Growing Technology Based SMEs - Department of Innovation ...

PRIME MINISTER’S SCIENCE,
ENGINEERING AND INNOVATION COUNCIL
n
FINAL REPORT m MARCH 2005
WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs

n
FINAL REPORT
m Part A — Phase 2: pages 1–62
m Part B — Phase 1: pages 63–103
ISBN - 0 642 72390 7
This paper was prepared by an independent working group
for PMSEIC. Its views are those of the group, not
necessarily of the Australian Government.

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PHASE 2 REPORT:
GROWING EXPORT CAPABILITY – MARCH 2005

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CONTENTS
1 Executive Summary and Recommendations 3
2 Introduction 5
3 Exports are key drivers of economic growth 6
4 Backing technology-based SMEs to export 7
4.1 Tech Team 7
a. Export competent teams who can open markets and
assist companies to close deals 8
b. Foster relationships between SMEs, larger firms and
Multinational Enterprises 8
c. One, coordinated strategy 9
4.2 Improve the reach and focus of Austrade’s national and
international representation 10
L
4.3 Government and industry leadership to remove constraints on
expansion stage businesses 10
a. Back Australian products in the domestic market 10
b. Maximise the impact of Government support programs 11
c. Modify EMDG to better support technology-based SMEs 11
5 Further evidence affirming Phase 1 Recommendations 11
Appendices
A Terms of Reference 12
B Working group members 13
C List of submissions and contacts 14
D Growing Export Capability: SME Case Studies 15
E Growing Export Capability: MNE Case Studies 36
F Export Market Development Grants program –
suggested approaches 60
G Glossary of terms 61
H Index of References 62
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PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005

1 EXECUTIVE SUMMARY
1.1 It is imperative that we back our technology-based
Small to Medium Enterprises (SMEs) and grow them
into sustainable businesses linked to global markets so
that they contribute to an increase in Australia’s GDP
per capita and wealth creation potential in the
knowledge economy.
1.2 The Government makes a substantial investment in
early stage businesses, through financial and other
assistance for innovation, early commercialisation of
products and export promotion and should capitalise
on its investment by backing the transition of these
businesses through the expansion stage 1 and
beyond. There is no critical mass of sustainable SME
exporters 2 and too few SMEs become Multinational
Enterprises (MNEs).
1.3 Australian SMEs, aided by various Government
programs produce leading–edge innovation. The
working group acknowledges that in a globalised
environment the high levels of investment required to
commercialise some technologies, for example, biopharmaceuticals,
means that a proportion of SMEs
must trade a whole or part of their IP to gain access
to capital. Yet it is industry’s view that many SMEs
fail to capitalise their innovation and that too often
their idea is lost to well-resourced off-shore
companies, resulting in loss of income, jobs and
economic growth.
1.4 Technology-based SMEs 3 produce high-value,
innovative products and services which, owing to the
small size of Australia’s domestic market, must be
exported. Exporters add value to the domestic
economy — they pay better wages and provide
more training for their employees and drive the
development of high-value, high-skill products which
return export income for Australia. 4 Exports are
critical to growing SMEs into successful, medium to
large enterprises and MNEs; and technology-based
exports have a high potential to accelerate company
1.5 The PMSEIC Growing Technology-based SMEs
Working Group’s recommendations 6 focus on
promoting sustainable and expanding export
capability for Australia’s technology-based companies
which comprise around 13 per cent of Australia’s
SMEs. 7 The recommendations will assist the
Government to achieve a higher return on its
considerable investment in R&D and early stage
commercialisation.
1.6 The Working Group proposes changes that will:
m back technology-based SMEs to develop the
agility and sustainability to deliver high-value
exports;
m maximise the benefits of all export-related effort
whether government or commercially-led to
enable growth in the number, sustainability and
value-add of SMEs and to their transition to larger
firms or MNEs; and
m resource the pipeline of skill attainment required
by individuals and their businesses to drive the
business capability to deliver high value-adding,
sustainable SME technology-based exports.
1.7 RECOMMENDATION 1
Implement a Tech Team concept for technology-based
SMEs through cooperation between key representatives
from the States, Territories and Federal government,
relevant industry representative and commercial sectors,
to establish:
m a network comprising all levels of government and
private sector partners;
m a shared vision for growing technology-based SMEs
through strengthening the links between exporting
and innovation;
m initiatives that align policies and programs to enable
the delivery of the vision; and
m the skills needed now and into the future to drive the
achievement of the vision.
growth. 5
1 Expansion-stage refers to product in the market and significant revenue growth - Venture Capital 2003-04,Cat.No. 5678.0, Australian Bureau of Statistics (ABS)
2 Sensis data indicates that overall, 16 per cent of SMEs reported that they had exported in the past year, with 4.4 per cent of all SMEs being high/medium high
technology exporters -Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources. Sensis Business Index, May 2004
3 A technology-based company is defined as one which acquires or creates new technology that it integrates to develop new products, processes and services as
the basis of its business competitiveness – see Glossary of Terms at Appendix G
4 Based on data in Australian Bureau of Statistics (ABS), Longitudinal Survey 1997/98. ABS Cat No. 8154.0
5 This is evidenced by the growth trajectories of a number of SMEs and MNEs based on technology export contracts. See case studies (Appendices D and E)
6 List of members and Terms of Reference are at Appendices A and B
7 Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources. Sensis Business Index, May 2004
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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Tech Team will develop:
i) export competent teams who can open markets and
progress opportunities to the point where companies
can close deals;
ii) foster partnerships between SMEs, larger firms and
MNEs to pursue international opportunities; and
iii) one, coordinated strategy focussed on the needs of
technology-based SMEs involving:
m enhanced trade and industry hubs;
m a web-based national entry point providing access to
all business growth and development-related
programs; and
m a Government-sponsored portal to enable companies
to seek partners for new export ventures.
1.8 RECOMMENDATION 2
Improve the reach and focus of Austrade’s 8 national and
international representation for technology-based SMEs
by adjusting the Austrade adviser skill profile and
employment arrangements to include:
m a COMET 9 -style, success-based 10 remuneration scheme;
m a requirement for demonstrable ability, in progressing
opportunities to the point where companies can close
deals in relevant technology-based industries; skills
market development and sales; and capacity to spot
potential buyers; and
1.9 RECOMMENDATION 3
Government and industry leadership to support later —
and expansion-stage business by:
m backing Australian product in the domestic market:
Government to maximise its investment in Australian
innovation by ensuring that Australia’s technologybased
SMEs have adequate opportunity to participate
in Government business;
m maximising the impact of Government support
programs: allowing those companies that have
already met eligibility criteria for COMET and
Commercial Ready, 11 to apply for the Export Market
Development Grant Program (EMDG) 12 without the
need to retest their eligibility for the same criteria, in
particular, those relating to the demonstration of
business skills; and harmonising the turnover limit for
access to EMDG ($30 million) with the turnover limit
for access to Commercial Ready ($50 million); and
m modifying EMDG to better support technology-based
SMEs in the areas of:
- Timeliness and quantum of support,
- Intellectual property management,
- Building relationships with other companies,
- Engagement of advisers/mentors,
-Greater interaction with other Government
programs,
-Technology showcasing.
m all front-line Austrade advisers to undertake technology
industry secondments on a regular basis to ensure the
currency of their skills and commercial acumen.
8 Austrade – Australian Trade Commission
9 COMET is a grants program administered by AusIndustry which focuses on early stage commercialisation. See www.ausindustry.gov.au for more information
10 A business owner has a ‘success fee agreement’ with a COMET adviser to assist with commercialisation, including raising capital. Under the extended COMET
program (in effect since October 2004), the success fee is payable at a flat two per cent and capped at $100,000, and applies to capital raised by either equity
or borrowing
11 Commercial Ready is a grants program administered by AusIndustry which focuses on R&D, proof of concept activities and/or early stage commercialisation.
See www.ausindustry.gov.au
12 The Export Market Development Program is an entitlement-based grants program administered by Austrade which provides business with export assistance.
See www.austrade.gov.au
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2 INTRODUCTION
2.1 The challenge addressed by this working group is to
sustain and grow Australia’s promising technologybased
SMEs, and to see them develop into larger,
successful Australian exporting businesses. By their
nature technology-based businesses must link with
global markets to be competitive. The advantages
for Australia multiply when these companies grow
through exports rather than move offshore and ‘seed
other economies’.
2.2 From 2005, the liberalisation of trade through the
Australia United States Free Trade Agreement
(AUSFTA), bilateral free-trade agreements with
Thailand and Singapore and multilateral agreements
will boost opportunities for Australian companies to
access overseas markets.
2.3 This working group examined the support
mechanisms and growth factors for Australian
technology-based SMEs and identified that growing
SMEs is about enabling Australian companies to
develop export markets for products and services:
it’s about business not science. Four critical factors
have been identified which have implications for
Government and the commercial sector in influencing
the growth of technology-based SMEs:
i) the ability to export;
ii)
a focus on developing innovative solutions to
customer problems;
iii) having access to sufficient domestic expansion
capital; and
iv) possessing experienced and skilled management.
2.4 The working group’s Phase 1 Report (tabled June
2004 PMSEIC meeting), sets out the major findings
on these growth factors. 13 PMSEIC agreed that the
working group continue its work with a focus on the
export capability of technology-based SMEs. This
final report is the outcome of that additional work.
13 The Prime Minister’s Science, Engineering and Innovation Council Working Group: Growing Technology- based SMEs: Phase 1 Report, June 2004 is Part B of this
publication
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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2.5 The working group consulted with government,
business and industry in preparing the final report.
A list of submissions and contacts is at Appendix C.
Case studies on technology-based SMEs and MNEs
have been developed as part of this study based on
interviews and discussions with leading Australian
companies. 14 (Appendices D and E).
2.6 The working group found further evidence affirming
the recommendations from the Phase 1 report, in
particular, those relating to availability of domestic
expansion capital and development of appropriate
business skills by SMEs.
2.7 The working group has consulted with the
Department of Foreign Affairs and Trade and
Treasury with respect to the impacts of current
policy and the opportunities for change. As a result
of the advice, and further consideration of the
issues, Recommendation 1, Phase 1 report is
supplanted by the recommendations in Phase 2. With
regard to further investigation of tax issues (sub-item
Recommendation 7), the working group decided that
this would not be a focus of the final study and that it
would not pursue Recommendation 1, Phase 1
Report, further.
3 EXPORTS ARE A KEY
DRIVER OF ECONOMIC
GROWTH
3.1 Exports are a key driver of economic growth and
wealth creation – they provide jobs, the capacity to
trade for goods and services Australia needs and the
capital to fund further innovation and growth.
“At the macro level, increasing exports will
generate important spillovers, and over time will
contribute to improving Australia’s … export
revenue, employment productivity and living
standards.” 15
3.2 Australian companies, 99.8 per cent of which are
SMEs, need to export to provide the critical mass
and expertise necessary for them to be competitive
and to grow to be MNEs. The Australian Government
has set a target to double the number of exporters
by 2006-07, and has identified SMEs as the priority
target group 16 . Meeting this target could increase
export revenue over 5 years by $36 billion according
to Austrade estimates methodology. 17
3.3 Encouraging and supporting technology-based firms
to export represents a good return on the investment
as technology-based SMEs are:
m more likely to persist as exporters, compared
with lower technology exporters; 18
m twice as likely to actively seek significant
expansion, compared with lower technology
firms; 19 and
m able to achieve a higher rate of intention to
export immediately or within the next 12 months
than other SMEs. 20
3.4 In addition to driving export opportunities in new
leading-edge technologies such as biotechnology,
information technology and nanotechnology,
Australian technology companies add value to
existing industries. For example, Pacifica, a car
14 The report and case studies will be available on the DEST website following presentation of the report to PMSEIC at
http://www.dest.gov.au/science/pmseic/meetings/13thmeeting.htm
15 Knowing and Growing the Exporter Community: A report from the Australian Trade Commission, (Austrade), 2002. ISBN 0-9580741-0-0, page 11
16 The Hon. Mark Vaile MP, media release, Historic Agreement to Boost Exports, 4 April 2002
17 Knowing and Growing the Exporter Community: A report from the Australian Trade Commission, (Austrade), 2002. ISBN 0-9580741-0-0, page 10, updated with 30
June 2004 export revenue figure of $143.4 billion from Table 5 ABS Cat. No. 5204.0 Australian System Of National Accounts
18 Based on data in Australian Bureau of Statistics (ABS), Longitudinal Survey 1997/98. ABS Cat No. 8154.0
19 Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources. Sensis Business Index, May 2004, Table 2. The full report will be
available on the DEST website following presentation of the report to PMSEIC at http://www.dest.gov.au/science/pmseic/meetings/13thmeeting.htm
20 ibid
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component manufacturer – a traditional
manufacturing industry, has adopted a cluster
strategy to encourage the development of small,
technology companies to provide Pacifica with their
leading-edge technology. 21
3.5 Total Australian export values grew at an average
annual rate of 5.6 per cent over the decade to 2003-
04. However, export values peaked in 2000-01 and
fell by 3.2 per cent in 2002-03 and by a further 3.3
per cent in 2003-04. The recent falls reflected a
range of factors including drought, SARS and
exchange rate movements.
3.6 The value of manufactured goods exports, which
include the high technology products that are the
subject of this report, grew by an average annual
rate of 6.3 per cent over the decade to 2003–04
but reached a peak in 2000–01, fell by just 0.1 per
cent in 2001–02 and 2002–03 and fell by a further
3.9 per cent in 2003–04. Total export volumes fell
0.6 per cent in 2002–03 but recovered in 2003–04,
increasing by 1.6 per cent. The Treasury Mid-Year
Economic and Fiscal Outlook 2004–05 forecasts
further growth in export volumes of 4 per cent in
2004–05.
4BACKING TECHNOLOGY-
BASED SMES TO EXPORT
4.0 Australia needs to invest in a fully coordinated and
collaborative effort between all stakeholders relevant
to technology-based companies to encourage more
SMEs into sustainable exporting and growth into larger
firms or MNEs. 22 The working group proposes creating
a Tech Team which will bring the right people together
at the right time to open markets and progress
opportunities to the point where companies can close
deals. Further, the working group proposes that the
right people to drive this initiative for technology-based
SMEs could be Austrade advisers remunerated on a
success-based, COMET-style arrangement.
4.1 Tech Team
4.1.1 The working group recommends bringing together
all relevant government and commercial sector
providers of export services to Australian
technology-based SMEs, including industry
representatives, 23 to form Tech Team.
4.1.2 The first task for Tech Team would be to develop
one, shared strategy to align all export-related
efforts to the vision for technology-based SMEs.
Tech Team would:
m be a network comprising all levels of
government and private sector partners;
m create a shared vision for growing technologybased
SMEs through exporting, embracing the
essential relationship with innovation;
m identify and integrate, and where appropriate,
retain, cease or re-frame initiatives or activities
that will enable delivery of the vision; and
m identify the skills needed now and into the
future to drive the achievement of the vision.
4.1.3 This proposal draws upon the philosophy of Team
Canada 24 embraced in a single point of access to
export information, market intelligence and financial
assistance, and advice and support from federal,
provincial and territorial governments, and the
private sector.
21 From an interview with John McKenzie, managing director and Alan Stevens, vice-president of Pacifica, and David Miles, Chairman of the working group on Growing
Technology-Based SMEs
22 According to Mr Ian Gillespie, General Manager, Metal Storm, there are advantages for Australia’s SMEs when they can establish business relationships and learn
from others’ experience. Metal Storm has learnt from other firms about how they have done things, especially in the US, where there are rules requiring majority
US ownership. “We had to find ways to extract the value and bring it back to Australia.”
23 Including groups such as the Industry Capability Network which assists SMEs build links with MNEs in relation to major projects
24 Team Canada Inc Annual Report 2002, www.exportsource.ca
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4.1.4 The working group’s proposal is closely in line with
Defence policies and initiatives to promote the
development and sustainability of Australian
industrial capabilities. 25 Defence exports support
Australian technology through:
m the Defence Technology Investment Program
(encompassing the Capability Technology
Demonstration program) to promote industry
investment in research, development and
demonstration of technologies critical to
Defence self-reliance;
m a new Defence Export Facilitation service to
improve export facilitation opportunities for
small business via a coordinated whole of
Government approach to defence exports; and
m continued marketing under the Team Australia
banner.
4.1.5 The Tech Team concept addresses the major
barriers for achieving and sustaining growth of
technology-based SMEs across all industries and
better coordinates the critical success factors for
that growth, including:
4.1.A Export competent teams who can open
markets and assist companies to close
deals
A.1 Consultations with technology-based SMEs indicated
that they are generally appreciative of Austrade’s
efforts, especially in terms of providing contacts in
overseas markets. However, many technology-based
SME exporters believe there is a lack of
understanding of high-technology applications and
the defence industry within Austrade. While overall he
was positive about the government assistance
provided by Austrade, Mr Gillespie of Metal Storm
noted that “there is a lack of understanding of our
industry, both the technology and the markets.
Austrade knows about dairy and wool, but doesn’t
have the specialised knowledge about our industry
and markets.” 26
A.2 A common theme was that the effectiveness of
assistance depended very much on the specific
Austrade officer. Mr David Sekel, CEO of Portland
Orthopaedics, commented that Austrade assistance
has been extremely helpful for Portland, as it assisted
in getting a contact in Japan. However, he also said:
“The extent to which Austrade is helpful depends on
the consultant.” 27
Dr Gray, Executive Chairman Sirtex Medical,
commented, “In the end their (Austrade’s) service is
too generic, it’s not focussed enough.”
A.3 Other issues raised by SMEs included the degree of
red tape in accessing services and programs; the
need for access to the right knowledge such as
financial, legal, cultural and consular services, and
the need for better promotion of the services
provided in Australia for SMEs.
A.4 The challenge for Austrade is to create an
environment where the right people with the right
skills will want to work in Tech Team: flexible, resultsfocussed
people who can form speciality teams
around technology-based SMEs, open and access
markets and progress opportunities to the point
where companies can close deals.
A.5 Access to experts in Tech Team will expedite the
development of business acumen in technologybased
SMEs, mitigate a level of risk inherent in SMEs
establishing export capability and increase the
number of business successes.
4.1.B Foster partnerships between SMEs, larger
firms and MNEs
B.1 Tech Team would be a first contact point for
companies seeking partnerships and sound advice
about domestic and global business relationships.
The worth of mutually beneficial relationships between
firms is acknowledged by some SMEs. However,
others are sceptical that big firms would want to take
them over, or would not deal fairly, especially on
issues of intellectual property. Australian businesses
need to develop strategic partnerships around
common interests 28 to fully capitalise on their
innovative leading-edge technologies. 29
25 From a submission from the Defence Science and Technology Organisation (DSTO) in the Department of Defence
26 See Appendix D, Metal Storm, paragraph 8
27 See Appendix D, Portland Orthopaedics, paragraph 9
28 Several SMEs reported on the value of partnerships to advance their business and exporting objectives for example, Managing Director of GPS Online, Mr Robert
Angel says “A collaboration with ADI military has enabled GPS to enter the Middle East market.”
29 Such as Tenix which runs a Take to Market Investment Fund to drive commercialisation of Australian technology by investing in companies, including SMEs,
concepts and initiatives, individuals and products where they can see some potential opportunities. Appendix E, Tenix, paragraph 2
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B.2 In discussions with David Miles 30 several MNEs noted
the value of business relationships including formal
cluster models in which Pacifica 31 is investing and
collaborations such as those IBM 32 deploys. Angus
Robinson of the AEEMA 33 noted that the low number
of MNEs in Australia makes it difficult to cluster
SMEs around companies with truly extensive global
supply chain linkages. Chris Smallbone of the WTIA 34
promotes the SMART TechNet Project which brings
industry and all levels of government together to
supply the technologies and technology receptors to
create viable industry sectors and overcome
constraints.
Mr Du Plessis says, “GeoSim has established
strategic alliances with four, specialist, microcompanies
in the aviation field, with the intention of
establishing an aviation cluster to support and
stimulate growth in the simulation environment.” 35
Robert Angel from GPS Online suggests that the
government pay facilitators, for up to six months, to
create and manage networks for approved
companies. “Getting the right partner is imperative to
exporting, as one of the major challenges is having
the capability to support the technology in remote
locations.” 36
4.1.C One, coordinated strategy
C.1 The strategy would encompass a number of
initiatives designed to maximise the value of
information services for the current clients and
create new audiences. These initiatives would
include:
i) enhancing the role of the trade and industry
hubs, including the eight new hubs announced in
the Coalition’s Election commitment 37 , by
incorporating Tech Team. The hub staff would be
at the frontline in integrating the programs by
promoting understanding of the relationship
between all export programs. They would explain
the journey of development required for people
and their businesses to achieve sustainability by
accessing programs at key growth points;
ii) program owners creating seamless transition for
businesses moving along the pipeline by
managing the boundaries between their
programs – ‘pass the baton’;
iii) building a web-based national entry point
providing access to all business growth and
development-related programs and advice from
State and Federal agencies focussed on the
information needs of a business seeking to
become a sustainable exporter.
The communication strategy should utilise the
internet to market information on
opportunities for SMEs to collaborate,
become internationally competitive and
display their capability, as according to the
Sensis Business Index, February 2004,
internet information is the most highly desired
by SMEs. 38
iv) a government-sponsored portal, under the
auspices of Tech Team, on which companies
advertise export business ventures for which
partners or collaborators are required. A suitably
skilled broker driving the development of
opportunities by mining the list, identifying
potential partners and facilitating partnershipcreation
would stimulate the growth of existing
SMEs. The working group suggest interest in
extending the functionality of the privately funded
InnovationXchange 39 website be considered
before committing to a new portal.
30 Mr David Miles, Chairman of the PMSEIC Working Group on Growing Technology-Based SMEs
31 Pacifica Group Limited makes car components. From a file note by David Miles, Chairman of the working group, of his conversation with John Mackenzie,
managing director, and Alan Stevens, vice-president
32 IBM Australia Limited – submission dated 28 September 2004
33 AEEMA — Australian Electrical and Electronic Manufacturers Association. From a submission to the working group confirming a discussion with Mr David Miles,
Chairman of the working group, dated 22 October 2004
34 WTIA – Welding Technology Institute of Australia. From a submission to the working group, The Oz Weld Technology Support Centres Network: A Unique Model for
Technology Innovation by Industry by Chris Smallbone
35 Appendix D, Geosim Technologies Pty Ltd, paragraph 7
36 Appendix D, GPS Online Limited, paragraph 4
37 Trade – Creating Jobs for Australians, Coalition election commitment issued 1 October 2004
38 Sensis Special report on How SMEs Access Information April 2004t www.sensis.com.au
39 InnovationXchange offers comparable functionality and demonstrates the merit of such a forum in creating opportunities to include exports –
www.innovationXchange.com.au
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4.2 Improve the reach and focus of
Austrade’s national and
international representation
for technology-based SMEs
4.2.1 The working group believes technology-based
advisers for export development agencies like
Austrade should be incentivised in the same
manner as COMET advisers – however, in this
proposal, the company and the adviser enter into a
contract whereby the company pays a success fee
to the adviser based on a certain volume of sales. 40
A success-based remuneration scheme aligns the
interests of the company and the adviser with the
vision of making and sustaining export sales to
drive the growth of SMEs.
4.2.2 Such advisers need to be recruited in Australia, and
in key overseas markets with a strong demand for
technology-based products to ensure they have the
skills to advance the export objectives of
technology-based SMEs. Further, all Austrade front
line advisers should be encouraged to engage in
regular technology industry secondments (in
Australia or in another country) to ensure the
currency of their skills and commercial acumen with
respect to assisting companies to progress
opportunities to the point where companies can
close deals.
4.2.3 An incentive-based scheme the Australian
Government would see heightened international
activity, leading to increased export earnings.
4.3 Government and industry
leadership to remove
constraints on expansion stage
businesses
4.3.1 The working group believes government and
industry have a role to lead the development of
initiatives in some specific areas and to remove
constraints that are hindering the growth of
technology-based SMEs, namely:
a. back Australian product in the domestic
market;
b. maximise the impact of Government support
programs; and
c. modify EMDG to better support technologybased
SMEs.
a. Back Australian product in the domestic market
SMEs comment that Australia does not support its own
companies by purchasing Australian made products but
prefers to buy foreign made goods. The impacts of this
include:
m Australian companies can’t get cashflow from initial
sales; 41
m buyers often experience unsuccessful after sales
service arrangements with offshore companies;
m overseas customers question the credibility of the
products because they are not bought in Australia
where the products should be least disadvantaged.
