SERD From Diagnosis to Implementation

Reflections on Australia’s Innovation Architecture after the SERD Essay

Australia produces world-class research but struggles to convert that capability into globally competitive industries. At the centre of that paradox lies a difficult truth: while our universities perform strongly, business investment in research and development remains comparatively weak.

Australia’s business expenditure on R&D is around 1 per cent of GDP, well below that of many OECD economies. If innovation policy is ultimately about productivity, competitiveness and prosperity, that gap deserves serious attention.

Introduction

Earlier this year I circulated an essay reflecting on the Strategic Examination of Research and Development (SERD) and Australia’s broader innovation architecture.

I shared it privately with people working across universities, research organisations, start-ups and industry, hoping it might provoke a serious exchange of ideas.

The responses that were received were thoughtful, candid and often remarkably generous. More importantly, they revealed something encouraging: across Australia there is a community of experienced people who care deeply about the effectiveness of our innovation system and who are willing to think seriously about how it might work better.

Reading the emails over the past few weeks was not a discouraging exercise. Quite the opposite. Many of the comments were sharp, practical and, on many occasions, genuinely inspiring. They came from people who have spent years navigating the system: running CRCs, building research-based companies, managing university commercialisation offices and advising governments.

Ahead of the Minister’s National Press Club address on 25 March, it seems worth bringing some of those perspectives into the broader conversation.

The Emerging Themes from the Feedback

Fragmentation rather than strategy

A recurring observation concerned the absence of clearly articulated national priorities guiding research investment. Funding programs operate across multiple buckets, each with their own rules, incentives and political dynamics.

One contributor described the resulting pattern as “garbage-can policymaking”: problems and policy tools are frequently combined without a coherent overarching rationale.

Another contributor emphasised a deeper institutional principle:

“Innovation systems succeed when institutions are designed so that good outcomes emerge naturally from the incentives participants face.”

Fragmented programs lead to fragmented decision-making. Commonwealth initiatives intersect with state priorities and institutional interests, producing a system that often appears busy but lacks strategic coherence. Programs evolve incrementally rather than as part of a deliberate architecture designed to build long-term national capability.

Structural distortions inside universities

A second theme concerns the internal economics of universities.

Research in Australia is often structurally loss-making and heavily cross-subsidised by teaching revenue, particularly from international students. When those revenues fluctuate, research activity becomes vulnerable.

At the same time, academic incentives remain strongly tied to publication metrics. Commercial engagement and translational work are frequently discounted in promotion decisions. This creates a predictable behavioural outcome: even highly entrepreneurial researchers must prioritise publication to maintain career security.

One contributor used a striking metaphor to describe university commercialisation policy. Universities, he argued, often behave as if every idea must be captured and monetised. A better model would resemble “a fishnet: catch the big fish, but let the small ones escape and grow.”

Another respondent made a related point: universities frequently treat commercial initiatives as if they all have equal potential, when in reality only a small number will ever generate substantial economic value.

These observations point to a deeper challenge: aligning academic incentives with the realities of innovation and commercialisation.

CRCs build capability, then dissolve it

Many responses emphasised the value of Cooperative Research Centres. CRCs have proven effective at building networks between universities, industry and government and have supported important translational research collaborations.

However, the time-limited structure of the program creates a recurring institutional paradox. As one contributor put it:

“We build capability and networks for ten years and then wind them down just as they reach maturity.”

Skilled teams disperse, relationships weaken and institutional knowledge fades.

Several contributors suggested that CRCs should evolve into more durable translational infrastructure: institutions capable of sustaining industry collaboration and commercialisation expertise beyond the life of individual programs. Some suggested that this evolution could take the form of place-based research and industrial facilities with long-term institutional continuity.

The missing innovation leaders

Perhaps the most striking theme concerned leadership.

Australia has many talented researchers and capable investors. What appears thinner is the layer of individuals who can translate research breakthroughs into scalable companies.

The market for start-up CEOs with deep technical understanding remains limited. Academic founders often lack the appetite for commercial risk, while experienced operators are scarce. Contributors also noted the limited mobility of talent between universities, industry and start-ups.

A seasoned researcher offered a particularly important observation about innovation leadership. In his experience, the individuals who successfully translate research into companies almost always begin their careers in business. Commercial discipline is learned first; technical depth follows later.

If that observation holds broadly, it raises important questions about how Australia cultivates innovation leaders and how talent moves between research and industry.

The view from inside a research-based start-up

The perspective of research-based entrepreneurs adds an important dimension to this discussion.

