Does Governance stifle Innovation?Rob Chalmers

Adelaide– Thursday, 5 June 2014

© Governance Institute of Australia

Innovation in Action: Research to Impact

ARI’s role:• Building reputation, relevance

& revenue for the University of Adelaide

Managing a diverse array of external engagement:• Grants, collaborations,

contract research, consulting, commercialisation

Balancing entrepreneurialism and governance…

Solving our partners’ real-world problems

Commercialisation

Heart Metabolics Limited

Spinout example: SNAP

2009 University spinout

Technology developed by the Australian Centre for Visual Technologies:

turns a collection of hundreds of unrelated cameras into a fast and powerful network, providing the ability to automatically track a target from camera to camera (“video pursuit”). www.snapcontrol.com

Spinout Example: Muradel P/Lwww.muradel.com.au

Licensing

Slide 7

Does Governance Stifle Innovation?

Yes (to a degree)

Governance of innovation– Regulating use of technology – Promoting technology development: “Stage gating”,

“Lean Startups”, crowdsourcing

Contextual understanding

Achieving Balance

Life on Mars…

Innovation: a threat to be “governed”?

Governance & Innovation:harnessing the technology Genie?

Laissez Faire? Educate? Activism?Regulation

• Industry Self Regulation • Promoting the adoption of technologies

– by conferring legal benefits – by removing regulatory impediment

• Mandating the adoption of technologies • Restricting the use of technologies • Prohibiting the use or communication of technologies

Impact of Contracts, Insurance, Tort, other laws

Technical methods of controlPrecautionary principle vs lost opportunity cost

Poor regulation is hard to avoid

• underlying issues are often ill-understood and continue to evolve with the technology

• “If the source, nature and scale of the problem are not fully understood, then the proposed policy is likely to be inadequate, inappropriate and/or inefficient. A complete understanding of the nature of the problem is essential for the proper specification of objectives and selection of appropriate alternatives”

(State Government of Victoria, Office of Regulation Reform)

Regulating Frankenstein:Gene Technology Act 2000

Caught between Scylla and Charybdis:• providing an enabling framework

– “friends of the new economy”• reacting to issues of immediate public concern – “slaves to the

shock jock”

Act excluded “old” gene tech: mutationsby irradiation/chemical mutagenesis/conventional breedingAOK

“New” GMO techheavily regulated

Promoting Technology Development: Innovation isn’t a sausage machine…

Disclosure Evaluation

IP protection & packaging

Proof-of-concept

Commercial pathway

& resourcing

Value addingExit

Research & Discovery

Adelaide Research & Innovation Pty Ltd

Lean Startup & “A/B” testing

Eric Ries, “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses”

• loop between build (code) measure (data) and learning (ideas)– Baseline: build a ‘minimum viable product’, and measure how

customers behave – Tune: experiment to improve– Pivot or persevere: when experiments reach diminishing returns, that is

the time to pivot• Startups: a human institution delivering products

and services under conditions of extreme uncertainty• Entrepreneurship is a “Bayseian sport”

Crowd Sourcing ideas & money

Eg Kickstarter - funding platform for creative projects: films, games, and music to art, design, and technology. Since launching in 2009, over $1 billion pledged by more than 5 million people, funding 50,000+ creative projects.

Getting Innovation To Market

Selection of strategy, partners

Due diligence

ownership and rights, IP issues, records, “freedom to operate”.

Funding and not least - Taxation

Legal

Structures, competition laws, franchising controls, relevant law, choice of law/jurisdiction, dispute resolution, responsibility for meeting regulatory controls and complying with applicable laws; currency; franchising laws; risk, liability, insurance, indemnity….

Understanding your context

Managing Risk Without Stifling Innovation

“Risk management has become a key function … but all too frequently it makes an organization so risk-averse that initiative and innovation become paralyzed.A central part of the problem is that risk managers, mainly reporting to the chief executive officer, tend to see their role as one that’s apart from other employees—as some sort of überguardian of the organization. This is a mistake.The role of risk manager should be to help build a culture that encourages all employees to take risks—prudent risks, of course.”

Fred Crawford March 17, 2014 businessweek.com

Risk appetite

Risk management/mitigation• to what extent is it code for risk aversion?

Are we leaving enough room for error? (source: FTI Consulting Inc “Blueprint for innovation”)

Jurisprudence:rules are inherently unreasonable

Adelaide Research & Innovation Pty Ltd

Governors: technology

American engineer Willard Gibbs analyzed Watt’s governor

He observed that in practice it was beset with disadvantages of sluggishness and a tendency to overcorrect for the changes in speed it was supposed to control

Gibbs theorized that (thermodynamic) equilibrium for any work producing system depends on the balance of 2 entities

(1) the heat energy supplied to the intermediate substance,

(2) the work energy performed by the intermediate substance (steam)

Innovation in governance

Detailed proscriptive approaches

are doomed to failure - from over and under inclusion

Meld Systems (Consistency) and People (Flexibility)

Genuinely accept risk and failure

criticise its absence

Apply innovation methodology to the governance process itself?

look outside your box

Innovation is reliant on trust

“Govern a great nation as you would cook a small fish. Do not overdo it.”

Lao Zi

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