Managing Director of GPS Online Robert Angel
says, “We need exports to find a market for our
cutting edge technology. But we need some
sales here in Australia to create a reference base
for our overseas clients to look at.” 42
Dr Keith Williams of Proteome Systems
comments, “Government needs to encourage
Australians to purchase locally as Australian sales
are useful not only because it is easier to deal
locally, but it helps when dealing with the Asian
market as they have the attitude that if you can’t
sell at home then why should you expect to sell
anywhere else?” 43
40 Under COMET, the company pays a success fee to the adviser based on the value of equity raised (capped at 2 per cent or $100,000)
41 Mincom Chief Executive Officer, Alan McElrea says that Mincom, an Australian MNE, would not have made the dramatic leaps forward in its development were it
not for strategic ‘backers’ – be they customers, partners or investors. One of the best current examples of this is Mincom’s partnership with the Australian
Defence Force (ADF). Appendix E, Mincom Ltd
42 Appendix D, GPS Online Limited, paragraph 3
43 Appendix D, Proteome Systems Limited, paragraph 8
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The Commonwealth Procurement Guidelines state: “The
Government is committed to FMA agencies sourcing at
least 10 per cent of their purchases by value from
SMEs.” 44 The industry view is that the greater proportion
of this is in non-technology-based consumables and is
insufficient to redress the disadvantage of current
purchasing patterns across technology-based industries.
b. Maximise the impact of Government support
programs
Industry believes that individual service delivery models
for various government programs could achieve greater
seamlessness if better aligned and with reduced
duplication 45 . The working group believes seamlessness
would be advanced by allowing those who have
previously met eligibility criteria for COMET and
Commercial Ready, to apply for the Export Market
Development Grants (EMDG) program without the need
to retest their eligibility for the same criteria, in
particular, those relating to the demonstration of
business skills. Further, the working group recommends
harmonisation of the turnover limit for access to EMDG
($30 million) with the turnover limit for access to
Commercial Ready ($50 million).
c. Modify EMDG to better support
technology-based SMEs
The EMDG program is the major export assistance
program for Australian companies and therefore was
under consideration by this working group. The working
group was invited by the Austrade Review Team to
provide input to the review of EMDG. In doing so, the
working group drew on personal experiences and wider
industry views obtained as part of its consultation with
SMEs. The working group considers that EMDG could
better support technology-based SMEs if changes were
made in the areas of:
i. Timeliness and quantum of support,
ii. Intellectual property management,
iii. Building relationships with other companies,
iv. Engagement of advisers/mentors,
v. Greater interaction with other Government programs,
vi. Technology showcasing.
These suggestions are expanded on in Appendix F.
5Further evidence affirming
Phase 1 Recommendations
5.1 Improve access to expansion capital
The Phase 1 Report identified the cause and effect
between lack of adequate expansion capital, the rate
of business failure and the rate at which Australian IP
is sold-offshore.
5.2 The Phase 2 Report affirms the findings of Phase 1
Report with respect to lack of expansion stage
venture capital and concludes that there is an
important role for Government, in collaboration with
industry and the investment community to encourage
greater venture capital participation. For example, for
the 3 years to June 2004, the average amounts
invested in expansion stage companies fell from
$4.15 million to $4.06 million. 46
5.3 A recent firm-based study by the Industry, Research
and Development Board 47 found that: “While
Australia’s domestic market is strong and growing, it
is too small to enable innovative firms to source
growth capital, increase sales and grow their
business.” It notes that, “capital for innovative R&D
and its commercialisation can be less costly and
more readily available overseas than it is in Australia.
This is especially the case for capital beyond the
A$10 million threshold.”
5.4 This perspective reflects views expressed by a number
of SMEs interviewed for Phase 2 regarding the
difficulties in accessing finance after early stage
development to achieve successful commercialisation.
Dr Keith Williams from Proteome Systems says,
“In Australia capital for scaling-up and sustaining
the company through the manufacturing and
commercialisation stages is a problem. The
assumption that supporting SMEs through the
R&D phase is sufficient to propel them into
successful commercialisation is wrong – in fact
commercialisation is more expensive and difficult
than R&D. Without a commercialised product
there will be no exports – companies need
support to commercialise and to prepare for
44 Commonwealth Procurement Guidelines, January 2005, Section 5.6
exporting.” 48 11
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45 Mr Gillespie of Metal Storm commented that government programs aren’t well promoted, Metal Storm only identified them by accident and the linkage between
programs is not clear. Appendix D, Metal Storm Limited, paragraph 8
46 ABS survey on venture capital, ABS Cat.No. 5678.0, in Venture Capital -04, November 2004. A portion of this is due to the record number of exits from
investments via trade sales, initial public offers and buyback
47 Industry, Research and Development Board: SMEs: Taking Innovation to the Global Market, a study of a small number (25) of selected participants in the R&D Start
and Biotechnology Innovation Fund programs, February 2005
48 Excerpt from discussion at Working Group meeting of 25 October 2004
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APPENDIX A
TERMS OF REFERENCE
FOR PHASE 2*
m Identify the key success factors that drive growth in
technology-based SMEs.
m Describe the impediments or hurdles to growth faced
by technology-based SMEs including accessing global
markets.
m Advise how Australia can best support the growth of
sustainable Australian technology-based SMEs.
m Develop case studies of technology-based SMEs
which are at different phases of growth to highlight
key issues. Case studies should be drawn from a
number of sectors such as mining, defence,
agriculture, energy, IT and biomedical technologies.
m Discuss the implications of these findings for
government, industry and other stakeholders.
*Note that Terms of Reference for Phase 2 were as for Phase 1. The
particular focus of Phase 2 was on the export capability of technologybased
SMEs.
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APPENDIX BPPENDIX A
WORKING GROUP MEMBERS
Mr David Miles
Chairman, PMSEIC Working Group;
Chairman, Industry Research & Development Board;
Chairman, National Innovation Council
Mr Gareth Dando
CEO, Uniseed
Mr David Gaul
President, CEA Technologies
Dr Katherine Woodthorpe
Director, People and Innovation Corporate Advisers Pty Ltd
Dr Keith Williams AM
CEO, Proteome Systems Limited
Mr Martin Adams
Chairman and CEO, Lochard Pty Ltd
Mr Peter Lewis
General Manager, CSIRO Business Development
Working Group Support
Department of Industry Tourism and Resources,
Innovation Taskforce
Ms Carolyn Jenkins, Manager
Ms Bianca Bortolin
Ms Anne Holmes
Mr Karl Rumba
Ms Denise Skea
Department of Education, Science and Training,
Office of the Chief Scientist
Ms Julie Walding, Manager
Mr Justin Withers
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APPENDIX C
LIST OF SUBMISSIONS
AND CONTACTS
The Chairman of the PMSEIC Working Group, Mr David
Miles, wrote to multinational enterprises and industry
associations providing an opportunity for engagement,
either through putting forward a submission, or a
discussion on any initiatives or views relevant to growing
SME export capability.
a) Submissions were received from:
Mr Angus Robinson
Executive Director
Australian Electrical and Electronic Manufacturers
Association (AEEMA)
Dr Allan Clark
CEO
Australian Industry Research Group (AIRG)
Mr Philip Bullock
Managing Director
IBM
c) Discussions with company executives or their
officers were followed by the development of Case
Studies, Appendix E, for the following MNEs:
Austal Ships; CEA Technologies; Cochlear Limited;
Computershare Ltd; Cowan Manufacturing Pty Ltd; IDT
Australia Ltd; Lochard Pty Ltd; Mincom Limited; ResMed;
Softlaw Corporation Ltd; Tenix Group.
d) The Chairman of the PMSEIC Working Group,
Mr David Miles, wrote to technology-based SMEs
to invite them to participate in a survey on growing
SME export capability.
Eleven SMEs participated and Case Studies were
developed from survey responses for the following SMEs
(Appendix D):
Codarra Advanced Systems; Electric Optic Systems
Holdings Limited; Geosim Technologies Pty Ltd; GPS
Online Limited; Intellection Pty Ltd; Metal Storm Limited;
Portland Orthopaedics; Proteome Systems Limited;
Seeing Machines; Sirtex Medical.
Mr Chris Smallbone
Executive Director
Welding Technology Institute of Australia (WTIA)
b) Discussions were conducted by David Miles or
members of the ITR team, over the phone and
through interviews, with several industry/business
representatives including:
Mr Rob Durie
Executive Director
Australian Information Industry Association
Mr John MacKenzie, Managing Director and
Mr Alan Stevens, Vice-President
Pacifica Group Limited
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APPENDIX D
GROWING EXPORT
CAPABILITY
SMALL AND MEDIUM ENTERPRISE CASE STUDIES
A small enterprise is an enterprise employing less than
20 people. A medium enterprise is defined as an
enterprise employing 20 or more people, but less than
200 people.
The following case studies are based on structured
interviews with CEOs of technology-based SMEs — eight
are high technology enterprises and two are medium
technology enterprises. The interviews focussed on
growing SME export capability. The selected companies
are successful technology-based companies who feature
in lists of fast growers. Many are award winners, and a
number were interviewed as part of the first phase of the
working group’s study.
Their individual stories highlight some of the key
characteristics of successful exporting firms, what
assists firms with exporting, some of the barriers and
challenges of exporting and suggestions for improving
opportunities for exporting companies. Some common
themes that emerged from the interviews were:
1. Importance of exporting to firm growth
Exporting was seen as important to all firms and most
saw it as the only way to increase scale and support the
development costs of high technology products. All firms
interviewed were exporting or planning to export in the
near future. Several firms have virtually no sales in
Australia, having gone straight to export – they were
‘born global’.
2. Support for Australian products
Several companies expressed concern that they could
not get their product accepted in the home market until
they had sales abroad. They referred to a “cultural
cringe” and called for more support through government
procurement and for Australians to buy local products.
3. Collaborations
Two thirds of the companies were currently collaborating
with other firms or would collaborate in the future. The
remaining third were reluctant to collaborate expressing
suspicion of large firms in Australia and were sceptical
they could form useful partnerships with them or that
larger firms would deal fairly especially on issues of
intellectual property.
4. Government assistance
There was general appreciation for the government’s
role in providing contacts in overseas markets and in
providing support through various export and innovation
programs. With regard to export assistance, two
common themes were that the effectiveness of
assistance depended very much on the specific officer;
and there was a lack of understanding of high-technology
applications.
Other issues raised in relation to government assistance
generally included: concerns about the time taken to
complete applications; difficulties in obtaining finance
after the early stages of development to achieve
successful commercialisation; and the lack of knowledge
about operating in other countries in areas such as the
tax system, laws and cultural processes.
Suggested areas for improvement included the need for
better promotion of export assistance; and more
specialised knowledge of technology industries to help
identify suitable partners and commercial opportunities.
List of SME Case Studies:
Codarra Advanced Systems
Electric Optic Systems Holdings Limited
Geosim Technologies Pty Ltd
GPS Online Limited
Intellection Pty Ltd
Metal Storm Limited
Portland Orthopaedics
Proteome Systems Limited
Seeing Machines
Sirtex Medical
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
CODARRA ADVANCED
SYSTEMS
Codarra is an information and communications
technology consultancy and systems integration
company. It offers complete project management
services from concept development to delivery and
follow-up. Codarra has both government (especially
defence) and private sector clients. Most of its products
are custom designed, but some are packaged, including
the Deployable Incident Management Toolkit, the Aircraft
Electrical Load Analysis tool and the Avatar Tactical
Mobile Reconnaissance Uninhabited Aerial Vehicle.
Codarra commenced operations 15 years ago when
Warren Williams and Scott McGeechan decided to launch
themselves into communications engineering services.
The company later expanded into both people services
and projects. Codarra has grown into a company that
employs 60 to 70 people, and has offices in Canberra,
Melbourne and Sydney. It also has a serviced office in
New York, which CEO Warren Williams describes as a
temporary ‘shop front’ solution, in order to obtain a US
presence, as most US companies will only purchase
from US-based companies. Currently, there is an agent
working on a commission basis servicing the US
operations: eventually, there will be a full time person
working in this office. Codarra currently invests most of
its profits into R&D and expects to expand its R&D
program to cover product support for exported items.
Codarra is a medium technology company that teams
with other technology companies to come up with clever
products to meet clients’ needs. For example, Codarra
has teamed with Intersect Alliance to sell its product,
Systems iNtrusion Analysis and Reporting Environment
or ‘Snare’. This is a leading-edge server product which
provides the ability to monitor network access and
usage. Codarra is in the early stages of exporting, not
having focussed on this in the past, and expects that by
the end of the financial year exports will have grown to
just less than 10 per cent of revenue. Mr Williams says
there is a demand for their IT security, aerospace and
defence products and services overseas. Codarra do
not export their intellectual property.
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Initially Codarra took too narrow a focus and generally
thought ‘too small’. Although the company expanded and
diversified at one point it was not sustainable and now
the company is focused on its primary ambition to be a
prime systems integrator company, competing with the
big players. According to Mr Williams this is a challenge
as Codarra lacks capital, and the only options are either
to merge with another company or raise capital through
means such as listing on the stock exchange.
Codarra has collaborated with other Australian firms in
order to export. Mr Williams has the view that big
companies would be unlikely to help them develop
exports. However, he does use his own contacts in
order to drive exports.
A barrier to exporting Mr Williams believes lies with the
need for domestic acceptance of a product. In Australia,
preference is often given for non-Australian products,
which denies Australian companies access to the
domestic market and as a consequence casts a
negative view of the products with potential overseas
buyers. Furthermore, Mr Williams has observed that the
Australian bureaucracy is approaching the Australian
United States Free Trade Agreement with incredible
enthusiasm and he fears that such enthusiasm will not
be reciprocated.
Mr Williams says the main challenges in accessing
overseas markets are selecting appropriate contacts
and being aware that bribery and reverse engineering
are prevalent in some countries.
Codarra has attended Austrade briefings, which
according to Mr Williams were “useful and informative.”
However, Codarra does not expend significant funds on
overseas exhibitions because they have learnt that such
exhibitions are useless unless substantial preliminary
work is undertaken in developing local relationships with
agents beforehand.
Mr Williams believes exporters could be assisted through
access to the right knowledge, for example a hand book
covering information for a range of potential export
countries, including: the basics of setting up; exporting;
tax system; relevant laws; and culture. This would assist
in spreading knowledge about different markets, for
example, “in Singapore we lost 20 per cent of our
revenue from withholding taxes that we did not know
about,” Mr Williams said. Further, access to capital and
time to devote to export preparation would ease the way
for new exporters.
www.codarra.com.au
In the past Codarra received a grant of $200,000 from
the ACT government. Due to time restraints and the
desire to be self sufficient, Codarra has not sought any
other financial assistance from the government, as they
consider the overheads to seek assistance are
prohibitively high. Mr Williams says “the red tape
associated with government ‘help’ often turns you away.”
However, in the future Codarra will look at seeking
assistance. Codarra plan to look at assistance through
the R&D tax concession, Commercial Ready 49 and the
Export Market Development Grants program. 50
49 Information on these innovation programs can be found at www.ausindustry.gov.au
50 The Export Market Development Grant program (EMDG), administered by Austrade, provides assistance to small and medium Australian exporters committed to,
and capable of, seeking out and developing export business by repaying part of their promotional expenses. For more information see www.austrade.gov.au
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
ELECTRO OPTIC SYSTEMS
HOLDINGS LIMITED
Electro Optic Systems (EOS) specialises in the design,
development and production of sophisticated laser
technologies including supporting software and
electronic sub-systems. The technologies are applied to
a variety of space systems, defence products and space
surveillance. EOS is also a developer, manufacturer and
marketer of robotic weapon systems to approved
military customers. The company, which was established
in 1985 and earns virtually all its revenue from exports,
has grown rapidly and has 88 staff employed in Australia
and Arizona, USA.
Dr Greene considers assistance and incentives for R&D
are critical for growth of companies, without which there
is a risk companies will sell off their IP early, or that
venture capitalists will strip the company of its assets.
EOS has received approval for $11 million in support
under two R&D Start 51 grants.
EOS established laser products for an overseas market
initially and when profits were earned the company
expanded its product line by employing appropriately
skilled staff through recruiting research staff largely from
the Defence Science and Technology Organisation. EOS
has a high technology profile, and its technology is
described as leading-edge. For larger projects EOS
enters into bundled arrangements where EOS
contributes the technology and other firms contribute
the finance. Dr Ben Greene says, “we plan intersections
with markets that no-one else sees because of our close
relationships with customers. This involves break
through R&D; this is why R&D is so expensive.” EOS
mainly exports products but is moving more into export
of services.
EOS has reached its initial target of $100 million, and
the company is continuing to accelerate. The next step
for EOS is to be a $1 billion company, and Dr Greene
expects that this level of growth will result in listing on
the stock exchange and that will change the focus for
EOS.
51 Information on the R&D Start program and other Government innovation programs can be found at www.ausindustry.gov.au
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Dr Greene says for the first 15 years EOS had no
domestic market and was ‘born global’: in the last 3
years 1 per cent of revenue has come from domestic
sales and EOS is aiming to drive that market to 4–5 per
cent of revenue. Dr Greene says, “we bring jobs here,
and as a consequence we get good support.” Dr Greene
believes the EOS strategy is simple and is the same now
as it was initially — understand the customers’ needs
and develop solutions for them. The key for realising the
strategy is commitment to deep relationships with
present and future customers. “For us to grow to a
billion dollar company we don’t need new customers, all
we need to do is increase the penetration of our
products to their business. It’s simple — we understand
and make our customers happy. We committed $100
million to a product and $70 million was contributed to it
by a customer — symbiotic relationships with customers
have helped us enormously.”
Dr Greene said his own contacts have been helpful in
establishing exports, and cites the value and assistance
of good government support, including, for example,
that EOS has a good relationship with US defence.
Dr Greene believes political support has been helpful in
raising the company’s profile, for example when the
Prime Minister makes positive comments about EOS
products when he visits other countries.
they received GERD funding worth $300,000. Dr Greene
says “without R&D Start, EOS wouldn’t be in Australia.”
Dr Greene says, “we had huge help from the government
in the beginning. At that stage the Australian Overseas
Projects Corporation (AOPC) merged into Austrade and
they did back-to-back contracts. The AOPC accepted
private contracts and went as the guarantor. At the
moment there is not the same support for building
overseas markets for example, Austrade does not
adequately exercise its powers to be a guarantor to
overseas customers for supply of products.” Dr Greene
believes Australian Defence organisations could help
market products, for example, UK and French Defence
representatives demonstrate the capability of their
indigenous technologies. Dr Greene believes that CRC
funding has been largely appropriated by universities
without a plan to focus funding in those areas of most
strategic need for Australia. There needs to be a
stronger focus on creative R&D.
www.eos-aus.com
EOS plans to double its exports next year – although
that doesn’t imply that exporting is easy – it isn’t. “We
have rebuilt our business model, and reinvented
ourselves, because that’s what the market, our
customers, required of us,” Dr Greene said. He believes
Austrade was helpful in the past, but that Austrade has
its own focus, for example, value added manufacturing,
which isn’t wholly consistent with EOS needs. EOS
accessed EMDG funding in the early years of the
company.
“EFIC 52 is no more help than other financial programs.
I think better access to performance guarantees in
relation to EFIC would assist the market more,”
Dr Greene said. EOS has received three R&D Start
grants worth $3 million from AusIndustry, and in 1986
52 Export Finance and Insurance Corporation (EFIC) is Australia’s export credit agency providing competitive finance and insurance services to Australian exporters
and Australian companies investing in new projects overseas. Products offered include: Direct Loan; Export Finance Guarantee; Documentary Credit Finance and
Guarantee; Political Risk Insurance; Medium-Term Payment Insurance; Bonds and Guarantees. See www.efic.gov.au
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
GEOSIM TECHNOLOGIES
PTY LTD
GeoSim Technologies is a Queensland company that has
developed a helicopter Part Task Trainer which has Civil
Aviation Safety Authority Certification to count for a
considerable number of the required instrument flying
time for helicopter pilots as well as recency and
currency credits. The software program uses 3D
visualization software based on local Australian airports
and topographical reference points as part of its training
function.
The company was established in September 2002 by
Charles Du Plessis and Graeme Brooke to develop the
Trainer in response to an identified gap in the market for
helicopter flight simulators. Geosim received a
Government COMET grant in 2004 of $52,000 to assist
in the commercialization of the product and was initially
supported by the Queensland Department of State
Development (QDSD) via Aviation Australia.
GeoSim is focused on product development to expand
their product range and to keep them at the forefront of
their industry. Currently, a Fixed Wing Part Task Trainer
is under development and negotiations are underway to
develop a sports trainer in collaboration with Jabiru, an
aircraft manufacturer, which will assist in the deployment
and promotion of the Trainer in the aviation industry
worldwide.
GeoSim is a medium-to high-technology company which
bundles with other companies to access technologies to
meet customer need. GeoSim base their technology on
off-the-shelf products and develop them further to meet
market needs and a key to its success in developing
products has been gaining access to adequate finance
and skills. Geosim export their products, but not their
intellectual property.
Exports are important to GeoSim, but it is a young
company, and is still developing its markets. Its first sale
was to a flight training company in Cairns. Now it has
ventured overseas and has four orders from Africa and
potential orders with the Singapore military. Geosim is
also looking at a joint venture into the United States.
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The company plans to expand internationally through
exporting products, creating employment and building
wealth for the company’s founders. In order to grow,
GeoSim is looking at Singapore, as it is the gateway to
South East Asia. With regard to the African markets,
Mr Du Plessis knows the African culture and has
extensive contacts in that market.
Mr Du Plessis says, “GeoSim has collaborated with
various specialists to access required skills and has
established strategic alliances with four, specialist,
micro-companies in the aviation field, with the intention
of establishing an aviation cluster to support and
stimulate growth in the simulation environment.” When
entering a new market Geosim establishes, through a
new company majority owned by GeoSim, a partnership
with a sales management company, which has a
presence or capacity to sell into that new market.
Aviation Australia provided GeoSim with some useful
contacts and Mr Du Plessis describes their support as
“tremendous and invaluable: they gave us credibility in
the market place, with both financial and management
assistance.”
get a grant.” Further, he believes that a number of SMEs
don’t know about the Australian Trade Consulates
located around the world and that these need to be
better promoted.
Mr Du Plessis suggested, “more needs to be done in
supporting entrepreneurs to establish overseas markets.
Currently funding support for travel costs is received
only when a sale is made without regard for the
difficulties and length of time it can take to get to the
first sale. This is compared with South Africa where the
government offers tax and support incentives for foreign
expansion. For example, the government assists
entrepreneurs financially to enter overseas markets,
instead of requiring them to draw on scarce company
reserves.”
Access to adequate early- and expansion-capital is
critical for technology-based SMEs. Access to some kind
of working capital to assist the innovator develop and
commercialise the innovation would allow projects to
develop at a much faster rate.
www.geosim.com.au
Visibility in the market is important and GeoSim has
attended almost every single air show in Australia since
it began. The launch of their product by Premier Beattie
gave Geosim major magazine coverage around the
world and added to their credibility.
Mr Du Plessis believes Austrade has been helpful with
information and contacts in various countries, and
through EMDG assistance. GeoSim is still cautious in its
foray into the overseas markets where these countries
have a reputation for reverse engineering.
With regard to Federal and State involvement, he says,
“it has been a bittersweet relationship with the state and
federal offices, with Comet and QDSD giving invaluable
support, without which we probably would not be where
we are today. However we have been turned down on a
number of occasions on applications such as R&D
Start.” The problem as he sees it resides with the grant
criteria, — “if you don’t fit into a box, then you do not
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
GPS ONLINE LIMITED
GPS Online commenced life in 1987 in the construction
and energy industries. It was listed in 1999 as a
company specialising in innovative location-based asset
management solutions. GPS Online provides solutions
and technology to help people understand and manage
asset usage and asset location. The company’s
products include mobile asset management, static asset
monitoring and process control.
GPS Online produces leading edge technology in
Defence, Environment, and Security and Asset
Management fields. It is a world leader in defence
applications including shallow water minesweeper
technology and military fleet health and usage
monitoring. GPS is currently exporting to the United
Arab Emirates and the UK. In 1998, the company tried
exporting to South East Asia but got caught up in the
currency crisis. The Company re-entered the exporting
market in 2002 supported by an R&D program which
develops products to meet specific market needs. It
includes the integration of GPS technology with third
party knowledge where applicable. Today GPS employs
around 45 employees.
Exports currently earn 15 per cent revenue and the
company aims to increase exports by developing
products which are technological solutions to meet
global market needs. To export successfully, GPS
invests in matching other countries’ technology
infrastructure and associated standards. For example,
GPS has to customise specifications for data protocols
for engine monitoring. Managing Director of GPS Online
Robert Angel says, “we need exports to grow revenue
derived from our cutting edge technology. It is important
that export sales are built upon a firm reference base in
the domestic market. The home market still has some
potential, but it’s limited. Overseas clients like to view
the working system of newly implemented technology.”
Local partnering has been useful when entering new
markets, as Mr Angel believes you cannot use an
Australian manager for overseas operations: getting the
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ight partner is imperative to exporting, as one of the
major challenges is having the capability to support the
technology in remote locations. For example, in South
East Asia Mr Angel says, “it’s not as simple as
understanding the technology as the intellectual property
is in the application of knowledge rather than in patents.”
A collaboration with ADI military has enabled GPS to
enter the Middle East market. “There is always a risk
that the larger firm can develop a competitive product
once the system parameters are understood. GPS tries
to incentivise any partner with the ability to develop
overseas markets to keep their focus on promoting the
products in the local market. This includes revenue
targets and generous margins,” Mr Angel said.
The Australian Defence Industry Network group has
assisted in introductions to overseas companies and
potential customers. In addition, government schemes
have been helpful in making suitable overseas contacts.
For example, the Queensland Government is helping GPS
get into the UK waste disposal market, and with
strategic alliances in Ireland. At other times, GPS has
targeted customers and approached them directly in
order to achieve export sales.
of success. Mr Angel praised the new R&D Tax
Concession allowing the rebate if no profit was earned,
as the old Tax Concession was only good if a business
was profitable. GPS considered accessing EFIC for
potential work in Indonesia but EFIC is only relevant once
a contract is in place, so it was not pursued.
Mr Angel said Australia has leading edge technology and
some of the best innovators in the world, however,
advancements in commercialisation are needed. He
suggested we need strategic partners to fill the gaps.
