be employee incentives. How do you stop that leakage of your novel idea getting out? It could be a cyber security plan. That's a real issue at the moment. Or as I said before, it could be as simple as doing a Freedom to Operate search as you begin your innovative process. So yes, I think there is some…those surprises are things that we need to, as Australian corporates, need to investigate more.
Therese Raft
And I suppose considering that we're doing so much more of our work online and we're embracing technology, I can only assume that this is going to be an increasing issue – that speed to market and checking to see what everyone else is doing.
Sandie Boswell
Absolutely. I mean, we're all doing this work from home, and I think it's actually been much more successful than any of us thought. We sat in March last year and I remember thinking: “how are we going to win work? How are we going to get business in? How do you actually engage with your customers? How do you create a culture when you're sitting at your kitchen bench like I am today, you know, and trying to engage with your people?” But it's…I think we've proven that we can do that. So, yes speed to market – yes, it is a challenge. It's more about how do we get out and get offshore and globally get out and connect. And the thing that's concerning me now is how the rest of the world is opening up and we're still closed. Is that going to slow us down? I mean they're all big dollar questions and they’re big concerns. I think, for us as an economy, we need to get back out into that global economy as soon as we can physically and connect with those markets because I'm not sure when we are left behind while they're all opening up and we're not, that's a big challenge. So I'm hopeful that we'll see Australia open up at a much faster pace now going forward over the next 6 – 12 months.
Therese Raft
Absolutely. There are so many pieces to this particular puzzle and we talked a lot about the disruption in the last 12 – 18 months, but looking forward – and you touched a little bit on other economies opening up – but what are some of the other trends that you're excited about or that we can expect to see more in the innovation sector going forward?
Sandie Boswell
There's no doubt you know, the speed of technology, things like Blockchain, things like AI are all really exciting and there's so many things that I read and think “wow that just sounds amazing” and these things are all on point. I think we're going to see much more rapid development and faster market despite the challenges that you and I just chatted through. And it's the rise in the value of the intangible asset. Because they're so fluid and dynamic, they can move anywhere and they can be created very quickly and the value of that IP aggregators very quickly. So I think that's something that we will see more commonly now is this intangible asset growth, which we're seeing already. You know, the most valuable companies in the world are all really technology based companies now. And I think we're seeing Australia realise that we need to be more self-reliant. Who would have thought we'd be shutting global borders, let alone state borders? So, we've got to think about our critical sectors – and the pandemic has definitely highlighted that – and how resilient they are. And moving towards a more innovative focus, diversification of our markets and improving that self-reliance are all things that I think we're going to see as trends over the next two years. It's really been a massive eye opener. And even just the rise of adoption of an acceptance of everyone working remotely is just unheard of and unthought of, so really innovative ways that we've adopted and adapted to the health crisis that we started talking about at the beginning of this podcast.
Therese Raft
Absolutely. And if we've got people listening at the moment and they have an innovative idea, they've got a creative idea that they want to explore, what's one piece of advice you'd give to companies that are looking to invest in innovation right now?
Sandie Boswell
Look, I think it's all about planning and think about all the stages of the process, so it's not just about get out there and develop your idea. It's setting up the right structure. It's thinking about that commitment of where you're going to spend your money. It's conducting those R&D activities. As I said before, it's about protecting and developing an IP strategy. How do you value your IP? What's your ultimate end game? So what is it? Is it exit? Is it offshore growth? What are you looking to achieve? And so I think all of those things set corporates up and people up for success right from the beginning. But it's thinking about it at the beginning, not as you go through. You don't want to have to unpack things and restructure things because it costs money, and it takes you away from the focus of your novel idea. For me, it's about thinking about every stage but planning ahead. So really critical to do that.
Therese Raft
Some fantastic advice there. Sandie, thank you so much for your time.
Sandie Boswell
My pleasure. And thanks for having me
Therese Raft
Now, Sandie, can people track you down on LinkedIn, phone or email if they would like to talk more about innovation?
Sandie Boswell
Absolutely. I always love talking about this topic and also just working with corporates on any of those areas. Here at GT, we sort of cover the gambit of those. We've got a really strong broad team that can bring a lot to the table around innovation and growth and protecting your IP. So do reach out to me or to anyone at GT, and we can hopefully work with you and add value to your company.
Therese Raft
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