Industry Growth Program: discussion paper

Successfully transforming an industry will take more than just supporting individual companies that are bringing new technologies to market. New technology companies play a crucial role and are usually the single point of focus of most commercialisation initiatives, however the IGF can deliver more meaningful change, by structuring support and objective selection criteria to embrace the different types of companies that collectively drive economic growth. Falling under ‘transform, scale and grow their business operations’ these organisations are:

Pilot Customers that need to adapt their current operations to integrate a new technology and are more likely to engage if they receive an incentive to cover innovation and switching costs. Customer adoption is crucial for the widespread impact of innovative technologies and these early adopters will help to drive market demand and influence others to follow suit.

Supply Chain Companies that are critical to achieving an optimised supply chain however need to adapt their operations to integrate a new technology. They are more likely to participate if they receive an incentive to cover some of the inherent high risk. The involvement of these companies will help to unlock access for new technologies to industry value chains.

Local Capital Providers that need to obtain the expertise necessary to invest in new asset classes, in order to support the growth of emerging technology companies. Without these providers funding and facilitating the scaling of innovative ventures, industry growth is limited, or Australian technology companies head overseas.

By extending the program's focus to embrace these different types of innovative companies it builds a powerful force for propelling industry-wide growth and transformation. Objective selection criteria needs to be broad enough to enable them to participate. A segmented rather than one-size-fits-all criteria may be more appropriate.

The success of the IGF will be determined by its ability to attract the most impactful projects. The structure of the funding provided is perhaps the single most influential factor in the types of applications IGF will receive.

A matched funding approach appears on the surface to deliver value for money as it pools government spend with other funding. Value for money should be measured by the transformative change occurring in industries, however, rather than degree of financial leverage achieved.

Matched funding is a very traditional funding approach used by many programs, perhaps based on the belief that the best projects will be able to attract external partners, collaborators and private investment, and business owners will be more committed to delivering agreed outcomes. It is not always the case and important projects are frequently thwarted by this funding mechanism.

For example, a small and promising technology startup that lacks industry connections or the resources to attract external partners will not qualify despite having groundbreaking technology with the potential to revolutionise the sector. Potential customers may not see the value of investing in a high risk technology until they see it demonstrated, which without funding is not possible. At times innovators settle for less ambitious goals in fear of being unable to find suitable matching partners, discouraging them from pursuing more impactful projects.

There are many other examples of where the mechanism is misguided.

Other funding mechanisms available to the IGF include, in no particular order, equity, concessional and commercial loans, competitive and rolling grants, small bet grants, tax incentives and perhaps the most practical, payment by results and follow on funding.

The blend of PbR and follow-on funding provides applicants with upfront and end-result payments that help to overcome the major cash requirement barrier to commercialisation, and encourage the achievement of results.

A good starting place is 60% upfront for commercialisation related expenses, and 40% “follow-on” funding once the result is achieved. The percentages will need to be adapted depending on the capital intensity of the project.

The benefit of such a structure is that it gives the company flexibility to perform the upfront commercialisation work effectively, while also giving IGF leverage to avoid frivolous spending, or additional investment in a product or company that is unlikely to succeed.

The TRL approach, while valuable for assessing technological maturity, might not fully capture the broader ecosystem needed for successful industry transformation.

To achieve meaningful industry transformation and economic growth, funding could be allocated to incentivise pilot customers, supply chain companies, and local capital providers to participate. Their involvement will increase the likelihood of effective market adoption and the integration of new technologies into value chains, enable access to funding for scaling innovative ventures, and drive holistic industry transformation.

TRLs will not be relevant for ‘transform, grow and scale business operations’ funding applications of this nature.

Industry transformation takes more than just funding great science.

It's essential to consider the impact projects can have on industry transformation which will include assessment of factors in addition to the conventional investor mindset criteria, across the the four quadrants required for commercialisation success:

Customer Adoption: Evaluate the willingness of customers to embrace the new technology including the complexity of integration, fit with existing operations and financial incentive to embrace a higher-risk innovation opportunity.