Mr Angel believes both local and federal money for air
fares, accommodation and facilitation would assist in the
commercialisation process. Mr Angel also suggested
that the government pay facilitators, for up to six
months, to create and manage networks for approved
companies.
www.gpsonline.com.au
Mr Angel says that “Austrade have been particularly
helpful in Hong Kong and Singapore where they not only
made useful introduction to potential clients, but followed
up with the contract completion phase. However not all
Austrade offices have the same successful partnership.”
GPS has used EMDG assistance in the past, and Mr
Angel considers that the scheme was good for GPS
initially, but that Year 4 and 5 sales targets became too
demanding. Mr Angel said GPS would be reluctant to use
Austrade’s user pays arrangements as they were not
good value for money. He believes the real assistance
from government is in networking.
Mr Angel was generally positive about AusIndustry, as he
thought Comet was a well designed, good introductory
scheme, although he thought the guidelines were very
strict. He said in the past R&D Start was time consuming
with little feedback and a low success rate. The
replacement Federal Government scheme is more
accommodating and offers companies a better chance
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
INTELLECTION PTY LTD
Intellection Pty Ltd is a Commonwealth Scientific and
Industrial Research Organisation (CSIRO) spin-off
company selling mineral analysis instruments and
services for ore characterisation and process
optimisation to resources companies. Intellection was
created in 2003 and employs 15 full time and 4 part
time employees.
Today, Intellection has three main systems – QEMSCAN,
the organisation’s flagship system, plus SITESCAN and
MINSCAN. Intellection’s primary business is providing
systems that maximise the returns from mining
operations by identifying, analysing and quantifying
minerals. The systems have also proven application in oil
and gas exploration, mineral exploration and for
characterizing coal, fly ash and environmental waste.
Intellection’s systems are used worldwide, including by
many Fortune 500 mining companies across five
continents.
Intellection is three divisions within one company,
offering systems, solutions and services: Intellection
Systems develops QEMSCAN, the fastest and most
accurate particle analysis tool in the world, as well as
other related software applications for the preparation of
samples and analysis of data; Intellection Solutions
continues the company’s scientific tradition by providing
research, development, training and analysis to help
clients maximise the benefits from their system
investment; and Intellection Services operates as a
mineral analysis agency, providing competitive and
reliable data from sample analysis.
Mr Calvin Treacy, CEO of Intellection, says the company
has a high technology profile, and leading edge
products. Mr Treacy describes Intellection as being ‘born
global’ as its first system was exported and
approximately 90 per cent of its business is through
exporting. Mr Treacy says Intellection will continue to
develop its technology and grow, whilst maintaining
financial independence. In the medium-term the company
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will expand into new sectors by providing standard tools
for industry.
Intellection was fortunate as it gained original customers
through the CSIRO research network and were able to
sell directly to end users. However in the second stage
of development resellers needed to be engaged in South
Africa, the US and Canada; this was not effective as it
was costly and the benefits didn’t flow to customers or
the supplier.
Mr Treacy says Intellection has a strong belief in
strategic alliances and companies such as Micromine
and Gecko have a very good fit with what Intellection is
doing. It is hoped that as Intellection grows these types
of relationships can be formalised and SMEs will be able
to grow together. Additionally, Intellection works closely
with overseas companies such as Carl Zeiss SMT and
Gresham Scientific Instruments who are original
equipment manufacturers for Intellection.
Mr Treacy says Intellection has little experience with
government, as they do not want to become reliant on
government funding and support. Mr Treacy was positive
about Austrade and Intellection plan to use them in the
future “provided we are able to use them in the right
way, and the process is managed properly from our
side.”
In order to grow Australian exporters Mr Treacy believes
that “Australia needs to focus on where we have a
comparative advantage for example minerals and
agriculture; and the technology associated with these
areas. Support these and lose the emphasis on the
bright and shiny things like biotech.”
www.intellection.com.au
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
METAL STORM LIMITED
Metal Storm Limited is an electronic ballistics
technology company based in Brisbane, Australia, with
an office in Washington DC in the United States.
Potential applications range from military through to
industrial, agricultural and seismic uses. The 100 per
cent electronic ballistics technology involves objects,
such as bullets, that have been tightly grouped in
multiple tube containers, such as barrels, and can be
electronically fired from those containers at variable
burst rates. Currently, leading defence and government
agencies have committed over AU$100 million of
funding to R&D programs for the technology.
The company was founded in 1994 by Mike O’Dwyer to
commercialise electronic ballistics technology. He
invented the technology to solve the problem of slowfiring
guns he observed when watching a WW2 movie
about the Coral Sea battle. Metal Storm is in the
Guinness Book of Records for achieving the fastest rate
of fire in a gun.
Metal Storm listed on the Australian Stock Exchange in
mid-1999 (ASX trading code MST) and listed on the
Nasdaq Small Cap Market in December 2001 (ticker
code MTSX), trading in Level 2 American Depositary
Receipts. Its major shareholders with approximately
70 per cent of the company’s capital are its founder,
Mr O’Dwyer, and a venture capital fund that invested
in the early years of Metal Storm’s existence.
Ian Gillespie, General Manager of Metal Storm, says the
company has been back to the market four times since
listing to raise a total of $50 million, in addition to
$50 million from other sources. It employs about twenty
people in Australia – a year ago it was seven people,
and it employs about 35 people in a subsidiary machine
shop in the US. Metal Storm’s market capitalisation is
approximately $120 million.
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Metal Storm has a high technology profile, and its
technology is described as being leading-edge. Metal
Storm has two key product streams arising from two
areas of intellectual property. The company has exported
some IP to the USA already and intends to continue, by
way of licensing technology, but may also manufacture
the consumable, ie the ammunition and export some
tangible product. Mr Gillespie says collaboration is
unlikely to be an option as we “guard our IP very closely
as our value as a company is in our IP portfolio.” Metal
Storm currently holds 49 issued national patents on its
technology and has 284 patent applications pending in
different countries and regions.
From day one Metal Storm was exporting and exports
account for 95 per cent of revenue. Metal Storm is still
in its development stage, with negative cash flows but
this production phase, will lead into commercialisation
and then sales to customers by way of licensing. Metal
Storm wants to grow its market capitalisation by 10 to
20 times in the next five years. The recent acquisition of
US manufacturer ProCam Machine LLC enables Metal
Storm to accelerate development of prototype weapon
systems for demonstration to potential US defence
industry customers and partners and in doing so remain
a leader in ballistics technology. Prior to the acquisition,
Metal Storm contracted its prototyping to an Australian
SME. Metal Storm wants to remain an Australian
company, with its research operations and IP based in
Australia, but will have a USA-based manufacturing
capability, which is important to the US Government and
US defence companies and avoids the export costs
incurred in Australia.
Australia has the skills, both technical and intellectual, to
commercialise world-class technology.” Metal Storm has
learnt from other firms about how they have done things,
especially in the US, where there are rules requiring
majority US ownership. “We had to find ways to extract
the value and bring it back to Australia,” Mr Gillespie
said.
Overall, Mr Gillespie is positive about the government
assistance provided by Austrade and AusIndustry. He
mentioned that the EMDG is useful for financial support,
however he believes the “amounts aren’t big.” In
comparison, he notes that, the US government gives a
lot of money to develop products, and then allows the
developer to commercialise, unlike here, where he
considers making money is frowned on. Mr Gillespie
commented that the government programs aren’t well
promoted, as Metal Storm only identified them by
accident and that the linkages between programs are
not clear. He believes companies need knowledge of
how to approach other countries – and advice about the
complexities of culture and business practices in
countries which may vary markedly from Australian
standards. Further, Mr Gillespie noted that “there is a
lack of understanding of our industry, both the
technology and the markets. Austrade knows about dairy
and wool, but doesn’t have the specialised knowledge
about our industry and markets.”
www.metalstorm.com
Mr Gillespie believes, “Australia should, but doesn’t, buy
local. There are lots of controls and rules. We are
restricted in where we sell, for example, we can’t sell to
China because it’s weaponry. Also the firearms
regulations make it very complex to move our product,
for example, to export a prototype. We aren’t in that
position yet, but it’s possible that all these impediments
will cause us to manufacture our prototypes offshore. It’s
a pity, because we have used them to showcase
Australian technology – and our great cost advantages.
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
PORTLAND ORTHOPAEDICS
Portland Orthopaedics was established in 1991 by
Professor Ron Sekel, who formed a group which
included the University of NSW Department of
Engineering, Lucas Heights Atomic Research Centre and
the Commonwealth Scientific and Industrial Research
Organisation (CSIRO) to research and develop the
Margron Total Hip Replacement System.
The Margron prosthesis was first implanted in 1997,
initially as a primary hip replacement, and after two
years of successful application the range was expanded
to include revision and oncology implants. Over 1,500
patients have received the Margron Hip prosthesis and
many more have benefited from an increased range of
products, including, prosthetic components and
instruments all of which Portland manufacture to
maintain complete control over quality assurance and
supply. From October 2001, the Rothschild Group,
Superannuation Trust of Australia and Equity Partners
invested the growth of the company to enable a
sustainable entry into the US, European and Asian
markets.
Portland produces high technology products, which are
leading edge. CEO David Sekel says that Portland’s R&D
focuses on convergence with other technologies to meet
new market needs and break through innovations
leading to new products and market uses. Portland
“aims to be a market leader in Joint Replacement
Systems, through developing a range of new and
innovative orthopaedic devices.” Mr Sekel would like
Portland to grow into a substantial designer and
manufacturer of orthopaedic implants based in Australia,
however, access to commercialisation capital is a
problem. Currently Portland is exporting to New Zealand,
the US, Israel and Belgium and aims to achieve export
growth by establishing markets in Japan, England
and France.
Portland Orthopaedics commenced exporting in its first
three years of operation as “the Australian market is
tiny. Without exports we would not be able to sustain our
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R&D as 80 per cent of revenue comes from exports,”
said Mr Sekel. “Portland is learning from other exporters
through interaction with their companies, which have had
similar experiences, including those arranged by
Austrade. Introductions to contacts in other countries
are important as it reduces the time spent consulting. In
addition opportunities to showcase our products have
been beneficial as have trade missions – it doesn’t
matter about the stage of development you are in, there
are benefits: the Australian Technology Showcase is
leading the way in early stage mentoring,” according to
Mr Sekel.
One of the main challenges for Portland is the fact that
they participate in a very conservative market, as
surgeons take a long time to train and do not like
change. In addition, working offshore is very expensive:
“it takes years to export and a lot of resources and a lot
of financial dollars, in order for the market to become
loyal,” Mr Sekel said.
and assists very well in the early stages. However, there
is a problem with the cash flow timing, as you do not get
the money straight away creating a ‘big hole’ between
expenditure and reimbursement.”
“EFIC”, Mr Sekel said “is too hard and too confusing to
try. If you are just selling to a distributor, then EFIC
works well. However, if you are doing the distribution
yourself, then EFIC does not help you if you don’t have a
purchase order, or contract. For example, to develop a
market in the USA we needed to build and take with us
$500,000-$600,000 of inventory, but we didn’t have a
distributor or signed contracts, as we were going to do
direct sales so we didn’t get any assistance – we would
have received assistance if we’d had a distributor.”
www.margron.com
Mr Sekel suggests there needs to be better promotion
of the services provided in Australia for SMEs. He
believes that the government has done a great job in the
last ten years, with R&D Start and the Biotechnology
Innovation Fund. However, he mentioned that although
there is early stage funding, “there is not one program
that helps commercialisation later on, and the hardest
hurdle is the later stage, as this costs millions.” Mr Sekel
believes there is a serious lack of venture capital for the
mid stage, and as a result of this companies go offshore
and take their profits and rewards with them. “For
example with R&D Start, if I fly 5 surgeons who are
members of the surgical advisory team to a location,
and pay their wages for 2 days to get their advice on
product improvements, this is not seen as an expense,
even though they are our designers and ultimately will be
our customers. It is yet to be seen whether the new
Commercial Ready programme addresses this issue.”
Austrade assistance has been extremely helpful for
Portland, as it assisted in getting a contact in Japan.
However Mr Sekel does say that the extent to which
Austrade are helpful depends on the consultant.
Mr Sekel mentioned, “the EMDG is a ‘terrific’ scheme
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
PROTEOME SYSTEMS
LIMITED (PSL)
Proteome Systems Limited is comprised of Proteome
Systems Technology and Proteome Systems Discovery.
Proteome Systems Technology business develops,
manufactures and commercialises innovative technology
solutions comprising instruments, software and
consumables that enable proteomics research.
Proteome Systems Discovery business discovers protein
biomarkers that have potential for use as diagnostics
and therapeutic targets in the areas of respiratory
disease, neurobiology and aging, cancer and infectious
disease. PSL has research and development and
manufacturing facilities in Sydney and in Boston.
A $7 million funding grant under the Australian
Government’s Major National Research Facilities
program led to the construction of APAF, (Australian
Proteome Analysis Facility) the world’s first national
proteomics facility under the directorship of Professor
Keith Williams at Macquarie University who subsequently
founded Proteome Systems in 1999 through a program
with Dow AgroSciences.
Proteome has a leading-edge, high technology profile
and has established business relationships with other
companies to access specific skills for example,
‘bundling arrangements’ to sell their technology and
foster the convergence of skills to develop their
products. Proteome export both IP and products. “We
employ people who are technically literate and who
understand that this is a business and can see
opportunities for the future,” said Dr Williams.
Proteome has a relatively long business horizon – as it
now has a suite of technology products available,
including for example, a device for measuring wheat
quality which is being marketed in the US and Canada.
This product uses core technology that will be used for
human diagnostics but attracts fewer regulatory
requirements as it’s an agricultural application. Proteome
seeks to commercialise diagnostics tools, for example,
the market for a TB diagnostic tool is potentially worth
$1.8 billion and similar opportunities are driving current
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development work on treatments for lung infections and
ovarian cancer.
To complement its biomarker Discovery programs,
Proteome is in the process of acquiring a Boston-based
biopharmaceutical company with a portfolio of
therapeutic compounds for disease that have
demonstrated potential efficacy in pre-clinical trials in
many disease models including stroke, MS, Alzheimer’s
disease and radiation induced dermatitis. In addition
Proteome undertakes its own ambitious research
program.
As biotechnology SMEs have very limited markets in
Australia, Proteome Systems was born global with a
focus on the major markets of USA and Japan. The
business was built through forming strategic alliances
and joint ventures with large overseas firms e.g. IBM,
and Japanese scientific instrument maker Shimadzu.
Dr Williams believes early funding assistance from
Government is helpful to enable spin-off companies to
develop initial products, but in Australia capital for
scaling-up and sustaining the company through the
manufacturing and commercialisation stages is a
problem. The assumption that supporting SMEs through
the R&D phase is sufficient to propel them into
successful commercialisation is wrong – in fact
commercialisation is more expensive and difficult than
R&D. Without a commercialised product there will be no
exports – companies need support to commercialise
and to prepare for exporting.
locally, but it helps when dealing with the Asian market
as they have the attitude if you can’t sell at home then
why should you expect to sell anywhere else.”
“A critical issue for the start-up and development of
biotechnology companies in Australia is a lack of
knowledgeable and experienced local venture capital.
This results in many early stage companies being forced
to list too early on ASX where they often languish as
they receive little or no attention from analysts, and are
not well understood by the market. As young companies
seek out further capital, they are often forced to go to
the US. This can result in the relocation of the company
or its headquarters to the US. We have been lucky to
access substantial private equity from the largest
investor in the biotech industry in Australia, Queensland
Investment Corporation”, said Dr Williams.
Business skills are important according to Dr Williams
and he has learned from companies which have failed:
“their technology was great but they didn’t put in place
sound business management practices, whereas we
have invested in good business, legal and accounting
advice – it makes Proteome more resilient.”
www.proteomesystems.com
Dr Williams says there is a problem with cultural cringe
in Australia. He suggests that the Government needs to
encourage Australians to purchase locally as “Australian
sales are useful not only because it is easier to deal
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
SEEING MACHINES
Seeing Machines is an award-winning technology
company with a focus on vision-based human machine
interfaces. Formed in 2000 from a spin off from the
Australian National University, Seeing Machines' purpose
is to commercialise its computer-vision IP across a
range of industries and applications.
Seeing Machines technology, faceLAB provides headpose,
gaze direction and eyelid closure tracking, and
has immediate and far-reaching impact in the realm of
transportation safety and active information awareness
systems. FaceLAB is used across the automotive
industry by clients such as Bosch, Delphi, Volvo,
Motorola, Nissan, Mitsubishi, Daimler Chrysler, PSA,
Honda, Hyundai, Renault and Toyota. It is also used by
many of the leading academic research groups and
transportation authorities worldwide.
Seeing Machines has been granted $250,000 under the
Biotechnology Innovation Fund to help develop a new
device that will enable earlier and more accurate
detection of glaucoma. The project will combine a
specialised extension of Seeing Machines’ unique visionsensing
technology with the latest glaucoma research
conducted at the Centre for Visual Research at the
Australian National University’s Research School of
Biological Sciences. The resulting product will passively
measure involuntary responses of the pupil to
specialised visual stimuli, dramatically improving
measurement of a person’s field of vision and the quality
and reliability of diagnosis. In 2002-03, Seeing Machines
received a R&D Start grant of $602,319 (part of $3.34
million dollar Start grant awarded January 2001).
Seeing Machines has a high technology profile and
produces leading-edge breakthrough innovations.
Exports are very important as they provide over 90 per
cent of revenue with in excess of 100 sales worldwide
versus 12 sales in Australia for faceLAB. Seeing
Machines export both the product and license to the
technology.
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Dr Zelinsky, founder and former Chief Executive Officer,
currently Chief Technology Officer of Seeing Machines
says their “ambition is to make a difference and to be
global and profitable in R&D.” He says when dealing with
multinational customers, it is easier for Seeing Machines
to go directly to the companies overseas, rather than
working with its Australian office. Seeing Machines has
not yet collaborated with another firm in order to export,
but are looking at a partnership with a local company.
Dr Zelinsky says ‘business angels’ have assisted Seeing
Machines in getting some good contacts overseas. He
also mentioned that it was difficult to spin out of
universities as there were barriers to setting up a viable
business – access to real capital is one of them but also
Australian universities and public research and
development institutions have poor records in
commercialising intellectual property, particularly in ICT.
"The right incentives have not been put in place that
encourages institutions, staff and students to undertake
entrepreneurial activities, and Government funding should
become tied to commercialisation outcomes and not just
research and teaching outcomes,” he says.
exporting and is an incentive to spend money on
overseas ventures.”
Dr Zelinsky says, “compared with other countries
Australia does not have favourable tax treatments
applying to employee stock options for start-ups. This
discourages private-sector ICT innovators from starting
companies in Australia. For this reason many start-ups
end up going to the US. In Australia employees can end
up paying tax on untradable shares as options can be
taxed when issued instead of as a capital gain on
disposal.”
New Australian companies must be born global as ICT is
a global business and the domestic market is too small
to be profitable. Products must be able to compete in
international markets and access to markets needs to
be facilitated through strategic partners and international
business networks. Government programs staffed by ICT
professionals could facilitate access to these
international business networks.
www.seeingmachines.com.au
A major challenge for Seeing Machines is that Australia
does not buy products until they are proven. Dr Zelinsky
questions why the government outsources to
multinational corporations instead of stimulating capacity
in local SMEs and supporting retention of Australian
owned capability, for example, BHP IT has been sold off
and this reinforces the “subsidiary culture.”
Good government support through Austrade has helped
Seeing Machines in exporting by providing access to
distributors. Although Seeing Machines did most of the
overseas selling by themselves, Dr Zelinsky said some
contacts have been gained through trade shows,
however he noted that for SMEs “some delegations are
not good as they lack a specific focus.” Dr Zelinsky was
disappointed that Austrade had downgraded the Detroit
office which was “great for component manufacturers.”
He also commented that the service received at
Austrade “depends on who you get at Austrade.” Dr
Zelinsky was positive about the EMDG as it “encourages
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APPENDIX D
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
SIRTEX MEDICAL
Sirtex Medical was formed in 1997 to acquire and
commercialise technology relating to the treatment of
liver cancer developed by the Cancer Research Institute
(CRI). Financial support for the development of the
technology came from Japan namely, and investment
fund managed by Nomura/JAFCO Investment (Asia) Ltd
which subscribed for equity in the Company.
Since its formation, Sirtex Medical has undertaken its
own research and development and also contracted
other agencies such as the CRI to further develop the
Company's technologies. The primary objective of the
R&D program is to research, develop and commercialise
effective treatments for liver cancer using novel, small
particle technology.
To capitalise on the market opportunities for its
technologies, Sirtex Medical has moved its corporate
head office from Perth to Sydney and has employed key
executives with experience in establishing and growing
an international medical products business. It is just
about to engage external consultants to find
international distributors.
Sirtex Medical aims to become the world leader in liver
cancer treatment products and believes the unmet
demand for effective treatment of liver cancer provides
an opportunity for its products. The Company will also
apply its intellectual property – micro-sphere technology,
to other diseases to ‘take their technology to a wider
community,” said Dr Bruce Gray, Executive Chairman.
Sirtex is a high technology enterprise with leading edge
products which when exported earn 95 per cent of all
revenue. Sirtex exported very early in their development
and are described as ‘born global’.
Dr Gray considers that a major impediment to exporting
was that Sirtex could not get finance in Australia as the
finance community had a “very short term view”, and as
a result the company had to go to Japan for the finance.
Sirtex has recently received financial backing to conduct
major clinical trials on SIR-Spheres, its liver cancer
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treatment, at two prestigious sites in Belgium. The
results from these trials will advantage the product in
global markets and thus earn greater export dollars.
Dr Gray said, “Austrade assistance was marginal in the
beginning, although more recently they have been helpful
in Japan as they showcased our product and got us
some contacts, although we took our own consultant
with us so that we could address enquiries
appropriately.” Dr Gray believes that: “trade shows
usually lack focus, Austrade are helpful but not very
effective, as they aren’t focused on our product, we
have to fit in with them. Austrade have such a hard task,
trying to cut their cloth to 50 different requirements. In
the end their service is too generic, it’s not focused
enough.” Dr Gray was positive about the EMDG scheme
as “every dollar is important to a small business, but the
amount is small and the rules keep changing every three
years.” Dr Gray said, “with the money we received from
Austrade we would have preferred to have used it to
engage our own consultants.” Sirtex has received
funding support from AusIndustry’s R&D Start which “has
been valuable and very helpful” although
Dr Gray was critical of the onerous reporting
requirements.
In order to grow SME exports Dr Gray believes that
SMEs need money. “If there is a financial incentive things
happen.” Dr Gray stated that the lack of re-imbursement
for its product under Medicare or private insurance in
Australia makes it almost impossible to sell here and as
a consequence it is hard to explain its value and sell it in
overseas markets. On the back of the heightened
reputation the SIR-Spheres will acquire from the trials in
Belgium Dr Gray will pursue government re-imbursement
for treatments in Europe and Australia. In the US, the
reimbursement authorities and physicians have little
interest in what happens in Australia so it doesn’t matter
to them, but it matters in Asia. The US government is a
delight to deal with. Their processes are much clearer
than Australia’s.”
www.sirtex.com
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APPENDIX E
GROWING EXPORT
CAPABILITY
MULTINATIONAL ENTERPRISE CASE STUDIES
A Multinational Enterprise (MNE) is a large enterprise
operating in a number of countries and having at least
one production or service facility outside its country of
origin. The following 11 case studies of Australian-based
MNEs tell individual stories and reflect the diversity of
the Australia’s technology landscape.
Key success factors
A review of their stories highlights some key success
factors in growing their business from a small company
to a large, multinational firm 53 .
List of MNE Case Studies:
Austal Limited
CEA Technologies
Cochlear Limited
Computershare Ltd
Cowan Manufacturing Ltd
ITD Limited
Lochard Pty Ltd
Mincom Limited
ResMed
Softlaw Ltd
Tenix Group
m Understanding business at a global level
m A streamlined product strategy
m Willingness to diversify product design to match
customer needs
m Access to capital and human resources to facilitate
growth
m Extensive use of strategic business partnerships and
alliances
m Technology acquisitions
m Continuous improvement
Benefits to the economy
The case studies illustrate some of the benefits brought
to the economy by multinational enterprises:
m Employment opportunities
m Continuous improvement of products, processes and
services
m Creation of investment opportunities for SMEs
m Opportunities for local firms to link into global
markets
53 In developing these case studies, the Department of Industry, Tourism and Resources spoke with company executives and drew on corporate documents and other
source material. All case studies were approved by the companies concerned with the exception of Cochlear and Computershare which were based on publicly
available documents.
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
AUSTAL LIMITED
Austal commenced operations in 1988 with a vision to
build high quality commercial vessels for the
international market. By the company's fifth anniversary,
Austal had become the world's leading manufacturer of
40 metre passenger catamarans and the dominant
supplier to Asia. Today, Austal is the world's largest
builder of fast ferries and lists among its customers
many of the world's leading fast ferry and shipping
operators. The Austal Group had 1,209 employees and
an operating profit after tax and outside equity interests
of $20.1 million at the close of the financial year 2004.
