Opinion: Australian science all “R” and no “D”

To extract maximum value from our research dollars, we must commercialise as much of the researcher’s outputs ourselves, and not leave it to overseas corporations to make millions from intellectual property paid for by the Australian taxpayer and return peanuts to the Australian economy.

80 per cent of the potential ROI to the Australian people is currently not being captured and kept here in Australia.

As such, we call upon all Australian Governments to realise that doing “R” without the “D” is consigning us as a nation to being net importers of technology and lining the pockets of foreign entities rather than capturing and trying to keep the discovery premium here in Australia.

The evidence is in and it overwhelmingly supports the case that the “D” element works best with commercial engagement with business. The current system rewards returns to universities (especially the focus on IP sales) at the expense of maximising returns to Australia that would be achieved with greater commercial engagement with business. IP sales are tiny compared with the potential to increase sales and profits within Australian business through the development of new products and services .

We need to readjust the incentives to and within universities to better align them with the national interest. This is the aim of Proof of Commercialisation (PoC). Business repeatedly reports that Australian universities have unrealistic valuations of their IP and a lack of understanding of the risks and costs in developing that IP.

The current system has insufficient incentives to encourage universities to address these issues and become more skilled in commercialisation that would benefit the national interest.

Another distressing signal in the ongoing struggle with our failure to do the "D" in R&D emerged with the public announcement of the wind-up of IXC Australia. In spite of its many achievements, IXC was ultimately doomed by the almost complete inability of this country's innovation system to do the "D" part of R&D.

The rest of the world often views Australia as either: a) a quarry; b) a holiday destination; c) a pub or; d) a place to send their children to be educated.

We have had endless panoplies of politicians from all walks, endlessly rolling out statistics to show just how far Australia is "punching above its weight" in terms of "R" output. Parameters like citation rates and percentage of papers published are trotted out, but at the end of the day if you're punching with all the strength of a mosquito, you're a mosquito, no matter what you think you are.

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The Federal government is prepared to sink $9.4 billion into science and technology in 2011/12. How much of that is going into "R" versus "D"? It will be an overwhelming amount, greater than 90 per cent.

We are not against "R". Far from it. But focusing solely on "R" is ignoring the vast potential that the value of science based research offers to the wider Australian community.

Of course there are the indirect, social benefits but the greatest value to the lives of Australians comes from the successful commercialisation and development of "R" to create new companies, new industries, new jobs and new opportunities for Australia to be viewed other than as a place to go if you want to dig things up, chop things down, grow or harvest things to sell.

Science & Technology Australia's President, Dr Cathy Foley, in her response to the recent budget, nailed it: "Science underpins some of the most productive areas of the Australian economy – mining and energy production, information technology, biomedical research – and should be at the heart of the productivity agenda in Australia."

But science isn't at the heart of Australia's productivity agenda because we are not leveraging our research base by developing the research outputs into commercial products.

There are endless studies done over the years that try to justify the amount spent on science and technology by looking at the multiplier effect that for every "x" dollars spent on science the community sees a benefit of "y" dollars in return (where y is greater than x).

These studies at best are laudable, and at worst laughable because they are all supposing Australia captures the value of its research output by turning it into jobs, increased income and company tax receipts, earned export income, etc.

We are not doing this. We are particularly inefficient and incompetent at deriving value from the research we are paying for as taxpayers. A large part of the reason this occurs is an almost complete lack of political will to understand the paramount importance of maximising the ROI for every dollar spent on research by commercialising the research here in Australia, not overseas.

Whilst President Obama commits to, "ensuring that the US continues to lead the world in science and technology will be a central priority for my administration”, in Australia we're actively decreasing our support for "D" by replacing successful $400+ million schemes like Commercial Ready and COMET, which both helped commercialise Australian Science, with a $50 million per annum scheme like Commercialisation Australia. To compound this shortsightedness, the one true bridge between "R" & "D", the Cooperative Research Centres Program, is having its funding cut.

Don't let anyone fool you by saying, "well, if our IP is picked up by overseas corporations we will net a nice revenue stream in royalties and license fees."

