Innovation in NSW

The State Government has put out a quick call for feedback on innovation in NSW. You can make your own submission but the deadline is today, 15 April. Alternatively, you can comment on my thoughts; I'd love your feedback. 

Sydney needs an organisation who will listen to high growth technology companies and find out what are the things that could be done that will actually help YOUR technology company grow quicker.  That's why a group of technology entrepreneurs and myself have setup TechSydney . The aim of TechSydney is to focus on the things that will help make Sydney one of the Top 10 ecosystems for high growth technology companies globally.

Below are the questions from the State Government website.

Q1 Open for Business

NSW as the home of innovation
NSW is already seen as a natural centre for innovative ideas and business models. More than 60% of Australian start-ups have their headquarters in NSW. The NSW Government Knowledge Hubs are providing important connections for research and innovation opportunities. Showcasing why NSW is a place of choice to live, work, and build the industries of the future sends a clear message that we are open for business. It’s about providing an environment which is rich in opportunity for individuals and companies to take ideas and turn them into products and services for the benefit of the NSW community.
The role of the NSW Government is to create the conditions for NSW industries to build on each other’s work. The NSW Government can play a role in fostering collaborations between the best and brightest researchers, entrepreneurs, and venture and other capital providers to generate genuine economic activity and growth.NSW offers an internationally competitive and compelling location for global companies. NSW is the hub of Australia’s economic activity and has a diverse economy including tourism, agriculture, medical, ICT, mineral resources and financial services. Our economy is knowledge based with strong research and development capabilities. Sydney, as Australia’s largest city, is a connected city offering a secure business environment which bridges time zones and has extensive links to international markets.
Discussion points:
  • The NSW Government has a track record of creating the conditions to support innovation in NSW. Are there aspects of existing policies or programs underway that are an essential support for you as a business, researcher, entrepreneur or capital investor?

Firstly, we can't just implement best practice from overseas. Sure we should learn and set that as a minimum but that wont be enough to accelerate Sydney as a global ecosystem, we are  behind in fact we are going backwards. We slipped from 12th in the world to 16th and we have to be willing to do more and to take risks.

We also have to get the implementation of these initiatives out of the public service. When I invest in a company it's my job to choose the right team who are focused on the right initiatives. Once I do and I make my investment, it doesn't give me the right to veto their day to day operations. I can provide feedback along the way and help when asked. Government needs to take this approach: pick the right people with the right focus, give them the rules they need to follow, resource them, then get out of the way to allow them to execute.

The rebuttal from government to this approach is the blow-back on spending public money. The reality is the current process is causing a waste of public money as you spend more time justifying what you are doing to people who don't know rather than focusing on what needs to be done. At a state government level there are very few initiatives that are valuable to a high growth technology company. The knowledge hubs is a starting point but the funding model is broken not only the magnitude of money available but how it is distributed.

  • The NSW Government is receptive to suggestions as to where we can best make a difference and direct efforts to support the innovation ecosystem. In your opinion, where would that focus best be directed?
  1. Facilitate the development of a centrally located campus that showcases our city and could house the entire ecosystem, from the smallest startup to the Atlassians of the industry. It must be a landmark easily accessible place that people want to be in. Not an office tower, but a culturally vibrant precinct.

  2. White Bay is not centrally located and transport is very difficult and is unlikely to fit this criteria. It could be a great location for the very high end research labs butis not well suited to host a startup ecosystem. There is lots of land owned by the government in great locations. The Powerhouse is now up for sale, the empty warehouses at Millers Point, facilities in the Naval base in Woolloomooloo and probably tonnes more I don't know. Do something that leaves a legacy that will improve our economy and the lives of our children's children. Not something that makes a developer a quick $$$ and probably falls down or looks like a ghetto by the time our grandkids are around.

  3. We are currently slipping from 12th to 16th in world rankings of startup ecosystems according to Compass. We need to be willing to take bold steps above and beyond what the rest of the world has done. Having a central location for the whole ecosystem that highlights this beautiful city is a world first. This would significantly manufacture the density required for the smartest people’s knowledge and experience to permeate through the whole ecosystem. It's our single biggest chance of having a BIG impact.