In 1993 in Hong Kong Austal introduced gas turbine
propulsion and the first two installations of the Austal
developed ride control system. The success in Asia and
the introduction of a range of sophisticated, large
vehicle-carrying fast ferries were the springboard for
ongoing growth in Europe, the Mediterranean and the
Asia-Pacific. In 1998 Austal entered the patrol boat
market securing an order for eight Bay Class vessels for
the Australian Customs Service. Sizeable orders from
other Australian and International agencies, including the
Royal Australian Navy, and the US Department of
Defense have cemented the company's place among the
world's elite patrol and combat vessel builders.
Austal listed on the Australian Stock Exchange in
December 1998 and has diversified its product base
through two acquisitions in 1999 of Image Marine and
luxury motor yacht builder, Oceanfast, and through, in
partnership with Bender Shipbuilding & Repair, the
establishment of a new US shipyard in Mobile, Alabama
in 2000. The Austal quality culture is embodied through
significant inter-site transfer between the Mobile yard
and the headquarters in Western Australia. Austal is well
placed to meet the requirements of the global market
and in both locations has purchased adjacent sites for
expansion.
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Austal's vessels embody the company's leadership in
engineering and technological advancements and it is
committed to implementing research and development
initiatives that will ensure the company stays at the
forefront of the shipbuilding industry. Austal pioneered
the use of a bulbous-bow, rounded-bilge hull catamaran
form developed by means of Computational Fluid
Dynamics and has been described by a leading
international hydrodynamics facility as providing the best
sea-keeping and lowest resistance in the catamaran
market.
Austal is at the cutting edge of aluminium structural
design and its use of laser welded and composite
aluminium structural panels are indicative of its
continuous innovation program and its dedication to
meeting customer needs. Austal developed it own ship
monitoring and control network, Marine Link, which
allows monitoring of machinery and systems throughout
the vessels, and is another example of technological
leadership.
Austal’s vision and continued focus is to provide
customers with the perfect solution, designing,
constructing and delivering vessels that are ideally suited
to operational requirements and that fully comply with
the needs and desires of its customers.
Austal’s success is based on:
m In-house design offering customisation and flexibility
m High quality technologically advanced and market
proven product
m Diversified product range
m Focus on meeting agreed customer requirements
m Productive, skilled and stable workforce
m On-time and on-budget delivery
m Financial strength and sound management
m Price competitive
www.austal.com
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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APPENDIX E
n
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
CEA TECHNOLOGIES
CEA Technologies was formed in 1983 and designs,
develops and exports systems at the forefront of radar
and communications technology. The Queanbeyan head
office includes an extensive test and system integration
laboratory and antenna test facilities. It also has facilities
in Melbourne and Adelaide and an office in San Diego and
a combined workforce of over 200 full-time permanent
employees.
capability, particularly by developing more in-house
production. CEA’s Marketing Manager Mark Foster
describes CEA’s research and development as a
combination of product development and breakthrough
technology enabled by the CEA Board which has
supported the investment in, and the development of, a
centre of excellence in research and development. The
R&D continues to be converted into new and innovative
products and systems which are exported with the
exception being those products designed exclusively for
the Australian Department of Defence.
CEA’s aim is to be successful in Australia, and to continue
to grow its export sales. CEA’s business strategy is
consistent with these objectives and focuses on fostering
partnerships in equity, products development and projects.
Despite its leading–edge profile CEA often teams with
local firms when entering new markets — USA for
example, and it’s probable CEA Technologies will need to
consider listing on the stock exchange as a means of
raising more growth capital as its venture capital partner
will exit soon. Mr Foster commented that CEA “needs to
learn about different environments and ways of doing
business, especially when trying to enter markets in
Europe and the Middle East.”
The company’s first contract was to improve an existing
communications system for the Royal Australian Navy
(RAN) which led to further development work with defence
support products as well as developing their own systems
for communications and radar applications. This
culminated in the development of a radar system for port
surveillance, with the assistance of federal funding, for the
ports of Melbourne and Brisbane. US military interest in
this system led to significant overseas orders over the
years which now represent a major portion of on-going
export sales. "The secret is to have a global focus from
day one – don’t limit your horizons," says David Gaul, CEA
President.
CEA’s ambition is to maintain its Australian identity,
develop and grow its R&D capability and to expand its
capacity to commercialise their technology. To this end
CEA invests 60–70 per cent of its resources in research
and development and is trying to grow an indigenous
CEA does have a domestic market but 30 to 40 per cent
of revenue comes from exports and over 90 per cent of
that comes from defence-related products. “The Australian
market is too small to support our products plus there can
be a disinclination in the Australian marketplace to buy
from local companies: both factors make exporting crucial
for survival,” Mr Foster says. However, at the moment, he
says, “our main competitors are major international primes
involved in radar and communications systems, but they
are also our partners when we collaborate – there are
areas where we work with them and areas where we
compete.”
The US Department of Defense is CEA’s most important
customer, and has assisted in establishing both agents in
the Middle East and advocacy suppliers generally. Mr
Foster says, “Australia doesn’t carry its companies like the
US and Europe. For example if the US or UK need a radar,
then they would go to one of their primes and ask them to
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develop it and give them $100 million to do so. In
addition, the UK has DESO which is solely organised to
sell UK defence product overseas. We receive some help
for investment in our technology, but the amounts are
comparatively small – we get $5-6 million, of which we
need to fund 50 per cent (refer full story below), however,
this does help us to stay competitive and not
complacent.”
CEA worked with the local Canberra network to get into
Indonesia and usually contact Austrade when entering new
markets. Generally Austrade are helpful although it can
depend on the person you get at Austrade: overall
Austrade needs more people with specialist defence
knowledge. CEA has used EFIC and praise their rapid
assistance, for example, a 48 hour turn around on
statements on insurance bonds is the norm. EFIC support
takes a lot of pressure off companies.
Mr Foster has two main concerns with the AusIndustry
R&D Start program: the first is that, while it helps through
product development stages, right when the company has
products developed and ready to sell, the assistance
drops off; and the second issue is the requirement for
SMEs to put in 50 per cent of finance, this sum can be
difficult for fledgling companies to find.
The following sets out the chronological development of
two product lines and shows the assistance provided
which enabled CEA to undertake the work.
Solid State Continuous Wave Illuminator (SSCWI)
Transmitter (2 nd generation product)
In 1995, CEA was awarded a contract by the RAN to
design, develop and manufacture six solid state 2kW
illuminator transmitters for installation in the final six
ANZAC Frigates. CEA was awarded a follow-on contract in
2002 to replace the existing Mk73 transmitters in the first
three ANZAC Frigates that were based on older Travelling
Wave Tube (TWT) technology and were becoming
increasingly unreliable.
The CEA SSCWI Transmitters provide target illumination for
the Evolved Sea Sparrow Missiles (ESSM) by transmitting
a powerful radar signal at an incoming target through the
SAAB 9LV Antenna Director. This combination has been
operationally proven in service with the RAN including
successful firings of the ESSM in 2003 and 2004.
On 14 November 2004, in a further testimony to the
SSCWI Transmitter’s scalable design and modular
architecture, a contract was signed with the Abu Dhabi
Shipyards for the manufacture and delivery of four 1kW
SSCWI Transmitters, spares and installation support to the
UAE Navy for the Baynunah Corvette Programme. This is
CEA’s first export to the UAE and the second major
contract in the region.
CEA-MOUNT (3 rd generation product)
In 1998, the Industry Research and Development Board,
through an R&D Start Grant, awarded CEA $5.9 million to
assist with the development and successful testing of the
next generation of target illumination technology, the CEA-
MOUNT Active Phased Array Continuous Wave Illuminator.
This technology replaces the conventional SSCWI
Transmitter and the Fire Control Director with an active
phased array illuminator.
CEA also received an R&D Start Grant to develop and test
an L Band Active Phased Array Identification Friend or Foe
(IFF) radar. This new radar is designed to complement the
CEA-FAR radar, which, together with the CEA-MOUNT
illuminator, is currently being considered by Defence for
the Anti Ship Missile Defence (ASMD) upgrade programme
for the ANZAC Frigates of the RAN and the new Air
Warfare Destroyers (AWD).
The success of these leading-edge capabilities in domestic
and export markets will rely heavily on the confidence
shown in Australian developed technology by Defence and
the Government. While the SSCWI contract provided CEA
with an excellent opportunity to offer an upgraded product
into the marketplace, the design was constrained by the
specification to replace an existing design. Consequently
the company sought alternative funds soon after to allow
it to commence a green-field development on the next
generation of this type of system. This approach helps
ensure that the company remains at the leading-edge of
product development.
www.ceatechnologies.com.au
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
COCHLEAR LIMITED
Twenty years ago Professor Graeme Clark, in his
groundbreaking research launched the world’s first
commercial multichannel cochlear implant. Since the
first commercial implant, Cochlear’s award-winning
Nucleus range has been implanted in nearly 62,000
people worldwide. Cochlear is the world leader in
cochlear implants that have enabled tens of thousands
of severe to profoundly hearing-impaired people to hear.
Cochlear is the only Australian publicly listed company in
this industry.
Cochlear operates in a global niche market with 80 per
cent share of the market in Asia-Pacific, 60 per cent
share in the Americas and approximately 60 per cent
share in Europe. Cochlear markets into 80 countries
across the Americas, Europe and Asia, in which are
located 1,000 clinics. Cochlear continues to expand its
export base throughout these regions and the Middle
East. Cochlear employs over 800 people, 450 of them
in Australia, with head office, manufacturing, and the
majority of R&D remaining in Australia: although some
R&D is undertaken in Europe and the USA. They have
regional offices in the USA, the UK, France, Belgium,
Switzerland, Germany, Japan and Hong Kong.
Dedication to innovation means Cochlear is a significant
investor in R&D, with $44.5 million spent on R&D in
2004 – which was a 7 per cent increase from the
previous year reflecting acceleration in the development
of new generation technology. Cochlear’s extensive
research program involves clinics all over the world. The
research program provides significant opportunity for
Cochlear to leverage the latest technology research for
future products. The collaboration is also a critical part
of the developing relationship between major implant
professionals and Cochlear. Cochlear’s research efforts
are closely linked to those of the Bionic Ear Institute,
University of Melbourne and the Cooperative Research
Centre for Cochlear Implants and Hearing Innovation.
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Today, Cochlear Limited is just outside Australia’s top
100 companies with a market capitalisation of over
$1.5 billion. Cochlear has been one of the major
success stories on the Australian share market over the
last five years, experiencing enormous growth in revenue
and operating profits and providing substantial share
returns. Sales revenue for the year ending June 2004
was $282 million, below the record 2003 revenue of
$306 million which reflects the impact of increased
competition, pressure on clinics and a slower than
expected uptake of neonatal screening and referral
hindering forecast growth in the infant market.
Cochlear has a strong focus on bringing its products to
new markets such as the Break the Silence, a national
campaign aimed at 26,000 Australians aged over 65
who are isolated by deafness. Cochlear has invested in
building skills and infrastructure in the Asia-Pacific by
conducting training programs with more than 150
surgeons, audiologists and rehabilitationists in North
East Asia and Japan. Similarly, the Cochlear Training and
Education Centre in Belgium is providing surgeons and
audiologists from Europe and the Middle East with
professional skills.
Cochlear has re-focussed its future growth strategy,
ceasing involvement in peripheral areas of research and
redirecting resources on its core business, the Cochlear
implant business, and the development of new products
and applications in the hearing impaired market. In 2005
Cochlear will launch its 4th generation cochlear implant
system; emphasise strategies to increase rate of sales
growth; and continue efforts to penetrate infant and
progressive markets through awareness and advocate
programs.
This case study was prepared from Cochlear’s 2004
Annual Report and material from the Cochlear website.
www.cochlear.com.au
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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APPENDIX E
n
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
COWAN MANUFACTURING
PTY LTD
Cowan Manufacturing specialises in stainless steel and
aluminium fabrication, and is respected throughout the
world for its pioneering work on the design, development
and manufacture of unique transportable recompression
chambers.
The company was formed in 1973 by Bob Cowan and in
the early years the business undertook refitting of ships.
Their reputation for good work gave them access to
contracts for the Australian Navy refits with Cowan
designing, manufacturing, and installing equipment on a
range of vessels. During its first 10 years the company
grew considerably. The 1980s saw a period of
diversification into marine fabrication; floating marina
systems; video booms for security cameras; design;
building of an aluminium cladding system for the
construction industry; and 4-wheel drive bull bars. In
1987 a request to develop a transportable
recompression chamber saw another significant turning
point for the company and although the company
struggled financially, the product was successful. In
1992/93 an order from the US Navy for 70 chambers
turned the tide for the company.
Cowan received financial support through loans and cash
payments. These included an Austrade Market
Development Grant worth approximately $150,000 and
an AusIndustry export loan to the value of approximately
$500,000. This enabled Cowan to strengthen its focus
on a market development strategy which has since
proven effective, and complete Quality Systems training
through the former National Industry Extension Service
Scheme. Cowan has also received small injections of
R&D funding under the R&D Start Program and its
predecessors. In total approximately $50,000 was
received to develop the necessary Quality Assurance
Systems.
Cowan Manufacturing has transformed its skills base
from refit-style sheet metal work and has diversified into
specialised high value added manufacturing. To support
its recompression chamber projects Cowan has
designed and built chamber assembly/disassembly
rooms, facilities to clean components for oxygen use,
carbon dioxide scrubbing devices and a CO2 and oxygen
analyser. To overcome the high temperature/humidity
associated with climates such as Thailand, Cowan has
also developed environmental control systems.
Cowan chambers are today used by police forces,
rescue organisations, commercial diving companies, and
hospitals and Navies – including those of Australia, USA,
Thailand and the Philippines. Over 140 Cowan chambers
are currently in operation worldwide. Products include
the highly successful Transportable Recompression
Chamber System, used extensively by the US and
Australian Navy, and the new era Standard 54” Double
Lock Chamber currently being purchased by the US
Navy.
Search and Rescue Chambers, for use on Philippine
Coastguard vessels, have also been supplied along with
low magnetic signature Twin Lock Chambers for the RAN
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Minehunter fleet, the Thai Navy and the RAN Penguin
Training Facility. Cowan has carried out training of Thai
Navy and Malay nationals on chamber operations and
maintenance.
In 2002, a major turnkey 14-person Hyperbaric Medical
Chamber project for a Thai Hospital was completed.
Cowan undertakes annual audits of the full system, along
with the reaccreditation of its Thai agent as in-service
support provider. A unique containerised recompression
chamber system has also recently been supplied to the
Thai Navy.
The Cowan website is used extensively to establish
contact with new or potential clients and communicate
its credentials to the global marketplace. Cowan’s
business strategy includes the ongoing development and
refinement of recompression chamber products and
services, hypobaric chamber systems that simulate high
altitude conditions for air force pilot training, hyperbaric
medical systems and other high value added products
such as underground rescue chambers. Its precision
welding capability, utilised by the ANU Plasma Research
Facility, is used in the development of many innovative
products. Within these bounds Cowan maintains a global
focus on Defence, other Government and commercial
markets. Cowan also continues to invite proposals to
manufacture metal structures and components.
Cowan has formed informal partnerships with other
businesses including members of the HunterNet
Cooperative to add specialised expertise and meet client
needs. As an example Cowan has established a longterm
partnership with IS Systems which enables it to
access the latest IP and capability essential to develop
more sophisticated products for clients, namely, a
computer driven control system. The relationship is
underpinned by high levels of trust and ensures a
seamless interface with the client from the contract
proposal stage through to the delivery and through-life
support. The US market is still valuable to Cowan.
However, Asia represents a growth market in both
Defence and medical applications for recompression
chambers with new markets having been established in
Thailand and Malaysia.
The focus on quality and commitment through gaining
and sustaining trusting business relationships with clients
has earned Cowan a valued reputation. A further market
differentiator in Cowan’s Asian market is the through-life
support model that Cowan has adopted with its incountry
agents. Cowan has made a considerable
investment in training its in-country agents by fully
involving them from the installation stage through to inservice
maintenance support. The trained local agent
can detect and resolve issues early, communicate
directly back to Cowan’s Australian-based technical
support team and is in a unique position to collect
market intelligence. Cowan is using the same model in
its approach to win contracts in India and the Middle
East. To strengthen this model, Cowan has brought
Malaysian technical staff to Australia for training and has
received funding from Department of Defence Export to
the total value of approximately $50,000, in 2003 and
2004, to run courses in Thailand to train Thai Navy
officers in chamber operations and maintenance.
Cowan considers that smaller-sized companies have the
advantage of greater agility and responsiveness to the
changing needs of markets. Such companies tend to be
highly creative and innovative. Often these attributes are
vested in one or two key people, for example, the
founders of the company. This means these businesses
need to appreciate the need for succession planning and
invest in identifying and nurturing entrepreneurship within
the company and outside the company through
networks, such as The Young President’s Group,
Australian Industry Group and the HunterNet
Cooperative. AusIndustry provides opportunities for
companies to highlight their successes and to motivate
people who have the essential ‘fire in the belly’ for
working or running a high-technology business. Cowan
believes that regional Austrade assistance through trade
shows and positive statements about the successes of
SMEs provides a good platform to help SMEs establish
and prosper.
www.cowanmfg.com.au
PHASE 2 REPORT: GROWING EXPORT CAPABILITY — MARCH 2005
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
COMPUTERSHARE LTD
Computershare is the largest and only global provider of
shareholder and employee management services,
administering more than 70 million shareholder accounts
for over 13,000 corporations across twelve countries
on five continents. Founded in Melbourne in 1978,
Computershare listed on the Australian Stock Exchange
in 1994 with an initial market capitalisation of $36
million. By 2001, it had a stock market capitalisation of
nearly $3 billion. Today Computershare employs
approximately 8,000 people worldwide. Australia
accounts for 25 per cent of Computershare’s sales, with
the rest being sales offshore.
Computershare has pursued growth via acquisition and
alliances on a global basis. For the few years after
1997, Computershare purchased many acquisitions to
the value of approximately $300 million. Among a long
list of acquisitions are:
m 1997: The acquisition of the share registery business
of the Royal Bank of Scotland Group, which doubled
the size of Computershare’s business.
m 1998-99: registry businesses in Ireland, South Africa
and Hong Kong. The Hong Kong acquisition
established Computershare’s presence in Asia whilst
considerably strengthening its position in the UK due
to the high levels of cross-ownership between Hong
Kong and the UK.
m 2000: acquisitions of the stock transfer business of
Harris Bank in the US, the stock transfer and
corporate trust businesses of Montreal Trust in
Canada, the employee plans business of Merrill Lynch
in the US, and the UK's leading institutional share
ownership analysis business, Citywatch.
m 2002: the employee stock purchase plan business of
Charles Schwab in the US; EFA Group’s assets,
including the software rights to EFA’s trading systems
and settlement and clearing systems. (During 2002
Computershare also formed a number of
partnerships in various countries for the strategic
supply of its services and expertise.)
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m 2003: the share registry and employee plans
businesses of Fifth Third Bancorp in the US; and
Georgeson Shareholder Communications, the world’s
oldest and most highly regarded security holder
solicitation and response firm.
m 2004: Equiserve, one of America’s largest share
registrars, for US$292 million. The deal makes
Computershare a pre-eminent supplier of both share
registry and employee plan services in the US.
In 2000, Computershare engaged in a joint venture with
San Francisco firm Pacific Exchange, which brought in
automated screen trading for 850 options traded on the
stock exchange.
In 2003, Computershare announced that it was building
its new international headquarters in Melbourne, which is
expected to create over 1200 jobs in Victoria over five
years. As a result the Victorian Government is providing
payroll tax relief to Computershare, whereby they gain
rebates when certain employment and investment
milestones are reached. Overall, it is estimated that
2600 offshoot jobs will be created in sectors such as
construction and finance.
This case study was prepared from information located
on Computershare’s website.
www.computershare.com
Computershare is leveraged to global share markets and
interest rates, earning fees through corporate
transactions. A major contribution to Computershare’s
growth has been its flagship software product SCRIP,
which automates and stores records of each
shareholder’s investment into a company. In
Commonwealth countries it allows Computershare to be
the share registry and transfer agent registrar in both
the US and Canada. Because this is a complex process
with many parties participating, the software needs to be
both strong and flexible and has to be modified for
different countries.
Currently Computershare is trying to gain a strong
market presence in the US, through its Chicago office.
There has been a large marketing campaign in order to
gain new US customers and make people aware of the
brand.
Dudley Chamberlain, Computershare’s Strategic
Business Development Manager says Computershare is
utilising the 24/7 software development in Bristol,
Chicago and Melbourne. This means at the end of each
day the projects are forwarded to the office in the next
time zone.
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
IDT AUSTRALIA LTD
Institute of Drug Technology Australia Ltd (IDT) is a good
example of growth through a major contract with a large
multinational firm, achieved in part through the
Commonwealth’s Pharmaceutical Industry Development
Program.
IDT has become a significant FDA-approved active
pharmaceutical ingredients development and
manufacturing company in Australia. It grew out of the
Victorian College of Pharmacy and now is a contract
research organisation that offers a range of high quality
drug development services to the pharmaceutical
industry. The Melbourne manufacturing site is used
primarily for the manufacture of anti-cancer drugs
(specialising in cytotoxics), anti-psychotics, antibiotics,
narcotics and anti-inflammatory drugs on a scale of
between 1 and 100kg. The facility also provides smallscale
manufacture of non-sterile finished product for
clinical trials, used in its Adelaide trials facility or under
contract for clients. IDT employs approximately 150
scientists and support staff.
IDT acquired CMAX, a 48 bed, phase I/II clinical trial unit
located within a dedicated ward of the Royal Adelaide
Hospital, Adelaide, in 2002. The clinical trial unit
provides a full range of clinical services including proof
of concept studies, first-in-man trials and bioequivalence
studies. Clients include small biotech companies through
to large multinational pharmaceutical companies. Both
the Melbourne and Adelaide clinics are regularly audited
by FDA and the Therapeutic Goods Administration.
IDT has won a long-term, multi-million dollar deal with
Pfizer Inc, the world's largest pharmaceuticals
manufacturer, for the development and manufacture of a
new developmental drug candidate. Under the contract,
IDT will provide a range of services to Pfizer including:
- process development and manufacture of active
pharmaceutical ingredients
- manufacture of sterile and solid dosage formulations
- clinical labelling and packaging of drug supplies
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The impetus for its primary manufacturing originally
came from a contract with Pfizer, which was a direct
result of Pfizer’s participation in the Factor (f) Scheme
under the Pharmaceutical Industry Development
Program. This demonstrates that supporting one part of
the value chain can have important flow on effects for
other sectors. In this case, the growth from Pfizer’s
investment has assisted IDT to become an established
contract manufacturer for smaller organisations.
IDT’s recently built manufacturing facilities will increase
the suite of full containment chemical manufacturing and
development facilities. This investment will help the
company diversify into the highly specialised area of
drug manufacturing and development, with a 9 per cent
growth in the reported net tangible assets of the firm.
Growth has also been achieved by IDT through its
Adelaide based CMAX operation. This business has
continued to grow and develop, gaining contacts from
both Australian biotechnology and pharmaceutical
companies and those in the UK and US. Additionally, IDT
is seeking to diversify its business to widen the range of
research to be undertaken. IDT attribute its success in
attracting important contracts to its high reputation in
meeting customer needs.
www.idtaus.com.au
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
LOCHARD LTD
Lochard is the world leader in aircraft noise and track
monitoring with a 60 per cent global market share and
installations at 130 airports, including Los Angeles,
Chicago, Heathrow, Amsterdam and Hong Kong.
Lochard was born global and quickly built a global
presence and is now an unlisted public company with
wholly owned subsidiaries in USA, Europe and Asia, with
95 per cent of its revenues derived from exporting
around the world.
The head office is in Melbourne from where the
operations and R&D are conducted. Sales and marketing
and customer services are conducted from its regional
offices in Boston, Sacramento, Amsterdam, Leeds,
Madrid and Taipei.
Lochard was formed out of a joint venture which
successfully tendered for a noise and track monitoring
system at Sydney and Brisbane airports to Airservices
Australia.
With limited opportunity in the Australian market, the
Lochard growth strategy focused on markets in Europe
and North America. With the help of an Export Market
Development Grant and an International Trade
Enhancement Scheme 54 grant from Austrade, the
company was able to secure contracts at key reference
airports in Manchester, Zurich, Washington and
Vancouver.
Lochard initially formed a ‘strategic alliance’ with NLR
(Dutch National Aerospace Laboratory) for the
development of specific technologies and
complemented this with the R&D work undertaken in
Australia with the support of an R&D Start grant. This
grant was pivotal as it enabled Lochard to catch the
crest of the technological wave quickly develop what
was needed and leap frog the competition. Lochard has
strategic alliances with CSIRO, Swinburne University and
the Wyle Laboratories (USA) to build and maintain
leading–edge technology.
54 This grant is no longer available.
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Lochard develops its software and instrumentation in
Australia and maintains a strong commitment to R&D in
order to ensure it continues to lead the market in
innovation and product offering. Lochard takes on the
brightest university students and invests in the
development of its employees.
Running a global business from Australia adds some
complexity but the cost benefits are derived from access
to Australia’s excellent R&D base.
Lochard has shifted its business model from that of a
supplier of equipment with a maintenance contract to be
an outsourced service provider. Lochard’s systems now
run from a common datacentre using the internet to
provide scalability. Lochard has capability in monitoring
air quality at airports reflecting environmental initiatives
such as carbon trading.
Lochard is now expanding its products and services into
real time optimisation of air traffic flow control systems
at airports in conjunction with its German partner delair,
a spin off company from DLR (German Aerospace
Research Laboratories). This technology is the most
advanced implementation of Collaborative Decision
Making with reference installations in Zurich and
Frankfurt is creating strong demand around the world.