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The Stanford University experience (1975 - 2000) is especially illuminating: one invention yielded US$255 million, accounting for over 50 per cent of royalty income. So one in 4,500 projects resulted in a spectacular success. The next best invention netted US$35 million. Another 28 yielded income less than US$1 million, and half netted less than US$10,000 per annum, and a 15 year average to break even with the costs of the research.

Given all this, Stanford’s IP royalty stream still only contributes less than 11 per cent to the research and less than 4 per cent to the total University’s budget. The average Australian University currently earns less than 1 per cent of its total budget via IP licensing.

The true value of Stanford University was it seeded the development of and became part of the engine that drove the commercial development of Silicon Valley. This is a stunning economic outcome that is clearly not understood in Australia at either the political or academic level evidenced by the lack of support for “D”.

Therefore to extract value from the research dollar we must commercialise researcher’s outputs ourselves, not leave it to overseas corporations to make millions from IP paid for by the Australian taxpayer and return peanuts to the Australian economy.

We call upon all Australian Governments to realize that doing “R” without the “D” is consigning us as a nation to being net importers of technology and lining the pockets of foreign entities rather than capturing and trying to keep the discovery premium here in Australia.

We’re not asking for more funding, but rather a rethink of the distribution of the current support for science and technology in Australia to boost the “D” in “R&D”.

We need Publicly Funded Research Agencies (PFRAs) to be actively encouraged to do research that is capable of being commercialised as well as their important role of conducting ‘blue sky’ research. Encouragement can only occur if the successful production of viable, applied research is suitably recognised and rewarded by being included alongside a researcher’s peer reviewed publication record on their CV.

The adoption of Science Industry Australia’s “Proof of Commercialisation” metric as a measure of the output of applied research will go a long way towards providing this necessary recognition.

Only then will the Australian community get close to full value for the money invested on their behalf in science and technology and realise that money spent on science and technology is a calculated and deliberate investment producing measurable returns rather than just spending in the serendipitous hope of discovering something useful or interesting.

We often talk of Australia being the clever country, but without support to translate research outputs into commercially viable goods and services this will always only be a pipe dream centered on the stump-jump plough!

This opinion piece was authored by Duncan Jones, Executive Director of Science Industry Australia Inc. (SIA) and Australasian Laboratory Managers Association (ALMA).

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The consequences of not capitalising on Australia’s Research outputs:

• 80 per cent of the potential ROI to the Australian people is currently not being captured and kept here in Australia
• Sustainable, long-term and viable jobs in advanced manufacturing are created overseas, not here in Australia
• The Australian people view spending on science as a lottery and not an investment as they do not see the new jobs, new industries and flow on effects to the rest of the economy
• We’re consigned to a nation of technology importers, lining the pockets of overseas corporations getting rich by commercialising Australian IP and discoveries
• We’re seeing an increasing ‘anti science’ mood in the broader community as they ask (quite rightly) “what’s in it for me?”

What we can do:

• Realign the current disparity in the funding of R&D from the current 90/10 per cent to a more equitable distribution
• Encourage the pursuit of commercially viable research by firstly measuring and documenting the amount produced and then acknowledging and rewarding the scientists who develop it

How can this be achieved:

• Introduce into the Excellence in Research Australia (ERA) scheme a metric that measures and documents accurately the commercially viable research output conducted by Publicly Funded Research Agencies (PFRAs)
• Industry will then be able to more easily start a dialog with PFRAs as the metric will pre-qualify and quantitate the nature of the commercial opportunity
• Reward the scientists producing this commercially viable research by allowing the quanta of this research (as measured by the metric) to appear on their CVs alongside their peer reviewed publication record as an equally valid measure of their achievements and output in order to attract further research funding
• The application, use and exploitation of this metric can be undertaken by existing commercialisation arms of PFRAs at no extra cost to the government and community

Does this metric exists:

• Yes, the “Proof of Commercialisation” metric, checklist and guidelines developed by Science Industry Australia could easily be incorporated into ERA