Users Lead Innovation - Dec 2012

Commentary by Metals NZ Chairman Noel Davies
As nations struggle to pull themselves out of the economic malaise created by the global financial crisis, an enduring theme appears to be innovation. In New Zealand, we have a newly-named Ministry for Science and Innovation (MSI); in Australia, they have the Department of Innovation, Industry, Science and Research.

Innovation is, according to the dictionary, the introduction of something new, and it is easy to see why countries would be focusing on something new in an effort to stimulate economic growth. Of course, there are many different aspects to innovation, but the most compelling is lead user innovation. This is where a company works with a customer to provide an innovative solution.

Arguably, the transition from concept to commercialisation is a daunting phase for any innovation; the attraction of the lead-user model is its promise of smoothing this process the commercial need has already been identified and the technology development can focus on a real-life, clearly defined customer need. So its a win-win situation: the customer, or lead user, gets the early advantage of the innovation; the company gains a customer-ready solution to take to market.

Indeed, lead user innovation is an especially suitable tool where government funding is constrained, as it is often not the government that invests directly but the lead organisations under the governments direction. In the New Zealand context, State Owned Enterprises, Government departments like Defence or, at a local level, city councils, are among the largest procuring entities in the country. They offer huge opportunities for New Zealand industry to work with them to develop and supply superior solutions to those they sometimes end up with.

The New Zealand Governments procurement spend alone is approximately $30 billion per year. As a result, public sector procurers have a major influence on the procurement chain, the follow-up operational cost and the total cost to the taxpayer. Importantly, the procurers influence extends to local industry development through their investment decisions, for instance, driving innovation by being lead users.

Internationally, the US government helps drive R&D procurement and stimulates innovation in smaller companies with its Small Business Innovation Research (SBIR) programme. Launched in 1982, the SBIR programme is the worlds largest seed capital programme for science and technology businesses: it makes more than 4,000 awards to small US businesses annually, totaling over USD 2 billion. It has converted billions of dollars of US taxpayer-funded research into highly valuable goods and services for the benefit of society and the economy.

Back home in New Zealand, one example of Government-led lead user innovation is the ANZAC Ship Project where the Ministry of Defence promoted local industry participation. One such local company was electrical control specialist Electropar, which recognised the commercial opportunity. The company formed new local partnerships, and designed and manufactured a new set of military-quality castings to house the fragile electronic componentry.

Electropars successful delivery for the project ensured ongoing defence opportunities, most recently the supply of naval defence-quality products for the three Air Warfare Defence Destroyers for the Royal Australian Navy.

Developing sustainable, profitable industries to increase employment and the general wealth of New Zealand is accepted government policy. There is no reason that we cannot perfect the art of lead user innovation; all it takes is the leadership to say thats what we are going to do.

US Government as a Lead User
nGimat, an intellectual property company and manufacturer of engineered nano-materials, was founded in 1993. It has won SBIR contracts from a number of government agencies including the Department of Defense, the National Science Foundation, the Department of Energy and the Environmental Protection Agency.

A $700k award from the Navy, which focused on thin film coatings and passive devices that can be embedded on printed circuit boards, led to a $7 million development and licensing agreement with Rohm & Haas, a subsidiary of Dow Chemicals. Today it has development programmes with several technology companies around the world.

Brewer Science supplies specialty chemicals and instruments to the micro- and opto-electronics industries globally. Its technology is used in products ranging from computers, phones and cameras, to medical instrumentation, telecommunications equipment and cars.

The company has received over 40 SBIR contracts from more than six different government agencies, many of which have led to commercially successful products. Established in 1981, Brewer now employs over 300 people worldwide and receives more than half of its revenue from outside the USA.

About Metals New Zealand
Metals New Zealand Incorporated was formed in February 2011 to advance the interests of New Zealands diverse metals industry, which today employs over 26,000 people and produces over $7 billion of product each year. Earlier this year, the organisation submitted its New Zealand Metals Industry Position on Public Policy Issues to the Government lead user innovation formed one of the many recommendations it made.

Every member of HERA is automatically a subscription-free affiliated member of Metals NZ. However, we encourage every member to become more involved and join up as fee-paying ordinary corporate member which is available at low cost. For more information and the latest version of the Policy Position paper, click HERE.