  4. Allocate some funding to an independent organisation run by a group of proven technology entrepreneurs with a focus on moving Sydney into one of the top 10 ecosystems globally. TechSydney has been formed to address this.

  5. Fund a campaign similar to what Tourism Australia / Destination NSW does to focus on articulating why Sydney is the best place to grow your startup in talent rich countries.

  6. Anything that de-risks the process of smart people coming to Sydney to work in a startup and, more importantly, setting up smart companies here. Establish a concierge service for high value people and companies that want to setup in Sydney.

  7. Focus on education. Our schools should be building a technology-focused curriculum in K-12, including learning to code, learning lean methodologies, user experience design, electronics, industrial design, sales / customer development skills and analytics.

  8. Payroll tax is an inhibitor to hiring in NSW after you reach a certain size. Technology companies should be exempt as they will just hire offshore or open up other offices to get around it.

  9. Invest in making this city great again. Sydney was fun during the 2000 Olympics; there were parties on the streets.  This kind of vibrancy attracts innovative people. It put us on the map. The lockout laws and a general trend since 2000 have allowed a minority to ruin the fun of a majority. This has become a factor that counts against us and has been one of the reasons which works against us when innovative people are making a decision to chose between here or New York.

Q2 Disrupting business and government

Disruption and a regulatory environment that supports innovation
In January 2016, the NSW Government released a Position Paper on the importance of the collaborative economy. The government committed to supporting a culture of innovation, including by ensuring that regulation is fit for purpose in the digital age and by ensuring fair and proportionate regulation that offers the right levels of protection for citizens.
Disruptive technologies can often present a challenge for existing regulatory regimes and it is important that the government has the right systems and processes in place to deal with the challenges of disruptive technologies as they emerge and to give the businesses the confidence they need to continually invest and grow in NSW.
Discussion points:
  • How should the NSW Government most effectively consider regulatory responses to disruptive technologies as they emerge?

It's a simple question: Are people better off or not? In the cases of Airbnb and Uber, the answer is "yes". Everyone is better off, except the companies that leave themselves open for disruption because of something missing from their service. They deliver something customers want and aren't getting from existing providers. People are just as safe staying in an Airbnb but enjoy a different kind of holiday. They have ratings and systems to remove the unsavory people from the market. If you look at the businesses that proactively collect feedback to make sure they are delivering a good product, the people of this state are going to benefit.
The government's attitude should be to allow new innovative companies to build a product or service people love. If the ACCC receive complaints about them, and they can't address the issues alone, then the government should intervene. Otherwise, don't legislate for problems that don't exist.

  • Are there current NSW regulations which unnecessarily inhibit innovation, even when balanced against consumer and business protections?

Yes:

  1. Multiple use planning laws could be introduced to allow a restaurant at night to rent out desks during the day etc.
  2. Payroll tax is a disincentive to grow, people will just be motivated to hire offshore.

Q3 Accessing markets and money

From Startups to Scaleups and growing traditional industries
Innovative products, processes and services must have adequate access to markets to successfully commercialise. This often involves a significant lead time to allow for market testing, market development and to secure funding. However, scaling is where the real economic benefits are derived. Research shows that the majority of net job creation comes from the small percentage of high growth businesses. Scaling a business needs large markets, which are often international, and a continuous investment pipeline.
There is opportunity to use the Australian Government’s initiatives such as the international landing pads and tax incentives to help NSW businesses access international markets and seek investment to increase their rate of growth.
Existing and new businesses and industries must innovate to stay competitive and transition into the new economy. While NSW has world-class research institutions, and world-class industry, there is an opportunity to improve partnerships between research and industry. Better collaboration between industry and research will provide a chance to translate research into commercial products. This will deliver the opportunity to universities and other researchers to commercialise their products, processes and services, and will provide industry with new products and markets.
We can build on the Australian Government’s research translation initiatives such as the CSIRO innovation fund and the university research block grants for industry collaboration for the benefit of NSW businesses and the community.
Discussion points:
  • What is working well with regards to helping startups be successful and how can we increase the rate of scaling up of startup companies?