Lochard’s business strategy is to focus: on outcomes for
clients; to be the best at what it does and to conquer
the niche which will be driven by getting into as many of
the major airports as it can; shifting the business model
— moving focus from a one-time sale to a service
relationship and achieving a longer-term revenue stream;
and expanding products to existing clients — air quality
and airport operation management optimisation.
www.lochard.com
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
MINCOM LIMITED
Mincom funded all its early export efforts itself, from
operating cash flow. The company was fortunate in that
its primary market sector, mining, already had a number
of global players when Mincom was started in the
1980s. As a result, Mincom’s early Australian successes
created a degree of brand recognition in other countries
with a strong mining sector – particularly South Africa
and North America. Mincom was able to use this to get
a hearing from prospective customers, and then was
successful in securing that all-important foundation client
in the new geography. In the first eight years of
Mincom’s existence it self-funded establishing export
markets in North America (Canada and USA), South
Africa and Indonesia.
Other early export activities were supported by reseller
partnerships established with locally based mining and IT
operations such as Gemcom in South Africa and a joint
venture with a local company PTMI in Indonesia. Mincom
identified and trained these partners.
Mincom received an Export Market Development Grant
in 1989, which funded expansion into Latin America to
support prospect development in the region. Offices
were opened in the region in the early 1990s and Latin
America continues to be an important geographic
market for Mincom.
The fundamental concepts behind the Mincom software
products and associated service packages were based
upon the experiences of the founders and those that
joined the company in its infancy. Early support for
Mincom products was derived from customers who
recognised the potential of the software for their
business and provided ongoing feedback to ensure the
software being developed would meet their needs. This
reflects the size of the gap in the marketplace that
Mincom software was filling and validation of Mincom’s
approach to customers.
In one case an early adopter of Mincom software helped
fund its further development by pre-paying a proportion
of the licence fees. Apart from this all R&D was funded
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from cash-flow. R&D has always been a core priority for
Mincom and a significant portion of earnings are
ploughed back into R&D. In fact R&D spending increased
23 per cent during FY04 to capitalise on opportunities in
mining, defence and utilities. Mincom received a R&D
Start Grant for MineStar in 1999 – a new product
co-developed with mining equipment manufacturer,
Caterpillar.
Mincom has collaborated with numerous technology
partners to enhance solutions. For example, a recent
agreement with Dexterra provides mobile connectivity to
the Mincom Ellipse product and Mincom also has a long
and fruitful technical alliance with IBM. Mincom is
branching into new areas of technology such as
specialised business to business ecommerce solutions
and exploring alternative ways to fund accelerated
development to capitalise on burgeoning market need.
Among the options is the opportunity to commercialise
the business unit responsible for the development of
ebusiness products, so it can seek separate funding
from external, strategic investors.
Critical success factors for Mincom’s development and
sustainability have been:
m Specialisation in five key industries through identifying
and addressing deficiencies in the current software
solutions available;
m Development of transportable software that can be
used on a wide variety of platform combinations, i.e.
hardware, operating software and databases enabling
solutions to be offered to companies with an existing
standard platform;
m Diversification into utilities support as their products
meet the software requirements of remote mining
communities in Australia which operate infrastructure
and services such as railways, power generation,
ports, roads and housing;
m Responding to the ‘outsourcing’ by the mining sector
who was also an early adopter of ‘outsourcing’, by
providing services such as facilities management.
These multiple sources of revenue have proven
invaluable from a sustainability perspective; and
m Selecting core alliance partners, significant because
of geography, industry or market and developing longstanding,
supportive relationships with key clients.
Mincom has made its living from selling its ideas and
technology to local and overseas companies. Critical to
success has been the unflagging belief in its expertise
by some of the biggest offshore customers. Mincom
would not have made the dramatic leaps forward in its
development were it not for strategic ‘backers’ – be they
customers, partners or investors. This underscores the
importance of collaborative, strategic partnerships to
drive innovation. One of the best current examples of
this is Mincom’s partnership with the Australian Defence
Force (ADF). Together, Mincom and the ADF are leading
the world in the development of logistics systems for
defence forces. As other defence operations around the
world are coming to understand the enormous
significance of these Mincom projects, they too are
looking to be part of the development program. This
means sharing the development risk for ultimately a
globally cohesive and operable military solution.
However, this model is currently applicable to the
defence industry alone. There is no forum for other
industries to collaborate on shared technology needs.
The creation of such a forum would help to drive more
efficient, market-driven development that reflects the
broader interests of any given industry, rather than the
needs peculiar to a single operator.
The key opportunity for government and industry is to
establish a forum where ideas for future development
and innovation can be discussed and prioritised, creating
a clear, shared path for intellectual property investment.
There may be opportunities for seed funding from key
stakeholders to provide greater ‘ownership’ of the
development and ensure projects come to fruition.
This will help to drive industry-specific, yet industry-wide
technology solutions, where development risk is spread
and minimised, because there is a guaranteed market at
the end of development.
www.mincom.com
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
RESMED
ResMed is a leading respiratory medical device
manufacturer, specialising in products for the diagnosis
and treatment of sleep disordered breathing (SDB).
When ResMed was formed in 1989, its primary purpose
was to commercialise a device for treating obstructive
sleep apnoea (OSA) which affects approximately 10 per
cent of adult males in Australia. If left untreated it can
severely affect quality of life, health and mortality, and it
is strongly associated with hypertension, heart disease
and stroke.
© ResMed Limited 2005
© ResMed Limited 2005
Dr Peter Farrell formed the ResMed group of companies
to commercialise an invention of Dr Sullivan and
colleagues at the University of Sydney in the 1980s. The
technology uses masks that provide nasal continuous
positive airway pressure from an airflow generator. This
was the first successful non-invasive treatment of OSA.
The most obvious manifestation of OSA is heavy
snoring. It proved very difficult to gain referee approval
for research grants for a treatment of a condition that
the medical profession regarded as clinically
insignificant. For example, a clinical conference of top
research scientists in pulmonary disease, when
considering why it had taken so long to acknowledge the
success of Sullivan’s treatment of OSA, reported (Chest
vol 86, 121, 1984) that: “It is hard to understand why all
the air blown into the nose does not come out the
mouth, but it does not. …it appears that this device is
100 per cent effective.”
© ResMed Limited 2005
During these early years ResMed received financial
support from a number of Commonwealth programs,
including: an R&D grant of AU$150,000 in 1989, a
National Procurement Development Grant of
AU$375,000 in 1991 and an R&D Start grant of
AU$2.6 million in 1997 and an Austrade International
Business Development grant in 1990. However, during
this time the company faced difficulties with attracting
interest from potential financiers, primarily due to
perceptions about its one product focus and a lack of
understanding about OSA.
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In June 1995 the company registered on the NASDAQ
exchange raising US$24 million and in 1999 the
company transferred to the New York Stock Exchange
and later co-listed on the Australian Stock Exchange.
Subsequently, wholly owned subsidiaries have been
formed (such as in the UK) or successful distributors
have been acquired in eleven countries.
ResMed was ‘born global’ and more than 95 per cent of
its products are exported to over 60 countries by
employees and distributors with extensive knowledge
and experience of local markets. This ensures that
ResMed supplies the right products to the right
markets—a key factor in the Company's business
strategy.
ResMed employs some 1,200 people world-wide with
550 at Sydney sites and from offices in the United
States, the United Kingdom, Europe, Asia, and New
Zealand. ResMed's principal manufacturing facilities are
located at the Norwest Business Park where it
assembles and tests devices, masks and accessories.
Revenues grew on average by 30 per cent from
US$88.6 million in 1999 to US$339 million by 2004.
ResMed has a current market capitalisation of
AU$2.2 billion on the Australian Stock Exchange.
ResMed spends approximately 7 – 8 per cent of net
revenues on research and product development and this,
along with a clear focus on growing market
opportunities, has enabled it to create and maintain
shareholder value. Listing on the New York Stock
Exchange provides greater visibility within the financial
community and increases the marketing opportunities for
the products.
technologies. Strategic alliances with other market
leaders such as Medcare Flaga hf., whose multi-channel
sleep recording equipment complements ResMed's
innovative range of diagnostic devices, enable ResMed
to offer a comprehensive product suite.
Critical factors which influenced the international
success of ResMed include:
i. the research base — Professor Sullivan’s group
made the initial invention and has maintained
developments in this field of research;
ii. the invention filled a high value, high volume need
that took time to be recognised by competitors;
iii. attracting the best overseas researchers through
strong research credentials — which enabled
ResMed to access international markets;
iv. establishing intellectual property — the original
patents enabled ResMed to keep potential
competitors out of Australia for approximately five
years. This was enough time to enable ResMed to
start selling and establish an important base in the
US; and
v. continuous improvement — willingness to invest in
new technologies to improve the outcomes for the
patients, for example, considerable research effort
over time has produced a range of flow generators
becoming quieter and smaller. Over 1 million have
been sold. Masks are being made more comfortable,
smaller, and capable of retaining pressure during
head movement. Production is running at a level of
about $2 million per year.
www.Resmed.com.au
Innovation has played a major role in ResMed's success.
Since the company's inception a large number of
product advancements and improvements designed to
increase patient comfort and encourage compliance with
therapy have been developed using feedback from
patients, those in the supply chain and physicians
worldwide working with the treatment of SDB. At the
beginning of 2005, the Company had a total of over
1,000 patents issued and pending for a range of
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
SOFTLAW CORPORATION
LTD
SoftLaw is a good example of growth through alliances,
especially with Government departments.
SoftLaw is involved in development and sale of
computer software, STATUTE Expert, which assists
people in the interpretation and assessment of how
legislation and other rules apply to a given factual
situation.
SoftLaw was established in 1989 with a vision of
assisting citizens to obtain their correct entitlements
from government. Today, its clients include some of the
largest government agencies and its technology has
matured to support rule-based decision making across a
range of practice areas including social security,
compensation, veterans’ benefits, housing and human
resources. It employs about 50 people worldwide.
The company has recently been the subject of a friendly
takeover but remains Australian owned, retaining many
of its original investors. The takeover has brought
additional capital, and strong management experience to
the company.
SoftLaw’s head office is in Canberra. In May 2001 the
company opened its European office in London and in
July 2002 its North American office in Arlington, Virginia.
The European and North American offices were opened
to provide a base for expansion into these markets so
that clients in Europe and North America could have
easier access to the software and services. In July 2003
Softlaw opened a Sydney office to accommodate its
Sydney based staff, to support its expansion into the
financial sector and to support state government clients.
An important early contract for SoftLaw was with the
Department of Veterans’ Affairs (DVA), where it
developed a Compensation Claims Processing System
(CPPS) incorporating STATUTE Expert. CCPS resulted in
radical work redesign, productivity improvements and an
average cut in claim processing time by 60 per cent for
approximately 50,000 claims a year.
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SoftLaw introduced a similar system, also incorporating
STATUTE Expert, in the Department of Defence to
replace over 60 manual and PC based systems. Other
tailored solutions were developed for Centrelink and the
Commonwealth Department of Family and Community
Services. An application of the concepts in a human
resources environment has been adopted by the New
South Wales Premier’s Department.
All of these sites became reference sites for SoftLaw’s
world leading technology. DVA was happy to promote the
value of SoftLaw’s intellectual property in the equivalent
departments in the United States and the United
Kingdom.
Seminars run in conjunction with Austrade resulted in
introductions to some major customers in the United
Kingdom. “The relationship SoftLaw has with Austrade
has been very helpful,” Surend Dayal, CEO of SoftLaw,
said. Mr Dayal also mentioned that, “we tend to have
broad and deep relationships within the one department
or organisation rather than spreading ourselves thinly
across many customers.”
www.softlaw.com.au
The company has achieved substantial sales in the
United Kingdom, with applications in the areas of Inland
Revenue and social security, and the UK Veterans’
Agency (the equivalent of DVA).
Government support has further contributed to SoftLaw’s
development. SoftLaw recently received an AusIndustry
R&D Start grant which provides matching funding over
three years of up to $4.1 million for SoftLaw’s research
and development. This new grant will aid the research
and development of SoftLaw’s technology for
international sale, including:
m significant enhancements to productivity through
accelerated rule-base construction techniques that will
result in quicker and cheaper application development
and improved tools for legislative QA, drafting and
rationalisation;
m broadening its own capabilities by incorporating
conventional third party tools; and
m additional work in advanced computational processing
techniques.
SoftLaw has twice received support from the ACT
Knowledge Fund Grant, the most recent in December
2003. This has been used to commercialise SoftLaw’s
Rapid Legal Analysis and Legislative Quality Assurance
technologies, now being used by the Inland Revenue and
other UK customers.
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APPENDIX E
PMSEIC WORKING GROUP: GROWING TECHNOLOGY-BASED SMEs
CASE STUDY
TENIX GROUP
The Tenix Group has its origins in Transfield, a
construction company which was commenced in 1956
by two engineers, Carlo Salteri and Franco Belgiorno.
Transfield diversified into defence in 1987 at the
initiative of then Joint Managing Director, Paul Salteri.
This led to the purchase of a company known as AMEC,
which successfully bid for the Naval Dockyard at
Williamstown, Victoria. First known as AMECON, then as
TDS, the company re-established a naval shipbuilding
capability in Australia constructing ten frigates for the
Royal Australian Navy and two for the Royal New
Zealand Navy.
Tenix acquired Hawker de Havilland in 1998 and sold it
on to Boeing in 2000 in line with global consolidation of
the aviation industry. In 1999 Tenix acquired a leading
engineering and maintenance contractor, Enetech, which
was named Tenix Alliance in 2001.
Tenix invests in extending capability from existing
products such as Crossbow, a web-based tool which
provides a single and intuitive view of information from
disparate databases. Tenix’s R&D program delivers
significant results such as the radar cross-section
reduction for surface ships.
In 2001 Tenix diversified further by establishing an
infrastructure group to provide project management
services to major private infrastructure projects and a
technology group to provide technology
commercialisation functions.
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Tenix defines its approach to building technology
commercialisation infrastructure as:
m connectivity, bringing together the right stakeholders
to advance projects;
m collaboration, alliances with local companies to
market products overseas;
m communication, about product uniqueness, capability
to solve problems, cost advantage and how to buy it;
and
m conservatism, balancing the excitement of science
and sound business decisions.
Tenix runs a Take to Market Investment Fund to drive
commercialisation of Australian technology by investing
in companies, including SMEs, concepts and initiatives,
individuals and products where they can see some
potential opportunities.
Across its business groups Tenix invests in partnerships,
joint ventures and alliances. Its government partners
include CSIRO with whom it has products under
commercialisation stage, Department of Defence with
whom it has led products through commercialisation and
into the marketplace. A joint venture between Tenix and
Lockheed Martin grew into Tenix Solutions which is
Australia’s largest provider of traffic enforcement
management services.
With respect to Government support programs Tenix has
found working with EFIC to be very useful and valuable.
Today the Tenix Group, comprising Tenix Alliance, Tenix
Aviation, Tenix International USA/UK, Tenix Defence and
Tenix Solutions, employs over 3,000 people. The
financial strength of the Tenix Group is underpinned by
total assets of more than A$776 million, full ownership
of its facilities and a forward order book of
approximately A$2.1 billion.
www.tenix.com.au
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APPENDIX F
EXPERT MARKET
DEVELOPMENT GRANT
PROGRAM – SUGGESTED
APPROACHES
i. Timeliness and quantum of support
m Consider refinements to program design to reduce
what is often an 18 month delay in receipt of
reimbursement of claims.
m Validate the whole export effort by guaranteeing
payment size for tranche 1 and 2. Recognise that
SMEs cannot self-fund a larger proportion of the
export effort from their export earnings and cash
reserves to compensate for the reduced size of a
second tranche payment.
m Reinstate grants for new markets after 7 years in
recognition that at this stage an exporter is still
financially vulnerable and to build sustainability needs
to expand more deeply or broadly into markets.
m Increase the current daily rate of $200 for Overseas
Visit Allowance to recognise higher market rates.
ii. Intellectual Property management
m Make expenses for professional IP advice and
management eligible under EMDG (5.3 Early
Commercialisation includes IP management and
protection as eligible expenditure) to provide
continuity of that support. Increased support for IP
management has been identified by various Action
Agenda industries.
m Allow expenses incurred by a firm which has disposed
of IP to a related company provided the related
company is NOT operating in the same market as the
first company. 55
m Reinstating expenses for registering and protecting IP
rights in overseas markets would remove a
disincentive these costs currently impose on potential
technology-based exporters, leaving the company
vulnerable to loss of the IP.
iii. Building Relationships with other companies
Support collaboration and linkages more strongly
through EMDG by easing the application process and
increasing incentives for the MNEs to initiate such
business relationships to foster innovation and exporting.
iv. Engagement of advisers/mentors
Make explicit in the EMDG Act and Guidelines that
reimbursement for engaging mentors/advisers is
claimable under ‘marketing consultants’.
v. Greater interaction with other Government
programs
Recognise achievement of eligibility criteria for COMET
and Commercial Ready should satisfy those eligibility
criteria for EMDG – thereby establishing the two former
programs as ‘pipeline programs’ for EMDG.
vi. Technology showcasing
Support technology showcasing through EMDG as it is
analogous to the kinds of export promotional activity
supported by EMDG — with the variation that the
particular method of demonstration requires higher
contact time with potential buyers. It represents SMEs
efforts to ‘scale up’ by developing further applications
for its products and to achieve new markets. Provide
higher levels of government support for various offshore
Australian technology business associations, many of
whom provide their members with a mix of mentoring,
networks, and experienced heads that technology
newcomers can call upon. Support through EMDG for
technology showcasing would augment the support to
Australian scientists through the International Science
Linkages program, which although it supports science
linkages and collaborations, does not directly support
showcasing activities. This gap has been identified by
various Action Agenda industries.
m Review the Australian content rules such as the
‘eligible goods’ status which is difficult to determine in
high-technology products, including IP, to remove
disincentives.
55 For example: when Australian-based Company A establishes Company B in the US to circumvent local market prejudice to foreign-owned companies; Company A
disposes of IP to Company B, and undertakes to finance the export promotional activity for and on behalf of Company B; Provided Company B does not operate in
Australia then an amendment to s55 would be supported
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APPENDIX G
GLOSSARY OF TERMS
Business Innovation: Business innovation is the
process by which ideas and the outcomes of research
and development are converted to goods and services,
or enhance the operation of a business. Business
Innovation generates a measurable change in output,
such as new products or services, increased productivity
or reduced costs. 56
Large Enterprise: A large enterprise is defined as an
enterprise employing 200 or more people. 57
Large Firm: A large firm is defined as a business
employing 200 or more people which exports but does
not have any operations in other countries.
Multinational Enterprise (MNE): An MNE is defined as
a large enterprise operating in a number of countries
and having at least one production or service facility
Types of equity capital:
Pre-seed capital: ‘proof of concept’ funding to
establish whether the idea will work and if there is a
potential market.
Seed capital: product is in development. Usually in
business less than 18 months. Funding used for
prototyping, testing, IP protection, business plan
development and other requirements to ready the
product for market.
Start-up capital: product in pilot production. Usually in
business less than 30 months. Used to get the business
licensed, set up and operating as a going concern.
Early expansion capital: product in market. The 1st
round of growth funding for the business.
Expansion capital: provides capital for further rounds
(2nd, 3rd) of growth funding as business plan milestones
are met.
outside its country of origin. 58
Small and Medium Enterprise (SME): A small
enterprise is defined as an enterprise employing less
than 20 people. A medium enterprise is defined as an
enterprise employing 20 or more people, but less than
200 people. 59
Technology-based company: A technology-based
company is defined as one which acquires or creates
new technology that it integrates to develop new
products, processes and services as the basis of its
business competitiveness. These companies occur in
many industry sectors and not just those that have been
traditionally regarded as high-technology industries such
as aerospace and electronics.
56 Department of Industry, Tourism Resources, 2003, Business Innovation, Working Paper for the Mapping Australian Science and Innovation, page 11
57 Australian Bureau of Statistics, 1321.0 Small Business in Australia, 2001
58 Penguin Dictionary of Economics
59 Australian Bureau of Statistics, 1321.0 Small Business in Australia, 2001
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APPENDIX H
INDEX OF REFERENCES
Australian Bureau of Statistics, Longitudinal Survey
1997/98. ABS Cat.No.8154.0
Australian Bureau of Statistics survey on venture capital,
Venture Capital 2003-04, ABS Cat.No. 5678.0,
November 2004
Australian Government, Commonwealth Procurement
Guidelines, January 2005, 5.3-5.6
Australian Trade Commission, Knowing and Growing the
Exporter Community, ISBN 0-9580741-0-0, 2002
Department of Industry, Tourism and Resources,
Technology-based SMEs, Special Report for the
Department of Industry, Tourism and Resources, Sensis
Business Index, May 2004. Will be made available at
http://www.dest.gov.au/science/pmseic/meetings/
13thmeeting.htm
Industry, Research and Development Board: SMEs:
Taking Innovation to the Global Market, a study of a
small number (25) of selected participants in the R&D
Start and Biotechnology Innovation Fund programs,
February 2005
Team Canada Inc Annual Report 2002,
www.exportsource.ca
The Coalition’s Election Commitment, Trade – Creating
Jobs for Australians. issued 1 October 2004
The Hon. Mark Vaile MP, media release, Historic
Agreement to Boost Exports, 4 April 2002
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CONTENTS
Executive Summary 65
Summary of Policy Recommendations 68
1 The Working Group’s Task 69
2 The Growth Challenge 71
3 Profile of Technology-Based SMEs 74
4 Key Findings: Meeting the Growth Challenge 77
5 The Export Imperative 79
Recommendation 1 81
CASE STUDY: ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED 83
6 Business Innovation Underpins International Competitiveness 84
Recommendation 2 85
CASE STUDY: PROTEOME SYSTEMS LIMITED 86
7 Australian Capital for Growing Australian Business 87
Recommendation 3 89
L
CASE STUDY: GEOSIM TECHNOLOGIES PTY LTD 90
8 Experienced Management is Essential 91
Recommendation 4 93
Recommendation 5 93
CASE STUDY: IMMERSIVE TECHNOLOGIES PTY LTD 94
9 Data on Technology-based SMEs 95
Recommendation 6 96
10 Additional Work should be Undertaken 97
Recommendation 7 97
11 Conclusion 98
Attachment A: PMSEIC Working Group Membership 99
Attachment B: Definitions 100
Attachment C: Submissions to PMSEIC Working Group 101
Attachment D: Technology-Based Company Interviews 102
Index of References 103
Photo from the previous page courtesy of CSIRO Plant Industry

EXECUTIVE SUMMARY
The Working Group’s vision is for the Australian
economy to provide fertile ground for the rapid
generation of technology-based small and medium
enterprises (SMEs) to seed the formation of many
large internationally successful and export-led
Australian-based technology companies.
Technology-based SMEs are critical for Australia’s
success in the global economy. Given Australia’s
location and size, business innovation is an imperative to
transform Australian firms into global suppliers.
Innovation is an important driver of economic growth.
The use of knowledge to create new products,
processes and services generates wealth and
accelerates the pace of economic development. Current
government policy is addressing the challenge of
generating new technology-based SMEs.
The Working Group’s vision is for the
Australian economy to provide fertile ground
for the rapid generation of technology-based
small and medium enterprises (SMEs) to
seed the formation of many large
internationally successful and export-led
Australian-based technology companies.
The next and most critical challenge is to sustain
and grow Australia’s technology-based SMEs, and
to link them with global markets. This challenge can
be met by growing more Australian SMEs into
multinational enterprises (MNEs) and better linking SMEs
with existing MNEs. Overseas 1 and local studies have
concluded that technology-based SMEs are fast growing,
create high value jobs and have high export potential,
renew established industries and create new industry
sectors. 2 They contribute directly to economic growth by
being catalysts for knowledge diffusion and by
introducing new technology products in response to
market demands. We need to achieve better business
outcomes from the Government’s substantial investment
in innovation. We need to grow Australia – not seed
other economies. This is a business challenge, not a
scientific challenge.
In Australia, SMEs comprise 99.8 per cent of the
estimated 1.16 million companies, contribute 26 per
cent to our Gross Domestic Product (GDP) and employ
3.3 million people. While technology-based SMEs
comprise only 13 per cent of all SMEs 3 , they constitute
two thirds of all SMEs that perform research and
development (R&D), spending $1.48 billion in 2001–02 4
— suggesting an untapped resource for growth. Sensis
1 OECD, Enhancing SME Competitiveness, The OECD Bologna Ministerial Conference, p 71-86, 2001
2 The Allen Consulting Group, Winning Companies and Jobs: How High Growth and Knowledge-Intensive Industries Create Jobs, p 8-9, 1997
3 Department of Industry, Tourism and Resources, Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources, Sensis Business
Index, May 2004
4 Department of Industry, Tourism and Resources analysis of ABS Business R&D database data 2001-02, commissioned April 2004. File titled: Final ABS File for
First Phase Analysis 8 Feb 2005.xls – worksheet ‘R&D Spend $’000”
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data reveals that overall, 16 per cent of SMEs reported
that they had exported in the past year (with 4.4 per
cent of all SMEs being high /medium high technology
exporters). 5 Global trends in manufacturing exports of
developed countries indicate high technology products
are the area of growth. 6
Australia has a stable and strong economic environment
to grow and sustain technology-based SMEs. However,
the relatively limited number of Australian global
companies and MNEs constrains the ability of SMEs to
grow by leveraging the knowledge and international
markets’ access of these enterprises.
