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At last, some slightly solid thinking about the innovation part of our economy.

Sir Peter Gluckman’s under-reported speech on the ‘Globalisation of science: New Zealand’s R&D direction’ is the first tentative indication of some higher level views on how we turn ideas into income.

The PMs chief science advisor gives some pretty sobering statistics and examples along the way – shorthand to say, ‘this innovation caper ain’t easy’.

Speaking at a recent NZ Agricultural and Horticultural Outlook Summit, Gluckman says it is essential we transform away from commodity-based trading, though he didn’t mention that the current boom commodity environment makes this more difficult to achieve than ever.

NZ has lagged behind other small advanced nations which have transformed their economies via government-led basic and strategic research and development because “we have failed to invest sufficiently in strategic and holistic scientific research in a manner sufficient to create a fully-functional innovative ecosystem,” he says.

“A key understanding of those countries which have thrived, Ireland excepted [earlier he pointed out Ireland's success was due to tax breaks to attract multinationals], is that their systems only work if there is sufficient idea flow for entrepreneurs and businesses to develop and that in turn can only come through investment in basic science. There is no other way,” he says.

Then he gave some numbers.

In Israel it is accepted that only 1 in 100 ideas leaving a university or institute will make it to the first round of commercialisation, and of those, if well managed and governed, 50% will succeed. Israel’s about our size, and reviews more than 10,000 ideas a year, half from the university sector. NZ’s nowhere near that.

Meanwhile, there’s a global recognition that in an increasingly weightless economy, it is ideas that generate money. The product can be produced anywhere [cue China], but in the end it is the source of the ideas that generates the return.

“We need to understand that idea generation is where it starts,” Gluckman says. “There are a then a series of steps that transform that into real dollars – at the end it is about scale and marketing.”

NZ needs to think hard and innovatively about scale, with one of our problems about marketing with this in mind is it takes a very different skill set to that that comes from traditional corporate training.

“We have the tradition of thinking that we must own the whole value chain from New Zealand, then try to sell it to the world,” says Gluckman. “In a country with a low capital base and a small number of technologically savvy managers, to try and do it on our own can only have a high failure rate. Too often we end up with clever ideas, undercapitalized, slow to be developed and likely to fail in the market. But there are solutions – we must be innovative and grab them.”

He says Israel is the most successful small economy in the knowledge based sector, whose first rule is to make sure they have enough ideas flow so that the good ideas can be identified and filtered, and effort is not wasted.

“They insist on international expertise on their boards, on proper scientific advisory boards, and high-quality skilled management with experience in knowledge based industries,” he says. For them the ownership of the idea is often more important than the site of manufacture.”

NZ could develop strategic partnerships at every level in the value chain says Gluckman. This would be both pre-commercial and commercial, generally with small advanced economies, where there is an equity of interest.

“We need partners who can do what we cannot do, be it access to markets, going to scale and/or expertise,” he says. “We are better to own a fraction of something large than stay small.”

From sticK’s point of view, this is the first real time that the PM’s science advisor has given some indicative thinking about how we might better turn ideas into income. First, start with lots of ideas – and we’re nowhere near Israel in the production of those.

Hopefully it is an indication of more to come – though the deafening silence of media about Gluckman’s innovation thinking isn’t encouraging.

See a copy of the speech here.