Firstly I want to address the University research and CSIRO aspect of the comment above. This is very important for the advancement of humankind but when looking at the number of really big companies (Apple, Facebook, Google etc) that have been created (anywhere in the world) there are few that come to mind. Should there not be equal if not greater focus in fostering innovation outside of universities and the CSIRO. The $8 million federal incubation initiative spread over a few years and divided between several organisations will amount to nothing.

My suggestion is start with a model similar to the Australian Institute of Sport that takes best and brightest people with the best ideas and pairs them with the best coaches who have done it before. Our focus has to be on making the best better at first , whilst up-skilling everyone with the right technology skills because if we help the best win and learn from it we can accelerate that learning to help those getting started to win.

How would it work? Experts are brought in from all over the world and experts from Australia are paid to develop a program for these great companies to address  the specific problems that will help them grow. We capture this learning so it can eventually be accelerated to a wider audience. The companies are housed  in a centrally located area and they work in an environment at least with the other teams but hopefully in a large centrally located campus for the whole startup ecosystem. (see the response in the location section for more detail) The current accelerators of Startmate an Muru D (of which I am one of the investors / mentors) do this. The problem is the mentors are volunteers and the people who really know how to help are busy building their own businesses. People need to be paid so they focus, consultants need to be brought in to address specific problems and be given the time to focus on the companies and the problems.

This could help build a curriculum and our long term capabilities into our school system of the future from K-12 but in the meantime students should be learning STEM and to code, learning lean methodologies, user experience design, electronics and sales / customer development skills.

The initiatives Larry Marshall and his team is implementing to make the CSIRO more focused on commercialisation is great. University research needs to be given a similar focus. A PHD should be not just about discovering something new but something that is new and valuable. Maybe entrepreneurs should be part of the supervision process of PhD’s at university or actually creating a valuable company is your PhD. 

There is no equivalent organisation to influence innovation outside university as I mentioned. This needs to be addressed.

In terms of scaling up what you are really talking about is jobs as that is what looks good to voters. Firstly it's important to reframe what a job is as a job in the future may look very different to today. For example Uber in Australia employs less than 50 people but it provided an income to thousands of people. In the order of magnitude of over $80 million according to Deloitte Access economics. So the state government needs to re focus the problem. Your initiative should be focused on Incomes for NSW not just Jobs for NSW

So in summary, let's help the best be better first. Use that knowledge to make everyone else build better more successful companies and start today educating our kids with the skills they need in STEM as well as technology focused creative subjects like design, user experience, growth marketing, customer development while we work this out as we are already so far behind.

  • What are the opportunities to improve business access to national and international markets and investments?

Sydney is on the doorstep of Asia and along with our lifestyle is one of the most significant assets we have for helping US & European companies expand operations into there from a base in Sydney. We first need to be able to concierge them to set up operations here with the promise of being able to concierge them into difficult markets such as China.

Q4 Sharing Innovation Spaces

Space matters. It affects the way we work, think and interact
It is vital NSW has the spaces and infrastructure to provide opportunities where ideas, lessons, knowledge and solutions are exchanged and the right people are connected. International trends in North America and Europe have demonstrated the benefits of proximity and the ability to share services between business, educators, trainers and government. The growth of Silicon Valley and London as international drawcards for new technology and technology platforms show the significant value of a vibrant innovation ecosystem to the growth of the economy.
Likewise, it is also important to have spaces that provide privacy and protect competitive intellectual property development, while still allowing proof of concept testing. Industry has expressed interest in new, ‘safe spaces’ for competitive entities to collaborate and learn from one another and build on each other’s work.  These spaces could grow around under-utilised public or private assets, including land, people or equipment.  In collaboration with the businesses, industries, research organisations and the people of NSW, the NSW Government will continue to support new spaces, and also look for ways to build connectivity within and between them. Together we can seek out geographic or virtual critical mass to harness regional competitive advantages, feed industry hot spots and realise growth potential. This includes exploiting natural clusters around large customers or education institutions, and leveraging Australian Government innovation investments.
Discussion points:
  • Do you have suggestions regarding possible physical environments and spaces that could support greater innovation?