One CEO who responded has spent nearly two decades commercialising a technology originating from a University of Melbourne PhD. His company has transformed that theoretical breakthrough into a patented digital pulse processing platform now applied across sectors including mineral analysis, security screening and medical detection.

The journey illustrates both the promise of Australia’s research system and the difficulty of translating that promise into global commercial success. It required sustained entrepreneurial leadership, patient capital and a long-term commitment to product development.

Examples like this demonstrate that Australian research can generate globally relevant technologies. The challenge lies in building a system that produces such outcomes more consistently.

The economic reality

Several respondents emphasised a simple but often overlooked fact: Australia is an expensive place to innovate.

High salaries and operating costs mean that experimentation is costly and failure is expensive. Small exploratory steps can require significant resources.

In such an environment, improving the return on each dollar invested in research becomes even more important. Innovation policy must therefore focus not only on funding levels but on institutional design and capability formation.

Several contributors also returned to a harder question that sits beneath many of these observations. Australia’s research system is internationally respected, yet business investment in research and development remains comparatively low by OECD standards. If the goal of innovation policy is to strengthen national productivity and competitiveness, this gap cannot be ignored.

Economic complexity and the role of business

Several contributors implicitly returned to a point that sits at the centre of the broader SERD discussion: the relationship between research capability and economic complexity.

Countries that sustain high productivity and rising living standards typically build industries capable of producing complex products and technologies. These industries embed deep technical knowledge, specialised supply chains and skilled workforces. They are also the sectors most likely to sustain significant private investment in research and development.

Australia’s research system produces many strong discoveries, yet the translation of those discoveries into complex products and globally competitive firms remains uneven. One reason is that much of the research system operates at a distance from the commercial environments where these investments ultimately occur.

Complex products rarely emerge from research alone. They emerge when scientific capability is combined with long-term business investment, disciplined product development and leadership teams willing to carry commercial risk over many years.

Services can also be highly sophisticated and economically valuable, but they are generally more mobile and less anchored to local ecosystems. For a high-cost country like Australia, the long-term foundation of innovation capability is more likely to be industries built around complex technologies and products, with sophisticated services evolving alongside them.

This reinforces a central point in the SERD debate: improving Australia’s research performance alone will not transform the economy. What ultimately matters is whether the research system strengthens the capacity of Australian firms to invest in R&D, build new industries and compete globally.

From diagnosis to implementation

Several of the responses also pointed toward practical institutional changes that could help bridge the gap between research capability and business investment.

One idea raised repeatedly was the potential evolution of CRCs into more durable, place-based translational infrastructure. Rather than building networks that dissolve after a decade, Australia could develop long-lived centres that sustain industry collaboration, technical capability and commercialisation expertise over much longer time horizons.

Another proposal concerns improving the decision quality of firms undertaking research and development. The emerging concept behind the RDTI Helper system is to support companies in designing stronger R&D strategies, improving experimentation discipline and strengthening the connection between technical work and commercial outcomes. The goal is not simply to increase claims under the R&D Tax Incentive but to increase the quality and economic impact of the R&D undertaken.

Both ideas point in the same direction: strengthening the institutional bridge between research capability and business investment.

Conclusion

The responses to the original essay reinforced an encouraging reality: there are many thoughtful people across Australia’s research and innovation community who are deeply committed to improving the system. Their insights reflect years of practical experience navigating its strengths and limitations.

But they also point to a central issue that cannot be ignored.

Australia’s innovation challenge is not primarily a research problem. It is a business investment problem. The country produces excellent research and highly capable scientists. What remains weak by international standards is sustained private-sector investment in research and development.

Addressing that challenge requires more than additional programs or funding pools. It requires institutions and governance structures that are deeply connected to commercial reality.

As one contributor observed from long experience inside government policy.

“Good policy design should reduce the need for heroic individuals by making productive behaviour the easiest path through the system.”

Another theme running through the feedback was the importance of leaders who understand innovation from inside companies. Individuals who have spent significant parts of their careers in businesses, who have owned shares, carried profit-and-loss responsibility and experienced the discipline of markets over a decade or more. Those experiences shape judgement in ways that cannot be replicated in purely institutional settings.

If Australia is serious about improving productivity, economic complexity and long-term prosperity, business must sit much closer to the centre of the research and innovation system. The question is not simply how universities collaborate with industry. It is how the system itself embeds commercial leadership and real economic accountability.

The SERD process now has an opportunity to move the conversation beyond diagnosis. The challenge is to design institutions that strengthen the connection between research capability and business investment, so that Australia’s research excellence translates into globally competitive firms and sustained economic growth.

Whether that opportunity is taken will become clearer in the months ahead.