Many small Australian companies with growth potential
are isolated and struggling to overcome start up
problems and the challenges posed by Australia’s scale
and location. While distance to markets is not as costly
to Australia as it used to be, geographic remoteness is
still a significant obstacle in the pursuit of world-class
productivity. 7 Small Australian companies are prone to
licence or sell technology early and move offshore to
raise capital. Worse still, many fail to realise the potential
of their ideas, resulting in loss of income, jobs and
economic growth.
The Working Group’s findings based on research,
consultations with key stakeholders and interviews with
the CEOs of leading Australian technology-based SMEs,
suggest four critical factors influence the growth of
technology-based SMEs. These are the ability to export;
a focus on developing innovative solutions to customer
problems; having access to domestic expansion capital;
and possessing experienced and skilled management.
This task necessitated new analysis on technology-based
SMEs as well as additional commissioned survey work.
Some of the data on technology-based SMEs appears
for the first time though more data is still required.
Exports are vital for the Australian economy and
the potential for technology-based SMEs to deliver
valuable, sustainable exports is especially high.
Technology-based SMEs must export to gain the
economies of scale needed to develop world leading
technology. The value of our high-technology exports is a
quarter of the OECD average, ranking Australia 26th
among OECD countries. Initiatives are needed to support
technology-based SMEs to facilitate market entry and
development of export markets, ideally in tandem with
industry-led collaboration. ‘Piggybacking’ on the
resources of established industry partners is an
important strategy for growing SMEs. 8
Business innovation underpins international
competitiveness. Innovation is about solving customer
problems, but it takes time and money. Scientific
invention is only a small part of innovation – and the
other elements are far more costly. A greater policy
emphasis is required on strategies that enable
technology-based SMEs collectively to drive commercial
and export success in their industries.
Business innovation requires significant and patient
capital. International venture capital offers access to
global networks and in many cases is needed to
commercialise Australian technology. However, no nation
can rely on foreign capital alone to develop its
technology industries. While current Government
programs focus on start-up funding, there is a shortage
of expansion capital for technology-based SMEs in the
range $5 million to $30 million, with the majority of
committed, expansion capital being directed to nontechnology-based
firms. The recent Innovating Australia
report noted that: “In almost no country other than
Australia does the stock market attempt to finance
innovation in its early phases.” 9
Growing global businesses requires high-quality,
experienced, entrepreneurs and managers, with
skills that can only be learnt ‘on-the-job’. There is
limited availability of experienced managers for
technology-based SMEs in Australia. In the short term,
we should repatriate experienced entrepreneurs,
encourage experienced managers of large companies to
run growing companies, and support local entrepreneurs
with high-quality mentoring and support. A prerequisite
for attracting the best people will be the availability of
top class business opportunities and the opportunity for
experienced entrepreneurs and managers to share
equitably in the future wealth they may create.
5 Department of Industry, Tourism and Resources, Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources, Sensis Business
Index, May 2004
6 OECD, Science and Technology Innovation Scoreboard 2003
7 Department of the Treasury, Budget Papers 2003
8 Austrade makes this point in relation to strategic alliances and notes that it is particularly relevant to biotechnology-based industry
http://www.austrade.gov.au/australia/layout/0,,0_S2-1_CLNTXID004-2_-3_-4_-5_-6_-7_,00.html – Austrade website – New Exporter Services – Different Ways to
Take Your Business Offshore
9 West J., Financing Innovation: Markets and the Structure of Risk, in Innovating Australia, Committee for Economic Development of Australia, (CEDA), April 2004
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The Working Group believes that a few key policies
coupled with the adaptation of existing successful
policies could significantly increase the expansion and
development of technology-based Australian SMEs in the
medium-term. Robust data will be essential for tracking
the impact of polices on innovation outcomes.
To grow Australia, we must become world-class
business builders and exporters. We need to create
the knowledge-based jobs future Australians will require.
We must place greater emphasis on achieving
commercial and export success – otherwise, the
benefits of our investment in science, technology and
education will be enjoyed, not in Australia, but overseas.
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SUMMARY OF POLICY RECOMMENDATIONS
RECOMMENDATION 1
(a) Introduce a Collaborative
Export Marketing Solutions
program to complement the
Export Market Development
Grants program, providing
competitive, merit-based grants
for SME-driven export
marketing initiatives.
(b) Fund the appointment of
additional, domestic and
international, Austrade Industry
Export Advisers to facilitate
technology-based SMEs to
develop collaborative export
opportunities.
RECOMMENDATION 2
Ensure that the new Commercial
Ready program supports companies
engage external assistance to develop
products to market readiness.
RECOMMENDATION 3
Increase the availability of domestic
expansion capital for technologybased
SMEs in the $5 million to
$30 million range by creating a taxadvantaged,
privately managed fund
into which individuals can directly
commit a portion of their
superannuation contributions.
RECOMMENDATION 4
Reform the tax treatment of
Employee Share Options to support
the attraction and retention of
skilled and experienced managers,
by making tax payable on the capital
gain only when options or shares are
cashed-out.
RECOMMENDATION 5
Through the extended COMET
program, support firms at the
expansion stage by introducing a
national and an overseas mentoring
network, contracting-in mentors to
assist in building management skills
domestically and for export markets.
Austrade should be involved in
building the network of mentors
overseas.
RECOMMENDATION 6
Upgrade business and innovation
surveys to track and analyse the
performance of knowledge intensive,
including technology-based,
industries, in all key areas
including exports. In conjunction,
develop a framework to map
Australia’s business innovation.
RECOMMENDATION 7
To build upon a key finding that
increasing the export capacity of
technology-based SMEs is critical,
the Working Group should be
continued and be tasked with
exploring this issue in more detail
in consultation with industry and
government agencies. Areas to be
investigated may include technology
demonstration programs,
enhancements to the Export
Marketing Development Grants
program, supporting the increased
use of industry collaborative
networks and addressing
impediments in the tax system to the
development of export-oriented
technology-based SMEs.
s
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1
THE WORKING
GROUP’S TASK
The Working Group has been asked to consider the
growth of Australian technology-based firms with
particular reference to the following:
m Identify the key success factors that drive growth in
technology-based SMEs.
In this report, a technology-based company
is defined as: one which acquires or creates new
technology that it integrates to develop new products,
processes and services as the basis of its business
competitiveness. These companies occur in many
industry sectors and not just in industries
that have been traditionally regarded as high
technology industries such as aerospace and
electronics.
m Describe the impediments or hurdles to growth faced
by technology-based SMEs including accessing global
markets.
m Advise how Australia can best support the growth of
sustainable Australian technology-based SMEs.
m Develop case studies of technology-based SMEs
which are at different phases of growth to highlight
key issues. Case studies should be drawn from a
number of sectors such as mining, defence,
agriculture, energy, IT and biomedical technologies.
m Discuss the implications of these findings for
government, industry and other stakeholders.
Working Group members are high-achieving business
people who are actively leading the growth of
technology-based SMEs. A list of members is included in
Attachment A.
In this report, a technology-based company is defined
as: one which acquires or creates new technology that it
integrates to develop new products, processes and
services as the basis of its business competitiveness.
These companies occur in many industry sectors and
not just in industries that have been traditionally
regarded as high technology industries such as
aerospace and electronics.
Small and medium enterprises (SMEs) are defined as
follows: small business is a business employing less
than 20 people; medium business is a business
employing 20 or more people but less than 200
people. 10 A multinational enterprise (MNE) is defined as:
a large enterprise operating in a number of countries
and having at least one production or service facility
outside its country of origin. 11 The key definitions used in
the report are listed in Attachment B.
In developing the report, the Working Group has drawn
on research from Australia and overseas, including
10 Australian Bureau of Statistics, Cat. No. 1321.0 Small Business in Australia, 2001
11 Penguin Dictionary of Economics
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Australian Bureau of Statistics (ABS) and Austrade data.
The report also draws on new data commissioned from
Sensis Pty Ltd and from the ABS.
The Working Group also sought submissions from key
stakeholders, with submissions being received from
technology-based SMEs; industry associations; the
finance sector; and both State and Federal
Governments. Submissions are listed in Attachment C.
Working Group members also conducted face-to-face
interviews with senior executives of 12 Australian
technology-based SMEs. Companies interviewed are
listed in Attachment D. Some case studies have been
developed based on these interviews.
The Working Group notes that the Government has
received several earlier reports on issues related to
technology-based SMEs and the Working Group has
taken the findings and recommendations of previous
reports into account. The reports include: the PMSEIC
reports on Management Skills and Public Research
Commercialisation; the House of Representatives
Standing Committee on Science and Innovation report,
Riding the Innovation Wave: The Case for Increasing
Business Investment in R&D, released in June 2003 (the
Nairn Report); the Government response to the Nairn
Report released in March 2004; and the Committee of
Economic Development of Australia report, Innovating
Australia, (the CEDA Report), released in April 2004.
The Nairn Report focused on identifying R&D drivers in
small and medium-sized businesses and the needs of
fast-growing companies. The Government’s response to
the report agreed that a number of the
recommendations would be considered within the
Government’s Backing Australia’s Ability policy
development framework. Several of the Nairn report’s
key findings and recommendations are consistent with
the findings of this Working Group and could be
addressed by implementing this report’s
recommendations.
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2
THE GROWTH CHALLENGE
Innovation is a key driver of economic growth and
accelerates the pace of economic development
“Excellence in science and innovation is critical if
Australia is to maintain its high productivity
growth… and to turn great ideas into Australian
jobs and income.”
The Hon John Howard MP, 25 February 2004, address to the
Committee for Economic Development of Australia.
“Excellence in science and innovation is
critical if Australia is to maintain its high
productivity growth… and to turn great
ideas into Australian jobs and income.”
The Hon John Howard MP, 25 February 2004, address to
the Committee for Economic Development of Australia.
Achieving high productivity growth through science and
innovation requires growing world-class businesses for
the benefit of Australia. If Australia does not rise to this
challenge and realise its potential, then the nation risks
seeing its invention and creativity ‘seed other economies’
at the expense of its own in a fiercely competitive world.
Innovation is not invention – it is the successful
exploitation of ideas. It often involves new technologies
or applications of existing technologies. Innovation is
important to all Australians because it will deliver better
products and services, more efficient processes and a
higher standard of living. Improving productivity growth
through technological innovation – finding smarter,
quicker ways of doing things – is vital for Australia’s
future prosperity.
Links between innovation, growth and productivity
are well documented
There is a close relationship between investment in
technology at the firm level and national economic
productivity. Links between innovation, growth and
productivity are well documented and governments
throughout the world are responding. 12
For instance, the UK Treasury has set out a 10 year
investment framework which firmly anchors innovation
policy as one of the British Government’s wider growth
and productivity strategies. 13 The British Government
sees innovation as the key to higher productivity and
prosperity for all. 14 It has made whole-of-government
action a top priority, including a National Technology
Strategy to encourage businesses to produce globally
competitive technologies. This initiative should be closely
monitored.
12 For example, OECD, The New Economy: Beyond the Hype 2001
13 HM Treasury, Science and innovation: working towards a ten-year investment framework, March 2004
14 Department of Trade and Industry, Innovation Report: Competing in the global economy: the innovation challenge, December 2003
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Productivity growth will help meet Australia’s current and
future challenges: such as ongoing external competitive
pressure; environmental sustainability; and an ageing
population. According to Gary Banks, Chairman,
Productivity Commission, “If Australia is to surmount
these challenges, we need to continue to find ways of
raising our productivity performance.” 15
Australia’s innovation performance
An OECD 2004 international benchmarking report
identifies areas of strength and opportunities for
improvement in Australia’s relative innovation
performance. See Figure 1. It confirms Australia’s robust
macroeconomic performance, scientific output and use
of human resources in Science and Technology. Areas
for improvement include: business expenditure on
research and development (BERD) as a percentage of
GDP; patents; science-industry linkages; technological
entrepreneurship; investment in venture capital as a
percentage of GDP; and share of high and medium-high
technology industries in manufacturing exports.
Relative innovation performance in the knowledge
economy needs to take account of industry structure
and not focus solely on growth factors. Professor Keith
Smith from the European Commission Joint Research
Centre, notes that the knowledge economy often
focuses on ‘frontier technologies’ and science based
industries, with high levels of direct R&D and patenting
including in computer manufacturing,
telecommunications, scientific instruments and biopharmaceuticals.
16 Research suggests that these
industries contribute less than 3 per cent of Gross
National Product (GNP) in most OECD economies.
On the other hand, manufacturing and service industries
such as food processing, hospitality, timber products,
textiles and clothing, mining, wine, mechanical
engineering and transport are large, often growing,
Figure 1: Profiling the Australian Innovation System (2001 or latest year available data) 17
500
450
400
Performance range of OECD countries
Performance range of G7 countries
Australia
350
300
250
200
150
100
50
0
1 2 3
4 5 6
7 8 9
10 11
12 13
14 15 16 17
18 19
20 21 22
Macro
economic
performance
R & D
activity
Human
resources
in S&T
Scientific
output
Innovative
output
Science-industry
linkages
International
linkages
Technological
entrepreneurship
Industrial
structure
1 Annual GDP per capita in USD
2 Annual growth rate of GDP
3 Annual growth of multi-factor productivity
4 GERD as a % of GDP
5 BERD as a % of GDP
6 R&D performed by the non-business sector as a
% of GDP
7 Scientists and engineers employment share as a
% of the labour force
8 Business researchers per 10,000 labour force
9 PhD graduation rate in science, engineers and
health
10 Scientific and technical articles per million
population
11 Publications in the 19 most industry-relevant
scientific disciplines
12 Share of firms introducing new or technologically
improved products or processes
13 Number of patents in the 'triadic' patent families
per million population
14 Business-financed R&D performed by government
or higher education as a % of GDP
15 Business-financed R&D performed by higher
education as a % of GDP
16 Share of firms with co-operation arrangements
with government or higher education institutes
17 Scientific papers cited in US-issued patents
18 Percentage of scientific publications with a foreign
co-author
19 Share of foreign affiliates in manufacturing R&D
20 Entrepreneurial activity
21 Investment in venture capital (early stages and
expansion) as a % of GDP
22 Share of high- and medium-high-technology
industries in manufacturing exports
15 PC Update, April 2004 Issue 24, quarterly Productivity Commission newsletter
16 Smith, K., European Commission Joint Research Centre, Seville, Spain, The Knowledge Economy in the Australian Context, Presentation to the National Europe
Centre, Australian National University, 2004
17 OECD, Public-Private Partnerships for Research and Innovation: An Evaluation of the Australian Experience 2004
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knowledge-intensive and innovative. Indeed, around 47
per cent of Australian exports are associated with
manufacturing. Mature industries may perform little or no
direct R&D and rarely patent. However, new product
development and sales in these industries are significant
and they often have high growth sub-sectors such as the
Australian wine industry.
We contend that technology-based SMEs drive the
technological upgrading of Australian industries. While
technology-based SMEs can drive the creation of new
industries, it is not the only source of growth.
Technology-based SMEs can equally assist incumbent
industries which often have complex, science-using
knowledge bases – the mineral exploration sector is a
leading example.
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3
PROFILE OF
TECHNOLOGY-BASED
SMES
Figure 2: Technology profile of SMEs
Medium to
High Technology
7%
Medium
Technology
17%
High Technology
6%
Figure 3: Growth by Technology Level
17%
64%
high
technology
19%
15%
60%
Low Technology
25%
medium
to high
technology
12%
70%
66%
22%
medium
technology
7%
51%
42%
low
technology
9%
55%
average
36%
significant growth moderate growth no growth
Australia’s technology-based SME sector
Australian industry is characterised by a large number of
small firms, the dominance of foreign-owned firms in
some industries and few large firms that operate as
home-based multinationals. SMEs comprise 99.8 per
cent of Australia’s 1.16 million companies, and generate
26 per cent of GDP. Around 50 per cent of these are
single-person businesses; 96 per cent are small
businesses 18 ; and 3.38 per cent are medium-sized. 19
An up-to-date snapshot of Australia’s technology-based
SME sector is provided below from the May 2004
Sensis Business Index. 20 A sample of 1800 SMEs were
asked to identify whether they were high, medium-high,
medium or low technology-based businesses. The results
indicate 13 per cent of SMEs consider themselves to be
technology-based businesses that fall within high and
medium-high technology categories. See Figure 2.
Sensis data reveals that overall, 16 per cent of SMEs
reported that they had exported in the past year (with
4.4 per cent of all SMEs being high /medium high
technology exporters). A much higher proportion of
technology-based SMEs plan to export than other firms.
As a group, technology based firms are twice as likely to
actively seek significant expansion, compared with the
medium and lower technology group. In addition, fewer
technology based firms have no plans to expand. See
Figure 3.
A proxy was used, based on OECD work to estimate the
research expenditure of technology-based firms. 21
Summary results of the analysis for manufacturing and
relevant services industries are presented in Table 1.
18 For the purposes of this report a small business is defined as a business employing less than 20 people. Categories of small businesses include:
- single person businesses: sole proprietorships and partnerships without employees;
- micro businesses: businesses employing less than five people, including non-employing businesses;
- other small businesses: businesses employing five or more people, but less than 20 people
19 Australian Bureau of Statistics, Small Business in Australia: Cat. No. 1321.0, 2000
20 Department of Industry, Tourism and Resources, Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources, Sensis Business
Index, May 2004
21 Department of Industry, Tourism and Resources analysis of ABS Business R&D database data 2001-02, commissioned April 2004. File titled: Final ABS File for
First Phase Analysis 8 Feb 2005.xls
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Table 1: R&D invested by technology-based firms (2001-02)
Technology-
Other
based firms
firms
Key Measures SMEs Large SMEs Large
Number of firms 2129 212 1099 319
R&D Business
Expenditure 1.48 2.07 0.61 1.39
Research Effort
(person years spent
on R&D) 11434 11104 3463 4387
The data indicates that technology-based SMEs spent
around 72 per cent ($1.48 billion) of the level of R&D
expenditure spent by large technology-based firms.
Technology-based SMEs spent more on research effort
than large technology firms (by person years of full-time
research). SMEs in non-technology industries also
invested substantially in R&D, for example, in the
aquaculture and the wine sectors.
Data for the last 10 years (in Table 2) 22 shows that
technology-based SMEs’ rate of business expenditure on
R&D was double that of other SMEs, and has also kept
pace with large technology-based firms.
For 2001-02, all industries analysed spent $5.5 billion
on R&D, including the mining industry. Note that the
mining industry was not classified as technology-based in
developing Table 2. Detailed analysis revealed the
relative importance of some service industries.
Computer services companies made up one in three of
the technology-based SMEs conducting R&D.
Table 2: Change in R&D Invested by technology-based
firms (1992-2002)
Technology-
Other
based firms
firms
Key Measures SMEs Large SMEs Large
Number of firms 34.83% 2.91% 54.14% -7.08%
R&D Business
Expenditure
($ Billion) 138.71% 148.23% 66.67% 63.15%
Research Effort
(person years spent
on R&D) 69.2% 72.49% 64.05% -16.37%
Potential gains from technology-based SMEs
SMEs make a disproportionately large contribution to
economic growth and to industrial development in
Australia, generating 26 per cent of GDP. According to
the Commonwealth Scientific and Industrial Research
Organisation (CSIRO), SMEs accounted for 70 per cent
of job growth over the past decade. 23
Technology-based SMEs are critical for Australia’s
success in the global economy. OECD and Australian
research suggests these firms are fast growing, create
high value jobs, have high export potential, renew
established industries and help create new industry
sectors. They contribute directly to economic growth by
being catalysts for knowledge diffusion and by
introducing new technology products in response to
market demands.
Of the SMEs that export, knowledge-based firms, such
as technology-based SMEs, were the fastest growing in
the decade 1992-1999. 24 Furthermore, global trends in
manufacturing exports of developed countries indicate
high technology products are the area of growth. 25
According to the Nairn Report, fast growing companies 26
are motivated by fear of “technological obsolescence”,
as they face “constant pressure to improve and innovate
in order to maintain their commercial viability. On
average, 70 per cent of (their) current revenue was from
new products developed within the last five years.” 27
22 Department of Industry, Tourism and Resources analysis of ABS Business R&D database data 2001-02, commissioned April 2004. File titled: Final ABS File for
First Phase Analysis 8 Feb 2005.xls
23 CSIRO, Australian Growth Partnerships, 2004
24 Austrade, Knowing and Growing the Exporter Community, 2002, p 17
25 OECD, Science and Technology Innovation Scoreboard 2003
26 The Nairn Report defines fast-growing companies as companies that display high employment growth and/or rapid turnover growth, p 49
27 Australian Electrical and Electronic Manufacturers’ Association Ltd, Riding the Innovation Wave, Submission to the House of Representatives, 2003, p 49
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The 2003 DeloitteTechnology Fast 50 survey which
ranks Australia’s fastest growing technology companies
supports these findings. 28 Some 37 per cent of survey
respondents intend to increase their staff complement
by at least 20 per cent in 2003. Around 45 per cent of
survey respondents expected a similar increase in 2004.
The Deloitte Survey also paints a picture of optimism
with 84 per cent of companies either very confident or
extremely confident about their growth prospects over
the next twelve months.
May 2004 Sensis data confirms this finding, with a
strong relationship between technology use by SMEs and
future growth expectations.
But despite high confidence levels, the Deloitte Survey
reported that 35 per cent of companies surveyed still
regarded managing growth as their biggest challenge
following by market expansion and related competitive
forces.
28 Deloitte Touche Tohmatsu, Technology Fast 50 Australia, 2003 accessed via www.deloitte.com
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4
KEY FINDINGS: MEETING
THE GROWTH CHALLENGE
The Australian SME sector is diverse and growing but
still faces significant challenges.
“There is a rich constellation of emerging new
firms, often in specialised niches, although few
appear to be major new trajectories. Such firms
are in a diverse range of sectors and include
firms bringing new technology solutions to
growing markets….” 29
“There is a rich constellation of
emerging new firms, often in specialised
niches, although few appear to be major
new trajectories. Such firms are in a
diverse range of sectors and include
firms bringing new technology solutions
to growing markets….”
The Working Group’s research suggests that, while there
is cause for optimism, a vibrant technology-based SME
sector is still a long way off in Australia. In particular, we
are constrained by the limited number of Australian
MNEs, which means fewer opportunities for SMEs to
leverage large-company knowledge and to access
international markets. 30
There are only a few large internationally successful and
export-led, Australian-based technology companies.
Australian also has a very low proportion of domestic
medium-high technology manufactures. 31 There are many
smaller, growing companies, but they are isolated and
struggling to overcome start-up problems and the
challenges posed by Australia’s scale and location.
The result? Australian companies are prone to licence or
sell technology early and move offshore to raise capital.
Worse still, many fail to realise the potential of their ideas,
resulting in loss of income, jobs and economic growth.
We therefore need to create a climate in which Australian
SMEs can create linkages with existing MNEs and grow
into MNEs in their own right. This is a business challenge
– not a scientific challenge. Dr Ben Greene, CEO, Electro
Optic Systems, stated: 32
“It is in Australia’s interests to keep growth
companies including their IP and talented people
onshore for as long as possible.”
29 Scott-Kemmis, D., Innovation Systems in Australia, Innovating Australia, Committee for Economic Development of Australia, 2004, p 70
30 Committee for Economic Development of Australia, Policy Statement, April 2004, Innovating Australia
31 In 2000, Australia ranked 25th amongst OECD countries for its share of gross value-added technology-based manufacturing (high and medium-high technology
manufacturing). Australia’s share was less than 4 per cent of total value added, against an OECD average of more than 8%, OECD Science Technology and
Innovation Scoreboard 2003
32 PMSEIC Case Study, 2004, Electro Optic Systems Holdings Ltd
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The Working Group’s findings based on research,
consultations and interviews with the CEOs of leading
Australian technology-based SMEs, suggest four critical
factors influence the growth of technology-based SMEs:
m the ability to export;
m a focus on developing innovative solutions to
customer problems;
m having access to domestic expansion capital; and
m possessing experienced and skilled management.
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5
THE EXPORT IMPERATIVE
Exports are vital for the Australian economy
Exports are critical to Australia’s growth. They help pay
for our imports, particularly technology imports that
drive productivity gains needed for Australian economic
growth. Exports account for one fifth of our GDP and for
one in five Australian jobs. There were close to 31,000
businesses that exported goods during 2002-03
together yielding over $115 billion in export revenue.
The 2,300 businesses that exported services (excluding
businesses providing services to tourists and students in
Australia) contributed export revenue of $18 billion. 33
ABS data reveals that exporters are more innovative, pay
better wages and provide more training for their
employees. 34 Exporters are more likely to introduce a
new good or service or use advanced management
techniques than non-exporters.
ABS data reveals that exporters are more
innovative, pay better wages and provide
more training for their employees. Exporters
are more likely to introduce a new good or
service or use advanced management
techniques than non-exporters.
Exposure to world markets facilitates the adoption of
innovations from other countries. It generates an
understanding of international best-practices and
exposes companies to leading edge innovations and
international competitors leading to more effective
domestic business innovation. Currently, around 16 per
cent of Australian SMEs are exporters and 4.4 per cent
of all SMEs are technology-based SMEs. 35
Domestic market for technology-based products
and services is too small
The growth potential of many technology-based SMEs is
limited by Australia’s small domestic markets and
impediments to accessing global markets. Australia’s
domestic market can be too small to warrant the
investment needed to develop world-class technology for
export. To begin to export, technology-based SMEs
require capital, business and marketing skills as well as
opportunities to network and showcase their products
and services.