Supply Chain Participation: Analyse the involvement and support required to build or integrate into the supply chain. Projects that foster collaboration and engagement in critical supply chain elements are more likely to achieve industry-wide impact.

Access to Capital: Consider the project's ability to attract local capital investment. Assess if the financial support required is readily available from local investors who understand and align with the project's vision, and if not what it will take to upskill investors to a point where they can embrace it.

By considering these factors across the four quadrants, in addition to investor mindset criteria, the selection process can identify projects that have a higher likelihood of success and a broader potential for transforming industries, creating economic value, and driving overall growth.

If the need for funding is due to a structural market failure it is worth capturing in the application. If it is based on the individual company’s need for funding the response generally reads as a weakness of the applicant, and comes across in a negative way, which is rarely helpful.

It is not recommended that the IGF rely exclusively on written applications to assess candidates. The application provides insight on the clarity of thought and clear communication style, but other factors need to be considered to reduce decision making risk. The job of the selection panel is not to assess the application - it is to assess the opportunity. Many times the potential of an opportunity hasn't come through in an application, and equally, the real life reality of a submission falls short of its shiny description in the application.

The next most important step in the selection process should be an interview of shortlisted candidates. The purpose of the interview is to assess the team’s unique insight on the market opportunity and grit or commitment to the problem they are trying to solve.

The panel need to be able to ask broad-based, follow-up questions to ensure they deeply understand the market opportunity. The type of questions asked by the panel can signal to the companies the areas where their application hasn’t provided enough detail, or potentially areas that the panel may have concerns. The questions and their answers will be clarifying for the business and the panellists alike.

The process doesn’t need to be a lengthy affair. It is possible to gain considerable insight from short 15-minute structured interviews. It may add time to the decision-making process, however it will dramatically increase the quality of the decision-making.

Some grant or investment processes ask companies to produce a short video. We don’t recommend that. Videos are time-consuming to produce, even with a smartphone, and don’t provide much additional insight.

Industry partner organisations play an important role in facilitating connections and knowledge sharing between the companies and organisations. Every new idea is a raw concept, or rough diamond. A lot of work is required to develop an idea into a business proposition that is worth taking on - work that could be made easier with access to the organisations and people that can provide answers, many of which should be members of an industry partner ecosystem.

For example, a company considering bringing a product to market needs to ensure the product design is the right fit for customers, distribution channels can be found that will reach them, raw materials can be sourced easily, manufacturing can be designed to be reliable and low cost and standards and regulations can be met. There are so many interrelated elements that need to fall into place, not just in any way, but in a way that generates profits. This is a complex and high order requirement.

Communities lower the transaction costs of gaining know-how, and increase the probability that companies, workers, suppliers and customers that could be working together, find each other.

Building an intelligence bank that can connect companies to individuals that can help them navigate this process will increase the likelihood of success and speed to market. Industry organisations have the advantage that they can work across governments, and build connections across supply chains and potentially into research institutions.

Innovation is a team sport. The process of evolving a raw concept into an idea worth pursuing - and then a successful business - is complex. The IGF and its industry partners could actively support companies through the process in a number of ways, for example:

- Building an ecosystem of organisations and experts that companies can draw knowledge, partner or supplier relationships from
- Providing opportunities for ecosystem members to network and reach out to each other through events and a digital community hub
- Improving each company’s understanding of existing or evolving technologies
- Meeting with individual companies to work out what type of assistance will help them progress and then introducing them to relevant people in the ecosystem
- Increasing awareness of regulatory requirements that need to be considered as well as links to key organisations
- Offering commercialisation skills workshops and ongoing support, and
- Sharing case studies of other initiatives that provide details of the approach taken in order to help build industry capability and enthusiasm for action.

Absolutely, yes. The IGF has the opportunity to utilise more than just the commonly used levers to generate economic value. Including committee members with the following skill sets will assist to broaden out the IGF offer and impact.