Part of the reason why Silicon Valley continues to lead the world in high growth technology companies is the density of people who are working on similar or adjacent projects you can learn from. You bump into people in cafes and the conversations and connections that ensue are significant. A company Grabble which I invested in via Startmate met a guy from Walmart at a random drinks event. Walmart ended up acquiring them a few months later. I personally was introduced by Martin Wells to a guy Kevin Hartz at an event in San Francisco who told me about the group buying model, which was very similar to the business I was working on - Booking Angel. I came back and launched Australia's first group buying site. 6 months later the industry employed over 1000 people and was worth around $500million to the economy.


If only the state government does 1 thing it should be this. A single location where every business from startups at Fishburners through to the largest businesses like Atlassian or Freelancer work and play. It can be designed with sections so people can have their own areas or be open plan to deal with any IP protection. It must be centrally located, easy to access via transport and showcase the beautiful city we live in. This is an asset that would put Australia’s innovation on the map. Who wouldn't want to work there. We would much easier be able to convince innovative companies to setup here from overseas, students to do more innovative STEM subjects as it would be a showcase of the amazing environment and companies that could be developed here and everyone smart will want to be part of it.

  • How can we provide regional NSW with the same opportunities?

The same thinking that went into the Australian government landing pads should be used for regional areas. It's ok for our companies to go to Tel Aviv or Silicon Valley, Why? Because they learn and come back smarter. They come back and enrich the local community with that knowledge. Having a strong central location in Sydney that would allow regional people to visit and learn from the best and return to enrich their local community. Setting up regional centres like this would be a waste of time as there are not enough people who are experts in innovation and building highly scalable companies to run or oversee them. We are already under resourced why spread that too thin.

Q5 Leveraging Data

Fuel research and innovation by creating greater access to data
Government data fuels business, research and innovation. In 2015 the NSW Government established the NSW Data Analytics Centre (DAC) to drive evidence based policy through whole of government data analytics and inform a more agile and responsive government.
The DAC is collaborating with data specialists, universities and government agencies on a range of projects including vocational education and transport. This work is offering new and innovative solutions to complex problems through harnessing government data assets.
Discussion points:
  • How can the NSW Government do more with government data?

The priority for the data is to know. How many new technology startups are starting and how quickly are they growing so we can measure the impact of these initiatives. We can then analyse the factors contributing to success or failure over time and tune our initiatives.

  • Are there particular NSW Government datasets or information that you think should be prioritised for release?
Are there existing data sources we can access to know this in realtime?
  • Are our current policies in relation to retaining data and Intellectual Property in the public interest?

Q6: Meeting Business Demand for Education and skills

The right mix of talent, skills and knowledge
The jobs of the future in game-changing technologies such as robotics, biomedicine, advanced manufacturing, aerospace, sensors, and smart connected devices will need a highly skilled, flexible and connected workforce. Science, technology, engineering and mathematics (STEM), problem solving, coding, design, and digital literacy skills will all be needed for the jobs of the future and we must prioritise this education across our primary, secondary and tertiary sectors. We also need the entrepreneurs that grow productivity by converting ideas into products and services, creating competition and scaling businesses.
Similarly, traditional industries are being disrupted through automation and new entrants into the market. This means the skill sets for these traditional industries are also changing.
To address these issues we need to consider our systems of education. How we can work in concert with industry to develop a more agile skilling system that embraces diversity, takes experience of mature workers into account, and provides for the future needs of business. Industry will need to play an important role in the development, attraction and retention of talent and skills.
Discussion points:
  • What do you see as the role of industry in supporting the development and retention of the skills needed for the future?

Firstly having a central location for all high growth technology companies that is an awesome showcase of the great companies to work for will be an incentive for young people to focus on those careers. They will want to work there and it will better sell the virtues of taking STEM subjects in order to work in such cool companies in a cool environment. The leaders of these companies can also be a source of inspiration for the next

Universities by virtue of the process of accrediting a degree cannot teach the most cutting edge techniques that would make a graduate highly valuable to a high growth technology company. How do we fix this?

Other organisations such as General Assembly, The Founders Institute and new educational startups that may teach virtually or in person are developing more dynamic curriculum focused on the skills required in a high growth technology company. These courses are not subsidised by the usual government channels or are developed by part time people. Funding experienced people to better develop the curriculum and possibly to incentivise people makes it not as easily accessible to people. This could be improved.