According to Austrade research, increasing numbers of
younger firms are ‘born globals’. 36 These, mostly
technology-based firms, develop their products for sale
in global markets and export within two years. There are
a number of reasons for the increased emergence of
‘born globals’, including improved global intellectual
33 Australian Bureau of Statistics, Cat. No. 5368.0, International Trade in Goods and Services. Feature Article -Australia’s Exporters 2002-03
34 Australian Bureau of Statistics, Cat. No 8154.0, A Portrait of Australia’s Exporters: A Report Based on the Longitudinal Survey
35 Department of Industry, Tourism and Resources, Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources, Sensis Business
Index, May 2004
36 Austrade, Knowing and Growing the Exporter Community, 2002, p 4
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property protection, the internet, and development of
‘mass customerisation’ processes in manufacturing and
services. ‘Born globals’ have traditionally been
manufacturing firms – but increasingly include services
firms in IT, digital content and professional services. The
‘born global’ trend must be encouraged and accelerated.
Technology-based SMEs – a natural and more
sustainable export potential
The Australian Government has set a target to double
the number of exporters by 2006, and has clearly
identified SMEs as the priority target group. Meeting this
target could increase export revenues by $40 billion by
Austrade estimates. 37
To achieve this goal, government policy must focus on
SMEs that can generate real value. At the 2003 Warren
Centre Innovation Lecture, Mr Evan Thornley, Chairman
of LookSmart, noted that the export opportunity for
Australian technology companies is in adding value to
existing technologies. Producing technology that meets
the needs of an existing customer base, rather than sunrise
technology, can minimise the cost of exporting.
Partnering with traditional industries that already have a
major market share and an international distribution
network will also assist in penetrating international
markets.
We all perceive Australian businesses to be strong
developers of innovative new technologies, products and
processes. However, nine of Australia’s top ten
merchandise exports are in the primary products
category. According to the OECD, for most advanced
economy countries, export growth in manufacturing is
concentrated in higher technology industries. It is
exports of the higher value-added products and services
that can have the greatest impact on Australia’s
economy.
Australia’s exports of high technology manufactures were
valued at $8.53 billion in 2002, representing 6 per cent
of all exports. As a percentage of GDP, the value of
these high technology exports is a quarter of the OECD
average – ranking Australia 26th in the OECD. 38
However, when knowledge-based service exports are
included, the value of exports from all technology-based
firms is in excess of $20 billion. 39
The Australian economy can make significant gains from
growth in technology-based exports. Diversifying Australia’s
export mix to include a greater proportion of technologybased
products and services is a strategic imperative.
The most recent ABS longitudinal study of Australian
exporters shows that technology-based SMEs 40 are more
likely to persist as exporters compared with lower
technology or service-based exporters. The ubiquitous
application of technology around the world means
technology-based companies must export to reach their
potential. Technology-based SMEs have a natural and
more sustainable export potential. They are therefore of
critical importance to improving Australia’s future export
growth.
Increasing the proportion of technology-based
SMEs among Australian exporters
For SMEs the idea of exporting can be daunting. They
have markedly reduced access to information and fewer
resources than large established firms.
The evidence suggests that a major part of a vision to
grow SMEs into MNEs, is greater support to grow
markets, especially in new geographic locations. Case
study interviews and submissions suggest that export
assistance to SMEs is essential. They also highlight the
important role of Austrade, particularly the Export
Market Development Grants (EMDG) program
complemented by State and regional support, in
introducing market opportunities to SMEs and making
them ‘export ready’.
Currently, the EMDG program assists new and emerging
exporters and small business (67 per cent of EMDG
recipients had export earnings of $1 million or less).
The Working Group notes that changes to the EMDG
program, effective June 2004, mean EMDG grants will
no longer provide extended funding to promote exports
in new markets.
It is clear from case study interviews and submissions,
that current overall Government assistance stops short
of what is needed in terms of:
m reach of export promotional programs;
m incentives for collaboration to build critical mass to
penetrate markets;
37 Austrade, Knowing and Growing The Exporter Community, 2002, p 10
38 OECD, Main Science and Technology Indicators, OECD, Paris, November 2002
39 Based on research from Austrade, Knowing and Growing the Exporter Community, Exhibit 7, 2002
40 Austrade, Knowing and Growing the Exporter Community, 2002
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m opportunities to showcase technology-based exports
onshore and offshore; and
m tax incentives.
The EMDG program should be broadened to promote
collaboration, provide export market intelligence and
create showcasing opportunities. Building links with
MNEs is also important for Australian firms to
understand how best to develop and build awareness of
Australian capabilities. Where close links with the head
offices of MNEs have been developed, Australian
industry has been alerted to opportunities and
subsequently won major contracts. Austrade’s capacity
to facilitate these linkages should be expanded.
Collaborative export marketing for SMEs
Technology-based SMEs require ongoing access to new
knowledge to be sustainable and to grow into MNEs.
Collaborative networking accelerates innovation,
competitiveness and growth. 41 In this regard, the Working
Group notes that the EMDG program includes a Special
Approvals category for the collaborative export
promotion activities of ‘Approved Bodies’ and ‘Approved
Joint Venture’ applicants. While this provision is available
to cater for peak industry associations and groups of
SMEs cooperating in joint venture-style arrangements,
under existing arrangements its potential is untapped.
There could be several reasons for this including
awareness issues.
The Working Group recommends complementing the
Special Approvals element with a Collaborative Export
Marketing Solutions program. This program would
provide grants for SME-driven export marketing
initiatives, including generic industry association
marketing. Importantly, this program would offer
competitively-based funding for grant applicants rather
than the staged funding approach where applicants
cannot be sure of the actual amount Austrade will fund.
To leverage the export impact of industry-led SME
collaborations, the Working Group also recommends the
appointment of more domestic and international
Austrade Industry Export Advisers to provide assistance
to technology-based SMEs. These advisers would
provide ongoing market intelligence and overseas
contacts and help to build links with MNEs.
r
RECOMMENDATION 1
(a) Introduce a Collaborative Export Marketing
Solutions program to complement the Export
Market Development Grants program,
providing competitive, merit-based grants for
SME-driven export marketing initiatives.
(b) Fund the appointment of additional, domestic
and international, Austrade Industry Export
Advisers to facilitate technology-based SMEs
develop collaborative export opportunities.
To illustrate how this might work, a group of SME mining
technology innovators would create a marketing
campaign targeting the South American gold and copper
sector. A promotional campaign would be developed and
delivered for a targeted list of companies. Austrade and
industry association representatives would play a key
liaison and facilitation role. This collaboration would
improve efficiencies in areas such as translation,
printing, postage, site visits and mailing lists and present
Australia in the role of market leader in innovation. This
would support local networks, and educate and assist
export-inexperienced SMEs.
Showcasing technologies
There are other aspects of exporting that could not be
addressed in the time available, without greater
consultation with industry and government departments.
For instance, technology-based SMEs seeking to export
often need to showcase products and promising
technology. One mechanism that could be expanded is
Invest Australia’s promotion of national showcasing
activities to include technology-based SMEs.
As existing Austrade programs are orientated towards
product promotion, one of the few avenues for
promoting promising technologies is to compete for
limited funds from technology showcasing programs
such as the Innovation Access Program, or those under
State/Territory governments. The Working Group
considers the case for expanding EMDG to provide
specific funds for technology-based SME exporters to
showcase products and promising technology should be
investigated.
41 OECD, Small and Medium Enterprise Outlook 2002, p 64–74
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Another area of export promotion that warrants further
investigation is the demonstration of technology and
prototypes ‘in situ’. These could, in effect, act as
reference sites for ongoing export activity. To win market
share, it is important that an SME can demonstrate to
prospective customers that its technology has gone
through the full cycle of development, implementation
and provision of long-term support. The Defence,
Science and Technology Organisation highlighted the
value of Capability Technology Demonstrator programs.
These enable SMEs to minimise the risk of failure while
developing and showcasing their technologies. The
Working Group considers there is merit in investigating
how this program could be extended to other industry
areas.
Tax disincentives inhibiting exports?
Case studies and submissions have highlighted tax
disincentives for exporting SMEs, and the potential to
expand exports through more favourable tax treatment.
SME exporters can incur losses developing overseas
markets, only to find that the loss cannot be deducted
from local income but is quarantined against future
foreign income. Such tax treatment compounds the
cash-flow crunch that many SME exporters encounter.
For example, in Hong Kong, SME export income is nontaxable.
The territory’s government has an aggressive
financing program to encourage SMEs to develop new
export markets.
The Working Group believes the Australian Government
needs to investigate the removal of tax rulings that act
as disincentives for SME exporters. Furthermore, tax
concessions, based on export performance, should be
encouraged to encourage SME exports – an idea which
has been advanced in submissions and interviews to the
Working Group.
However, the Working Group recognises that taxation is
a complex area, and that proposed changes would
require consultation within Government (including the
Department of Foreign Affairs and Trade regarding World
Trade Organisation compliance issues), and with
industry, to explore a range of incentive mechanisms
such as concessional tax rates and tax rebates, based
on SME export growth performance and SME company
growth. The Working Group therefore recommends that
tax-based incentives for exporting SMEs be the subject
of future study.
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tCASE STUDY 1
ELECTRO OPTIC SYSTEMS
HOLDINGS LIMITED
Electro Optic Systems (EOS) is an Australian–owned company based in
Queanbeyan, NSW. EOS specialises in the design, development and
production of sophisticated laser technologies including supporting
software and electronic sub-systems. The technologies are applied to a
variety of space systems, defence products and space surveillance. EOS
is also a developer, manufacturer and marketer of robotic weapon
systems to approved military customers.
The company, which was established in 1985, earns virtually all its
revenue from exports. It has grown rapidly with revenue in the order of
A$30 million, and 88 staff employed in Australia and Arizona, USA.
CEO, Dr Ben Greene, considers assistance and incentives for R&D are
critical to the growth of companies. His view is that, without them, there
is a risk companies sell off their IP early on, or are the victims of venture
capitalists who strip the company of its assets. EOS has received
approval for $11 million in support under two R&D Start grants.
For EOS, the current business model works off an existing customer base
that has emerging product requirements, therefore research and
development are important for sustained growth.
Demonstrator facilities are an important mechanism to build markets, and
the Reference site scheme, drawing on National Procurement
Development Program Grants, helped establish the company’s
credentials.
In contrast there is not the same support for building overseas
markets, for example, Austrade does not adequately exercise its powers
to be a guarantor to overseas customers for supply of products. Likewise
the Australian Defence organisation could help market products, as is
done by UK and French Defence representatives to demonstrate
capability of technologies.
EOS aims to be a company with a $100 million turnover. If it were based
in the USA, then it could aim to be a $1 billion company, but, for EOS,
remaining based in Australia has been a lifestyle choice.
www.eos-aus.com
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6
BUSINESS INNOVATION
UNDERPINS
INTERNATIONAL
COMPETITIVENESS
Business innovation is the process by which the ideas
and outcomes of R&D are converted to goods and
services, or enhance the operation of a business.
Business innovation generates a measurable change in
output, such as new products or services, increased
productivity or reduced costs. 42
SME skills in developing competitive final
products and marketing-related activities,
such as market study, marketing tests and
preliminary market analysis, are not as
advanced and require further development.
Business innovation involves discerning and meeting the
needs of customers. It can relate to the development of
new products and manufacturing processes. However,
improvements in marketing, distribution, and service are
innovations that can be as important as new products
and processes. Innovation can also relate to the
organisation of the firm, management practices and the
way a firm does business, including supply chain
management and use of e-commerce.
Knowledge diffusion and product development by
Australian SMEs
Australian SMEs are proficient in technology-related
activities, such as prototype development, in-house
product testing and technical analysis. However, SME
skills in developing competitive final products and
marketing-related activities, such as market study,
marketing tests and preliminary market analysis, are not
as advanced and require further development. These
marketing-related activities are important in developing
successful, new products. 43
Technology-based SMEs face obstacles in working
effectively with public sector research institutions. Many
of these were identified by submissions to the Working
Group; and in interviews in the recent review of the CRC
program. There is a mismatch in time horizons where
public sector research bodies have a long-term research
focus but SMEs must develop and bring new technology
to market in the short term.
Structural inhibitors often prevent research institutions
from collaborating productively with SMEs. The cost and
time constraints faced by institutions and the risks of
investing in small companies for uncertain gains work
against successful partnering with technology-based
42 Department of Industry, Tourism Resources, Business Innovation, Working Paper for the Mapping Australian Science and Innovation, 2003, p 11
43 Journal of Small Business Management, January 2002, New product development processes in small and medium-sized enterprises: Some Australian evidence,
Vol. 40, Iss 1, p 27
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SMEs. Public research institutions and universities should
allow more intellectual property to flow through to
industry. Companies should control their intellectual
property as they take products to market.
The Working Group considers that SMEs are in the best
position to identify and address these impediments to
the commercialisation of Australian R&D. To resolve the
impasse between SMEs and the research sector, the
Working Group recommends that assistance be provided
to SMEs to overcome obstacles in their late-stage
technology development. Such measures can build on
the not insignificant capabilities of Australia’s publicly
funded research organisations and universities to help
accelerate SME growth. This approach would enable
SMEs to take the initiative in collaboration for product
development, collectively drive commercial and export
success, and influence the time horizon culture of
research institutes.
r
RECOMMENDATION 2
Ensure that the new Commercial Ready program
supports companies engage external assistance to
develop products to market readiness.
The Working Group welcomes the Government’s recent
announcement 44 of the new Commercial Ready program
to encourage collaboration between Australian
businesses and public research providers to develop
competitive new products and processes with strong
commercial potential. The Working Group notes that
before the design of the program is finalised, industry
will be consulted to ensure that the program provides
commercial outcomes and jobs for Australia. The
Working Group strongly recommends that the new
program helps technology-based SMEs to engage
external assistance to develop products to market
readiness.
44 This initiative was part of the Backing Australia’s Ability – Building Our Future through Science and Innovation package announced by the Prime Minister, 6 May
2004 www.backingaus.innovation.gov.au
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tCASE STUDY 2
PROTEOME SYSTEMS LIMITED
Proteome Systems Limited (PSL) develops, manufactures and
commercialises innovative technology solutions comprising instruments,
software and consumables that enable proteomics research. The
Company uses its expertise in proteomics to discover proteins that may
be used to develop new diagnostics for therapeutics in the areas of
respiratory disease, neurobiology and aging, cancer and infectious
disease. PSL employs 140 staff, and has research and development and
manufacturing facilities in Sydney, Australia and in Boston, USA and joint
ventures (Proteome Systems Japan KK) with Itochu Corporation in Tokyo,
Japan and Charles River Laboratories (Charles River Proteomic Services
Inc) in Worcester, USA.
A $7 million funding grant under the Australian Government’s Major
National Research facility program led to the construction of APAF,
(Australian Proteome Analysis Facility) the world’s first national proteomics
facility under the directorship of Professor Keith Williams at Macquarie
University. Dr Keith Williams subsequently founded Proteome Systems in
1999 through a program with Dow AgroSciences.
Understanding that biotechnology SMEs have a very limited market in
Australia, Proteome Systems was born global with a focus on the major
markets of USA and Japan. The business was built through forming
strategic alliances and joint ventures with large overseas firms, for
example, IBM, and Japanese engineering firm (Shimadzu).
Keith Williams concludes that early funding assistance from Government
is helpful to enable spin-off companies to develop initial products, but in
Australia capital for scaling up and sustaining the company through the
manufacturing and commercialisation stages is a problem: “Many
companies hit a brick wall when it comes to the growth stage. The
R&D Start scheme does not support late stage
commercialisation.”
www.proteomesystems.com
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7
AUSTRALIAN CAPITAL FOR
GROWING AUSTRALIAN
BUSINESSES
Technology-Based SMEs are growth SMEs
In order to fund their growth, 9 per cent of technologybased
SMEs are actively seeking external capital, and
another 15 per cent are planning to seek external capital
in the near future. In the past three years, 63 per cent of
technology-based SMEs sought funding in the $50,000
to $500,000 range and 15 per cent had sought
$500,000 to over $5 million. 45 As these companies
continue to grow they expect to require expansion
capital in the $5 million to $30 million range.
“Because breakthrough technology can at
first appear absurd to even the smartest
resource gatekeeper, innovators must be
able to pitch to many potential sources of
support…. There is a need for diverse
sources of funding, particularly ‘smart
money’.”
Technology-based SMEs require significant
expansion capital
Expansion capital is critical to support a company’s
formative commercial development. The ability to access
adequate capital, preferably ‘smart capital’ from venture
capitalists, was identified as the single most important
success factor for technology-based SMEs in 43 per
cent of submissions to the working group.
“Because breakthrough technology can at first
appear absurd to even the smartest resource
gatekeeper, innovators must be able to pitch to
many potential sources of support…. There is a
need for diverse sources of funding, particularly
‘smart money’.” 46
Existing government programs such as the Innovation
Investment Fund and Pre-Seed Fund programs aim to
address the gap in seed capital funding that occurs in
the $100,000 to $4 million range, rather than providing
expansion capital.
To allow technology-based SMEs to fulfil their potential
and grow into large, international businesses, they need
access to patient expansion capital. Mr Christopher
Newell, CEO, Mediaware Solutions stated:
“Companies like ours require a major, material
capital boost to realise our potential and develop
our markets. Without significant financial support,
many high-potential technology companies won’t
make it.”
45 Department of Industry, Tourism and Resources, Technology-based SMEs, Special Report for the Department of Industry, Tourism and Resources, Sensis Business
Index, May 2004
46 Innovation Xchange Network Submission, p 2
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Expansion stage capital is growing, but not for
technology-based SMEs
Working Group submissions and interviews identified a
shortage of expansion capital for technology-based
SMEs in the $5 million to $30 million range, as the
majority of expansion capital is being directed to nontechnology
firms. By way of international comparison, 19
per cent of expansion/development capital in the UK is
allocated to high-technology companies. The comparable
allocation in Australia is estimated to be much lower by
the Working Group.
The shortage of expansion capital will severely restrict
Australia’s ability to grow large, domestically-based
technology businesses. Dr Keith Williams, CEO,
Proteome Systems Limited, said: 47
“Early funding assistance from Government is
important to generate start-up companies, but in
Australia capital for scaling up and sustaining the
company through this stage is a problem. Many
technology-based companies hit a brick wall
when it comes to the growth stage.”
Reliance on offshore capital will ‘seed other
economies’
The increasing numbers of start-ups now being created
will exacerbate the shortage in expansion capital for
technology-based SMEs. As a result, promising SMEs
may fail, not achieve their potential, or be obliged to
relocate offshore at an early stage.
“While international VC may offer strong access
to a quality global network, they may also be
more inclined to ‘flip-up’ the start-up company in
the USA or UK capital market than to further
develop it as an Australian commercial entity.
This is really early stage IP transfer from the
Australian economy into USA and/or European
usage of Australian inventions.” 48
The Working Group considers that the longer we can
maintain the investment of Australian money in Australian
SMEs, the greater the economic return will be to the
nation. However, it is recognised that this is not always
feasible. Local industry may sometimes have insufficient
capacity to develop the intellectual property owned by
Australian technology-based SMEs on its own, and it may
be appropriate that foreign commercial partners are
sought.
A strong and viable domestic venture capital market is
needed to help Australian SMEs negotiate a fair deal
when partners are sought. Relying excessively on
offshore capital will see Australian ideas and the
Government’s substantial investment in innovation
benefiting other economies at the expense of our own.
Australian venture capital market is growing, but
still relatively underdeveloped
“While the Australian venture capital market is
growing, it is still relatively immature, especially
when compared with the USA or UK.” 49
Compared with other OECD countries, Australia’s venture
capital market is relatively underdeveloped. It ranks 15th
among 27 OECD nations in terms of venture capital
investment as a percentage of GDP for the period 1998-
2001.
The venture capital market is a major source of finance
for new technology-based firms and plays a crucial role
in promoting the radical innovations they often produce.
Venture capital backed companies were responsible for
an estimated 10 per cent of US industrial innovations in
the past decade.
While the overall level of venture capital in Australia has
grown, this growth has not flowed to the technology
sector. In OECD countries, high-technology firms attract
half of venture capital investment on average, but in
Australia they account for less than 25 per cent. By
contrast, the sector receives more than 80 per cent of
total venture capital in Canada and Ireland.
As a result, the Working Group estimates that Australian
high-technology firms have access to a pool just one
tenth of the size available to comparable US firms, even
after adjusting for the size of our economy. Hence,
domestic growing firms must often seek expansion
capital overseas, or from the domestic public equity
markets which have a focus on short-term results. The
recent Innovating Australia report noted that:
“In almost no country other than Australia does
the stock market attempt to finance innovation in
its early phases.” 50
47 PMSEIC Case Study, Proteome Systems Limited, 2004
48 Sciventures Submission, p 3
49 Sciventures Submission, p 3
50 West J., Financing Innovation: Markets and the Structure of Risk, in Innovating Australia, Committee for Economic Development of Australia, (CEDA), April 2004
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A large and growing proportion of investible funds
are under the control of large superannuation
funds
Superannuation funds control a large and growing
proportion of investible funds that could be invested in
SME expansion. As at 30 September 2003, Australian
superannuation entities had $548.5 billion in assets and
had received a net inflow of $24.5 billion in funds over
the year. Asset allocation of pension funds to venture
capital is less than 1 per cent in Australia compared with
around 7 per cent in the US according to OECD data. A
1 per cent increase in the amount of capital allocated to
Australian venture capital by superannuation funds would
double the total amount of venture capital available.
In its response to the Nairn Report, the Australian
Government noted that it cannot actively intervene to
influence the investment strategies of individual
Australian superannuation funds which are set to
maximise returns to members. The Government noted
that recent reforms give Australian widely-held
superannuation funds an exemption from Capital Gains
Tax on investments through Pooled Development Funds
which should encourage greater investment in venture
capital.
The Working Group agrees that the Government should
not dictate investment allocations. However, the Working
Group believes people have the right to invest their
superannuation as they wish and the Government could
reward investments that benefit the economy through
limited, targeted tax advantages.
Increasing the pool of domestically managed
expansion capital for technology-based SMEs
The Working Group considers individual Australian
taxpayers should be encouraged and enabled, through
incentives, to direct superannuation savings to venture
capital. This would address the current problem of low
portfolio allocations to venture capital investments by
superannuation funds.
The Fund should appeal to individual taxpayers on a
number of levels. Firstly, it would allow Australians to
invest in technology-based SMEs that are integral to
Australia’s future. These companies are often not listed
on the share market and investment in them is generally
restricted to institutional investors or wealthy individuals.
The chief benefit to individual taxpayers would be the
potential to earn venture capital-style returns, which
typically represent a 5 per cent premium on those
offered by listed equities. The tax-advantages offered by
the Fund would also be attractive.
Individuals would directly commit a portion of their
superannuation contributions to the Fund which would
subsequently invest in venture capital funds specialising
in technology-based SMEs. There is a wide variety of
mechanisms to enable individuals to directly commit
their superannuation contributions. Most have a limited
and capped impact on tax revenues, and many would
stimulate additional superannuation contributions. For
example, superannuation contributions to the Expansion
Capital Fund of Funds in excess of the 9 per cent
minimum could be taxed at a concessional rate of 7.5
per cent rather than the current 15 per cent.
Tax concessions should be limited for each individual and
the total concessional contributions pool should be
capped at $200 million per annum, leading to
$15 million in forgone tax revenue annually. This strategy
would make $1 billion in expansion capital available to
Australian technology-based companies over five years.
r
RECOMMENDATION 3
Increase the availability of domestic, expansion
capital for technology-based SMEs in the $5
million to $30 million range by creating a taxadvantaged,
privately managed fund into which
individuals can directly commit a portion of their
superannuation contributions.
To enable individual Australian taxpayers to direct
superannuation savings to venture capital, the Working
Group supports the creation of a tax-advantaged,
privately managed, Expansion Capital Fund of Funds.
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tCASE STUDY 3
GEOSIM TECHNOLOGIES PTY LTD
Geosim Technologies is an innovative Queensland company established
on 3 September 2002 that has developed a helicopter Part Task Trainer.
The Part Task Trainer has Civil Aviation Safety Authority Certification
(FSD2 cat B) to count for 20 hours of the 40 required for instrument
flying time for helicopter pilots as well as recency and currency credits.
The software program uses visualization of local Australian airports and
topographical reference points as part of its training function.
Geosim received a Government COMET grant in 2003 of $52,000 to
assist in the commercialization of their product and was supported by the
Queensland Department of State Development via Aviation Australia.
“The key to GeoSim’s success in developing our product has been
gaining adequate access to finance and skills,” Charles Du Plessis,
Managing Director of GeoSim Technologies, said.
“Access to adequate early and expansion capital is critical for technologybased
SMEs.”
“In addition, access to some kind of working capital to assist the
innovator develop and commercialise the innovation without having to be
concerned about the basic need to place food on the table will ensure
that projects develop at a much faster rate.“
In order to have access to the necessary skill base, GeoSim has
collaborated with various specialists and drawn them into the GeoSim
fold. GeoSim has also established strategic alliances with four, specialist,
micro-companies in the aviation field, with the intention of establishing an
aviation cluster which will then support and stimulate growth in the
simulation environment.
“Our ambition for the company is to expand internationally through export
of products, creating employment and building wealth for the company’s
founders through company growth.”