- Commercialisation policy strategist to assess the effectiveness of the levers being used to drive results and recommend adjustments to improve outcomes

- Ecosystem builder to help drive better engagement, idea generation and higher quality of applications

- Expert in collaboration models and incentive structures that can foster meaningful relationships across value chains and increase the likelihood of industry transformation

- Talent and future workforce planner that can foresee needs to enable more effective market capability development

There is a mismatch between the grant-making timeline and the urgency of commercialisation activities. It can take over 9 months from when a grant round closes until grants are publicly awarded. Such a timeline does not fit with the pace and adaptability required to successfully commercialise a new product. People move. Markets move. Opportunities reset.

Given the timing mismatch, many great companies and products simply do not apply, even if they have an interesting opportunity to pursue. They either shelve the opportunity, or go it alone and lose out on the benefit of govt support.

Alternatively, companies do apply, but put forward opportunities that are less commercially urgent, as they factor in the wait and punt on the application process. The outcome is lower quality opportunities to consider, which jeopardises value for money and the overall impact of the strategy.

The success of the Industry Growth Program can be measured through a combination of quantitative and qualitative metrics, taking into account both its impact on the economy as a whole and the benefits it brings to participating businesses. Some key measures for assessing success include:

Economic Growth: Evaluate the program's contribution to overall economic growth (in the longer term), including increases in GDP, job creation, and improvements in productivity across industries supported by the program.

Industry Transformation: Measure the extent to which the program has facilitated industry transformation by supporting innovative technologies and business models that drive significant changes in traditional sectors.

Technology Adoption: Assess the rate of technology adoption and commercialization of innovative products and services resulting from the program's support, reflecting its ability to bring cutting-edge technologies to market.

Market Impact: Analyse the market impact of supported businesses, such as their market share, revenue growth, and expansion into new markets.

Collaboration and Partnerships: Measure the level of collaboration and partnerships fostered between industry participants, universities, research institutions, and other stakeholders, as this collaboration can lead to more robust and sustainable innovation ecosystems.

Return on Investment (ROI): Evaluate the ROI of the program by comparing the total investment made by the government to the economic benefits and value generated for businesses and the broader economy.

Employment and Skills Development: Assess the program's contribution to job creation and the development of new skills in emerging industries.

Sustainability and Social Impact: Consider the program's impact on environmental sustainability and social benefits, such as supporting initiatives that promote sustainable practices and address social challenges.

Long-Term Viability: Examine the long-term viability of businesses supported by the program, including their ability to continue thriving beyond the initial funding period.

Participant Feedback: Gather feedback from participating businesses on the program's effectiveness, relevance, and impact on their growth and success.

Successes across grant recipients need to be shared. As do approaches taken, mistakes made and challenges faced. The IGF and its industry partners will be in a unique position to have access and be able to share insights that help to build the capability of each industry sector to transform and embrace new technologies.

Effective ways for generating value include:

Selective Networking: Providing opportunities for ecosystem members to meet past applicants in person and online via virtual community platforms. It’s critical that ecosystem members are able to reach out to each other directly.

Thematic Events: Running events around relevant themes that bring people together, providing significant time for networking, potentially releasing the names of people that will be attending prior.

Newsletters: Sharing learnings from the communities in a regular newsletter format. Stories that share the challenges being faced, how others have found ways around them, big wins as well as failures are all equally important for building a sharing and ‘we’re in this together’ culture.

Guest Speeches: Engaging guest speakers including past applicants that can talk through the process of bringing products to market and can share valuable insights.

Curated References: Building an easily searchable library of reference materials of published articles, case studies, recorded events and valuable material curated from other sites that members can tap into as needed.

By adopting a strategic approach that identifies and targets high potential industry segments across the four interrelated quadrants - technological innovation, customer adoption, supply chain participation, and local capital investment - the IGF can enhance its impact significantly compared to funding ad-hoc and unrelated projects.

Rather than duplicating efforts, the program can collaborate with existing university, industry, and government initiatives in these areas to build valuable partnerships and leverage their expertise.

This collaborative approach allows the IGF to concentrate its funding on filling the critical 'gaps' in the ecosystem, ensuring better value for money and maximising the potential for meaningful industry transformation.