Maybe a hybrid of the two is a solution that every degree requires some hands on industry training component a dedicated intern program with specific related training around what they are working on focused on the below areas of specialty.

  • Are there skills gaps that need to be addressed in your business, industry or community group in NSW, and how could the NSW Government best assist in filling those gaps?

There is a significant shortage of product managers who know how to grow scalable startups. It's by definition something  that can only be learned well by having hands on experience in a company that has built something from scratch that eventually became valuable to lots of people. We need to incentivise and import this talent and convince product teams from large growing companies to set up in Australia so that knowledge can be shared. It's not really a course you can do online.

Q7: Doing business with government

Enabling investment in new products & innovative approaches to service delivery
Government is a major customer for businesses in NSW procuring over $24.4 billion worth of goods and services in 2014-15, including $7.8 billion spent with small to medium sized businesses. Innovative approaches to government procurement are key to increasing access to this market for small and medium sized businesses in NSW.
Reforms to NSW procurement policy since 2011 are providing greater opportunities for small and medium enterprises to supply to government agencies. Simpler procurement processes, online catalogues and registration schemes together with increased use of short form contracts have helped to reduce the cost and complexity of doing business with government.
In 2014, a dedicated ‘Procurement Innovation’ stream was established to reduce the red tape for government to conduct proof of concept testing and outcomes based trials. Early and ongoing engagement with the market is vital.
Discussion points:
  • What are the challenges for citizens and businesses doing business with government?
  • How can government make it easier for suppliers to do business with government?
  • What are the possible benefits of diversifying government procurement practices?

The UK government has a procedure where the growth rate of a company that is providing the services is part of the procurement process and higher growth companies are given priority over lower growth. This is an interesting initiative that give startups an advantage.

I'm told that amounts over $30k have to go to tender and that significantly inhibits a startup compared to a large company who has a team dedicated to RFP’s.

Q8 Smarter Government

Creating a culture of innovation within government & better service delivery
The NSW state sector represented about 13.5 per cent of the NSW economy in 2013–14 and the NSW public sector employed 10.6 per cent of all NSW employed persons. It is critical that the way in which the government goes about its work is in step with the broader workforce and economy.
Many of the complex social challenges facing the community today will require fresh thinking, new approaches, and the testing of new technologies. The provision of a ‘safe harbour for risk’ within government could provide more innovative ways to work with business, industry and the community to test new technologies, apply pilots, and develop solutions.
Discussion points:
  • What are the key attributes of a successful ‘digital government’?

An ability to try things and test their impact is important. If the whole ecosystem was under one roof this would be much easier. It would be a sandbox to test policy and initiatives and quickly see the impact.

Great groups of industry leaders have been involved in the innovation agenda, jobs for NSW etc but the problem then is that it is left to the public service to implement. These people have no experience building high growth technology companies and you are asking them to be the arbiters of what does and doesn't happen. Pick people with experience and proven track record, fund them to implement it, give them the rules of what they can't do, be transparent so anyone can see what is going on and can provide feedback and share the learning so we can constantly improve.

  • How can NSW Government design services with the customers in mind?

As above.

  • How do we appropriately encourage more risk-taking in the public sector?

Get different people who are naturally risk takers involved or empower the good people that are in government. Don't give them ridiculous policies to follow if there is no reason to.

What's Next?

The Government is meeting with a range of stakeholders, including not-for-profits, NGOs, the start-up sector, research, industry and peak bodies; as well as looking to best practice examples nationally and internationally. The Government is also engaging through social media and working with stakeholders across the government sector.
The NSW Government will consider insights from both open and targeted consultation to assist with policy development.
Contact us and closing date
Closing date for submissions is on 5pm 15 April 2016
For more information you can contact the Innovation team for Department of Finance, Services and Innovation and Department of Industry via email at innovation@finance.nsw.gov.au | www.finance.nsw.gov.au
General submissions
Do you have other suggestions NSW Government should consider in the development of it’s Innovation Policy? Leave your thoughts in the comments.