Geosim is focused on continued product development to expand their
product range and keep them at the forefront of their industry. They are
currently developing a Fixed Wing Part Task Trainer in collaboration with
Jabiru, an aircraft manufacturer. Once complete, Jabiru will assist in the
deployment and promotion of the Fixed Wing Part Task Trainer in the
Aviation industry worldwide.
www.geosim.com.au
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8
EXPERIENCED
MANAGEMENT IS
ESSENTIAL
Growing global businesses requires high quality,
experienced entrepreneurs and managers. A motivated
and experienced management team with strategic
technical skills was identified as a critical factor
necessary for a technology-based company to grow in 40
per cent of submissions received by the Working Group.
Managers need specific knowledge and skills to develop
and market products, including for export, and manage
the demands of research and commercial reality.
“Having the best idea, or being first to
market with a unique technology, is not
the most important element for success,
although it is sometimes assumed to be
the case. Without world-class commercial
leadership, even the best ideas and
technologies are likely to fail in the global
marketplace.”
“Quality management is the most important
ingredient for success. The old saying ‘a great
manager can take a bad idea and turn it into a
good business, while a bad manager can take a
great idea and turn it into a failure’ definitely
holds true. Having the best idea, or being first to
market with a unique technology, is not the most
important element for success, although it is
sometimes assumed to be the case. Without
world-class commercial leadership, even the best
ideas and technologies are likely to fail in the
global marketplace.” 51
A survey of 600 chief executives and senior technology
managers from Australia and a range of OECD countries
concluded that management skills and personal qualities
are often in shorter supply than technical knowledge in
innovative firms. 52
In Australia, there is limited availability of experienced
managers for technology-based SMEs. This is due both to
a shortage of large technology companies and the limited
number of MNEs conducting global product development
operations in Australia. These companies are the leading
source of future managers for Australian SMEs.
The management skills necessary to successfully grow a
technology-based SME come largely from ‘on-the-job’
experience, rather than formal education and training.
Structured training and acquisition of formal skill sets are
important and are catered for by the formal education
system and specialist training infrastructure. Business
schools and other educational institutions provide formal
training, as do private trainers in company-building skills
such as Achaeus, Corporation Builders and SEA.
51 Mediaware Solutions Submission, p 3
52 Arthur D Little, The Innovative Company: Using Policy to Promote Development of Capacities for Innovation: 2001 (Prepared for members of the OECD Focus
Group on the Innovative Firm)
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Australia must attract experienced managers to
technology-based SMEs
Over 23 per cent of submissions to the Working Group
supported initiatives to repatriate experienced
entrepreneurs; encourage experienced, managers of
large companies to join SMEs; and provide high quality
mentoring to develop local entrepreneurs’ management
skills.
“Support is needed in business mentoring –
bringing real experience from those that have
been successful, or have learned from failure, to
current technology SMEs…the challenge will be
finding top quality mentors and getting sufficient
dedicated time from them.” 53
“The best way to support the growth of
Australian technology-based SMEs is to provide
incentives to repatriate Australian senior
managers with experience in technology
commercialisation.” 54
Background interviews with successful technology-based
SMEs also identified the need to increase the migration
of highly skilled managers from overseas and assist
SMEs to obtain support from larger domestic
corporations in the areas of business management and
risk management.
The PMSEIC working group on Management Skills for
High-growth Start-up Companies (December 2001) also
recommended an incentive scheme to fund the return of
expatriates to work with SMEs and encourage MNEs and
large companies to mentor Australian SMEs. The
scheme aimed to:
“offer competitive salary or tax breaks for
experienced entrepreneurs to return to Australia
to mentor start-up companies. Expatriate
entrepreneurs, particularly in the US, are highly
remunerated both in salary and stock option
plans. It may not be possible to match US or
European salaries in absolute terms but there
may be a greater willingness to accept lower
Australian salaries if a significant compensation
component would be in tax advantaged stock
options or equity.”
This recommendation was not implemented at the time
and should be revisited.
Employee Share Options
Employee share options (ESOs) are the international
‘industry standard’ for providing entrepreneurial
incentives to managers in technology-based SMEs. ESOs
allow Australian SMEs that would not otherwise have
sufficient cash-flows to offer internationally competitive
remuneration to experienced managers. Australian policy
should be tax neutral towards innovative employee
ownership/remuneration schemes.
“It is difficult to find and retain good people given
limitations to Employee Share Ownership Plan as
a means of remuneration within the Australian tax
system.” 55
ESOs are not widely used in Australia because the
current tax treatment contains major disincentives. Some
20 per cent of submissions to the Working Group
suggest reforms on ESOs, with the Australian Venture
Capital Association identifying two problem areas in the
current ESOs regime:
m Ordinary income: gains arising from the holding
period in respect of options are taxed as ordinary
income unless circumstances permit the application
of the discount capital gains tax concession.
m Capital gains tax concession: this requires the
employee electing to be taxed upfront on the value of
the options at the time of issue and then holding
underlying shares for at least 12 months after
exercise of the relevant options.” 56
The Government has previously received representations
on the reform of the tax treatment of ESOs. The Working
Group supports the broad thrust of these
representations and does not see effective alternatives
to them.
Reform of the tax treatment of ESOs should reflect two
principles:
m tax becomes payable only when options or shares are
cashed out; and
m returns are taxable as capital gains, not ordinary
income.
53 CHAMP Ventures Submission, p 1
54 GBS Venture Partners Submission, p 1
55 GBS Venture Partners Submission, p 3
56 AVCAL Submission, p 1
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The Working Group believes these reforms are as
relevant to all employees as they are to managers.
The Government has previously considered some
aspects of ESOs but these have not resolved the tax
impediments to technology-based SME growth. In its
2003 response to the Nelson Report, the Government
set a target of doubling employee participation in ESOs,
and set up the Employee Share Ownership Development
Unit in the Department of Employment and Workplace
Relations. In 2004, both the Nairn Report and the
Government’s response to it referred specifically to
ESOs but in the context of start-up companies rather
than technology-based SMEs seeking to grow.
The Working Group believes that this issue is important
and unresolved and should be urgently considered by the
Employee Share Ownership Development Unit. However,
as advised to the Working Group, the current work
program of the Employee Share Ownership Development
Unit does not give a priority to resolving the specific
issue of impediments to technology-based SME growth.
The initial cost of reform of the tax treatment will be low,
though it is not easily quantifiable by the Working Group
because option plans are not widely used and tax
receipts are low. Ongoing revenue effects are likely to be
neutral or positive because new tax revenues will be
generated from greater business activity and profit
growth by technology-based SMEs. Econometric
modelling could provide a more precise estimate of
revenue effects.
The risk of abuse of ESOs by large companies can be
mitigated by rules on company size and the nature of its
activities such as those governing Pooled Development
Funds.
r
RECOMMENDATION 4
Reform the tax treatment of Employee Share
Options to support the attraction and retention of
skilled and experienced managers, by making tax
payable on the capital gain only when options or
shares are cashed-out.
Accessing mentors “When you’re the boss – who
do you call?”
Submissions to the Working Group highlighted the need for
guidance to managers from people who had experienced
success and failure in technology-based SMEs:
“We hope that future government initiatives will…
provide high quality mentoring skills aimed at the
improvement of the key executives of SMEs.” 57
The Nairn Report recommended that the Australian
Government expand the mentoring services available to
small and medium-sized enterprises beyond those
currently offered by the COMET program.
The Government’s response to the Nairn Report noted
that after a review of the COMET program in 2002,
changes were underway to introduce an expanded
mentoring element under the program’s Management
Skills Development stream. The Small Business
Assistance Program also assists firms obtain mentoring
services through its Small Business Enterprise Culture
grants.
However, there is a significant gap in mentoring support
for firms entering export markets and for those at the
expansion stage, which the Working Group believes can
be bridged. A national network could assist at least 50
technology-based SMEs to employ a mentor at $25,000
per annum, with mentors being employed for up to two
years. Similarly, an international network could assist at
least 25 technology-based SMEs to employ a mentor
based overseas at $50,000 per annum, with mentors
being employed for up to two years.
The Working Group welcomes the recent Government
announcement to extend the COMET program and
recommends that a portion of this additional funding be
used to address this gap in mentoring support.
r
RECOMMENDATION 5
Through the extended COMET program, support
firms at the expansion stage by introducing a
national and an overseas mentoring network,
contracting-in mentors to assist in building
management skills domestically and for export
markets. Austrade should be involved in building
the network of mentors overseas.
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tCASE STUDY 4
IMMERSIVE TECHNOLOGIES
PTY LTD
Immersive Technologies is a Western Australia based company that
produces Computer Based Training (CBT) systems for the Mining Industry.
The company’s simulators are in use around the world and have trained
and assessed thousands of personnel. Immersive Technologies invests in
ongoing R&D to ensure its products remains a benchmark of Simulator
technology.
The company started out as a very small computer based training
business in the mining sector, run out of the founder’s garage in
collaboration with his brother and father. Later, customer familiarity led to
the identification of the big opportunity in simulators.
“We built a prototype with only $20k of accumulated reserves, plus we
had the profitable computer based training business to pay salaries until
sales came in”, said Peter Salfinger, CEO.
“The key to our success is our tenacity, our ‘never say no’ attitude and
our willingness to find a solution to any problem. But the key to our
continued growth was our recognition that we needed extra
management skills. So we brought them in.”
The backing of Immersive Technologies by a venture capitalist provided
the company with credibility and made it much easier to attract staff from
large companies.
“In hindsight, we should have sought access to venture capital earlier, as
it makes it much easier to access good staff during a company’s growth
phase.”
An impediment to the growth of the company has been the very slow take
up of their product by the Australian industry. In fact, they are amongst
the last worldwide, despite the large local mining sector. The majority of
Immersive Technologies’ customers are from overseas.
The ambition of the company is to treble in size and become a
multinational company, while retaining Perth as their headquarters.
Immersive Technologies also wants to be a business that top quality staff
wants to work in. When their simulators are the standard training tool in
mining and other sectors then Immersive Technologies will know that they
have been truly successful.
www.immersivetechnologies.com
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9
DATA ON
TECHNOLOGY-BASED
SMES
Future data collection should occur through
comprehensive regular innovation surveys.
A critical prerequisite for accelerating the rapid diffusion
of knowledge and technology integration in Australia is
the ability to identify and track the performance of
technology-based firms.
The Working Group strongly recommends
that the Government commit to biennial
innovation surveys incorporating a definition
of technology-based firms to provide a
performance benchmark for assessing
incentive programs in the future.
One of the key impediments the Working Group faced
was the lack of data on Australian’s technology-based
companies. Data is dispersed across various ABS
subject areas and the agency is now looking at ways of
capturing technology related information both in its
Innovation survey and use of Information Technology
Surveys.
Data collection on technology-based firms also suffers
from a lack of agreed definitions and the absence of a
co-ordinated approach among agencies for collecting
information. The Working Group sees robust data on
these firms as vital for tracking growth and innovation
performance and resolving this issue should be a top
priority for Government.
The Working Group notes that the ABS is currently
conducting an Innovation Survey but that this will not
provide detailed data on Australian technology-based
firms. The Government noted in its response to the Nairn
Report that the ABS currently has no firm plans for
future surveys beyond 2004. The decision on future
surveys will be based on demand, relative priorities and
the ABS’s overall funding.
Some current data on Australian technology-based SMEs
was obtained from the May 2004 Sensis Business Index
Quarterly Survey of Small Business. In addition,
information was obtained from analysis of ABS data on
the R&D investment made SMEs during the period
1992–2002.
The Working Group strongly recommends that the
Government commit to biennial innovation surveys
incorporating a definition of technology-based firms to
provide a performance benchmark for assessing
incentive programs in the future. Better data will improve
policy development, allow more robust evaluation of
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innovation outcomes, and promote more rigorous
monitoring and measurement frameworks for policies
and programs.
ABS initiatives
The Working Group supports ABS initiatives and
proposals for improved systematic data collection and
recommends including classification across the whole-ofgovernment
and industry so that knowledge intensive
and technology-based industries can be identified and
tracked for their performance. An important initiative
proposed by ABS is the introduction of an integrated
statistical database, which would draw on tax data. A
change to tax legislation is needed and the Working
Group urges Government to support this legislative
change.
r
RECOMMENDATION 6
Upgrade business and innovation surveys to track
and analyse the performance of knowledge
intensive, including technology-based, industries,
in all key areas including exports. In conjunction,
develop a framework to map Australia’s Business
Innovation.
The range of industries covered by the current
Innovation Survey and related surveys should be
expanded to include more industry divisions. Data
collection should integrate measures of technology
including enabling technologies such as biotechnology
and nanotechnology. Supplementary questions on use of
these technologies could be added to future ABS
surveys to complement the currently proposed ABS
Biotechnology survey. Future data collection via
innovation surveys should be comprehensive and regular
and allow reporting on technology integration and
diffusion, and export performance.
Framework to map Australia’s business innovation
The task of mapping Australia’s science and innovation
system carried out by the Government in 2003 found a
shortage of data on business innovation. A framework to
map Australia’s business innovation building on the data
from the mapping study and future innovation and
technology surveys should be developed.
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10
ADDITIONAL WORK
SHOULD BE UNDERTAKEN
The Working Group believes that a more detailed
examination of some of the issues is warranted,
particularly exports. Given the importance of exports to
Australia’s future and the limited time available to tackle
such a complex task, the Working Group recommends
that its work be continued to enable greater consultation
on issues with industry and relevant agencies.
r
RECOMMENDATION 7
To build on the key finding that increasing the
export capacity of technology-based SMEs is
critical; the Working Group should be continued
and be tasked with exploring this issue in more
detail in consultation with industry and
government agencies. Areas to be investigated may
include technology demonstration programs,
enhancements of the Export Marketing
Development Grants program, supporting the
increased use of industry collaborative networks
and addressing impediments in the tax system to
the development of export-oriented technologybased
SMEs.
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11
CONCLUSION
Technology-based SMEs have enormous potential to
increase economic growth in Australia through their
ability to grow new industry sectors and renew
established industries.
The Working Group has identified the key success
factors that drive growth for technology-based SMEs,
particularly at the expansion stage. These are: the ability
to export; a focus on developing innovative solutions to
customer problems; having access to domestic
expansion capital; and possessing experienced and
skilled management.
At a cost to Government of $48 million per annum for
five years, the Working Group believes that accepting
the recommendations would produce over the life of the
program:
m a dramatic upsurge in technology-based exports as
75 national and international mentors work directly
with companies in generating export capability;
m an increase in companies developing market-ready
technology products;
m a new technology-focused domestic expansion capital
sector with $200 million per year to invest; and
m much needed growth in the management skills
required for future Australian-based technology
industries.
In summary, a combination of new initiatives and the
modification of existing initiatives have the potential to
have a significant impact on the growth of technologybased
Australian SMEs and the Australian economy.
Strengthening Australia’s capacity to generate and grow
technology-based SMEs will increase its international
competitiveness by forming many large and globally
successful, export-led Australian-based technology
companies in several, competitive sectors.
To grow Australia, we must become world-class business
builders and exporters. We need to create the
knowledge-based jobs future Australians will require. We
must place greater emphasis on achieving commercial
and export success – otherwise, the benefits of our
investment in science, technology and education will be
enjoyed, not in Australia, but overseas.
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ATTACHMENT A
PMSEIC WORKING
GROUP MEMBERSHIP
Working Group Members
Mr David Miles, Chairman, PMSEIC Working Group; Chairman, Industry Research & Development Board; Chairman,
National Innovation Council
Mr Gareth Dando, CEO, Uniseed
Dr Mark Dangerfield, CEO, BioTrack Australia Pty Ltd
Dr Jackie Fairley, CEO, Cerylid Biosciences Limited
Mr David Gaul, President, CEA Technologies
Dr Laurence Hammond, Director & Founder, Timsco Pty Ltd
Ms Elizabeth Lewis-Gray, CEO & Managing Director, Gekko Systems
Ms Catherine Livingstone, Chairman, CSIRO Board
Dr Katherine Woodthorpe, Director, People & Innovation Corporate Advisers Pty Ltd
Working Group Support
Ms Carolyn Jenkins, Manager, Innovation Taskforce, Department of Industry, Tourism and Resources
Mr Jared Henry, Assistant Manager, Innovation Taskforce, Department of Industry, Tourism and Resources
Mr Karl Rumba, Assistant Manager, Innovation Taskforce, Department of Industry, Tourism and Resources
Ms Julie Walding, Manager, Office of the Chief Scientist, Department of Education, Science and Training
Ms Tammy Pavelic, Office of the Chief Scientist, Department of Education, Science and Training
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ATTACHMENT B
DEFINITIONS
Business Innovation: Business innovation is the
process by which ideas and the outcomes of research
and development are converted to goods and services,
or enhance the operation of a business. Business
Innovation generates a measurable change in output,
such as new products or services, increased productivity
or reduced costs. 58
Large Enterprise: A large enterprise is defined as an
enterprise employing 200 or more people. 59
Multinational Enterprise (MNE): An MNE is defined as
a large enterprise operating in a number of countries
and having at least one production or service facility
outside its country of origin. 60
Small and Medium Enterprise (SME): A small
enterprise is defined as an enterprise employing less
than 20 people. A medium enterprise is defined as an
enterprise employing 20 or more people, but less than
200 people. 61
Technology-based company: A technology-based
company is defined as one which acquires or creates
new technology that it integrates to develop new
products, processes and services as the basis of its
business competitiveness. These companies occur in
many industry sectors and not just those that have been
traditionally regarded as high-technology industries such
as aerospace and electronics.
Types of equity capital:
Pre-seed capital: ‘proof of concept’ funding to
establish whether the idea will work and if there is a
potential market.
Seed capital: product is in development. Usually in
business less than 18 months. Funding used for
prototyping, testing, IP protection, business plan
development and other requirements to ready the
product for market.
Start-up capital: product in pilot production. Usually
in business less than 30 months. Used to get the
business licensed, set up and operating as a going
concern.
Early expansion capital: product in market. The
1st round of growth funding for the business.
Expansion capital: provides capital for further
rounds (2nd, 3rd) of growth funding as business plan
milestones are met.
58 Department of Industry, Tourism Resources, 2003, Business Innovation, Working Paper for the Mapping Australian Science and Innovation, p 11
59 Australian Bureau of Statistics, 1321.0 Small Business in Australia, 2001
60 Penguin Dictionary of Economics
61 Australian Bureau of Statistics, 1321.0 Small Business in Australia, 2001
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ATTACHMENT C
SUBMISSIONS TO PMSEIC WORKING GROUP
Ms Narelle Kennedy
Chief Executive
Australian Business Foundation
Mr Gary Reed
Manager
Australian Business Angels
Australian Business Limited
Mr Tim Reardon
Senior Advisor – Industry Policy
Australian Chamber of Commerce and
Industry
Ms Lyndal Thorburn
Managing Director
Advanced Consulting and Evaluation
Pty Ltd
Mr Eddy Lee
Chief Executive
Amcom Telecommunications Limited
Ms Hyejin Lee
Industry Policy Adviser
Government Industry and Policy Group
Austrade
Australian Government
Mr Trevor Wykes
Manager, Coordination Unit
Department of Communications,
Information Technology and the Arts
Australian Government
Mr Mark Bonner
Manager, Energy Technology Policy
Australian Greenhouse Office
Australian Government
Mr Gavan Cattanach
Manager
Science and Innovation Policy
Department of Agriculture, Fisheries
and Forestry
Australian Government
Ms Brigitte Smith
Managing Director
GBS Venture Partners
Mr Grant Kearney
Chief Executive
Innovation Xchange Network
Mr Chris Newell
Chief Executive Officer
MediaWare Solutions Pty Ltd
Mr Mitch Hook
Chief Executive
Minerals Council of Australia
Mr Andrew Littlejohn
Group Product Manager
MYOB Pty Ltd
Mr Michael Hirshorn
Chief Executive St George Innovation
Fund
Nanyang Ventures
Mr Michael O'Neill
Managing Director
Pacific Capital Corporation Ltd
Professor Peter Andrews
Queensland Chief Scientist
Queensland Government
Dr Greg Smith
Director
SciVentures Investments Pty Ltd
Mr Robert Mitchell
Chief Operating Officer
The Warren Centre
Ms Wendy Spencer
Assistant General Manager
Innovation Science and Technology
Department of Economic Development
Tasmanian Government
Mr John Loney
Deputy Director-General
Business and Trade Services Group
Department of Industry and Resources
Western Australian Government
Dr Nick Yazidjoglou
Director, Science External Policy and
Programs
Defence Science and Technology
Organisation
Department of Defence
Australian Government
Dr John Kapeleris
Director
Regional Commercialisation Services
Australian Institute for
Commercialisation
Mr Rob Durie
Chief Executive Officer
Australian Information Industry
Association Ltd
Mr Colin Scully
Chief Operating Officer
Australian Stock Exchange
Mr Jake Burgess
AVCAL Projects Manager
Australian Venture Capital Association
Ltd
Mr David Nathan
COMET Business Advisor
Principal
BASIX Pty Ltd
Mr Robert Beaumont
COMET Business Advisor
General Manager
Beauchamp Pty Ltd
Mr Stuart Wardman-Browne
Director
CHAMP Ventures Pty Ltd
Mr Peter Mogg
Managing Director
Compucat Research Pty Ltd
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ATTACHMENT D
TECHNOLOGY-BASED COMPANY INTERVIEWS
BY PMSEIC WORKING GROUP
COMPANY
BresaGen Limited
Electro Optic Systems Holdings Limited
GBC Scientific Equipment Pty Ltd
Geosim Technologies Pty Ltd
Grain Biotech Pty Ltd
Immersive Technologies Pty Ltd
Intellection Pty Ltd
Metal Storm Limited
Proteome Systems Limited
Protocom Development Systems Pty Ltd
Radiata Communications (Cisco Systems)
UTS Navigation Systems (DTI)
PERSON INTERVIEWED
Dr Meera Verma, COO
Dr Ben Greene, CEO
Mr Ron Grey, Managing Director
Mr Charles Du Plessis, Managing Director
Dr Ian Edwards, CEO
Mr Peter Salfinger, CEO
Mr Calvin Tracey, CEO
Mr Ian Gillespie, General Manager, Australia
Dr Keith Williams, CEO
Mr Jason Hart, CEO
Dr David Skellern, co-founded Radiata Communications
Mr Neil Goodey, CEO
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INDEX OF REFERENCES
Allen Consulting Group, Winning Companies and Jobs –
How High Growth and Knowledge-intensive Industries
Create Jobs, 1997
Arthur D. Little, The Innovative Company: Using Policy to
Promote Development of Capacities for Innovation, 2001
Austrade, Knowing and Growing the Exporting
Community, 2002
Australian Bureau of Statistics, Cat. No. 5368.0,
International Trade in Goods and Services. Feature
Article -Australia’s Exporters 2002-03
Australian Bureau of Statistics, Cat. No 8154.0, A
Portrait of Australia’s Exporters: A Report Based on the
Longitudinal Survey
Australian Bureau of Statistics, Cat. No. 1321.0 Small
Business in Australia, 2001
Australian Electrical and Electronic Manufacturers’
Association Ltd, Submission to the House of
Representatives, Riding the Innovation Wave, 2003
Backing Australia’s Ability – Building Our Future through
Science and Innovation, May 2004.
backingaus.innovation.gov.au
Committee for Economic Development of Australia,
Innovating Australia, April 2004
CSIRO, Australian Growth Partnerships, 2004
Deloitte Touche Tohmatsu, Technology Fast 50 Australia
2003, February 2004. www.deloitte.com
Department of Industry, Tourism and Resources analysis
of ABS Business R&D database data 2001-02,
commissioned April 2004. File titled: Final ABS File for
First Phase Analysis 8 Feb 2005.xls
Department of Industry, Tourism and Resources,
Technology-based SMEs, Special Report for the
Department of Industry, Tourism and Resources, Sensis
Business Index, May 2004
Department of Industry, Tourism Resources, Business
Innovation, Working Paper for the Mapping Australian
Science and Innovation, 2003
Department of Trade and Industry, Innovation Report:
Competing in the global economy: the innovation
challenge, December 2003
Department of the Treasury, Budget Papers, 2003
HM Treasury, Science and innovation: working towards a
ten-year investment framework, March 2004
House of Representatives, Riding the Innovation Wave,
2003
Journal of Small Business Management, January 2002,
New product development processes in small and
medium-sized enterprises: Some Australian evidence, Vol
40, Issue 1
OECD, The New Economy: Beyond the Hype, 2001
OECD, Enhancing SME Competitiveness, The OECD
Bologna Ministerial Conference, 2001
OECD, Main Science and Technology Indicators, OECD,
Paris. November 2002
OECD, Public-Private Partnerships for Research and
Innovation: An Evaluation of the Australian Experience,
2004
OECD, Science and Technology Innovation Scoreboard,
2003
OECD, Small and Medium Enterprise Outlook, 2002
Penguin Dictionary of Economics
Productivity Commission quarterly newsletter PC Update,
April 2004 Issue 24
Scott-Kemmis, D., Innovation Systems in Australia, from
Innovating Australia, Committee for Economic
Development of Australia, 2004
Smith, K., European Commission Joint Research Centre,
Seville, Spain, The Knowledge Economy in the Australian
Context, Presentation to the National Europe Centre,
Australian National University, 2004
West, J., Financing Innovation: Markets and the Structure
of Risk, in Innovating Australia, Committee for Economic
Development of Australia, April 2004
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