Drivers and Barriers to Australian Innovation Rail Innovation Australia Pty Ltd Case Study Mr Brian Bock Director RIA Prof Peter Robinson Director RIA Dr Anna Thomas General Manager RIA 9 August 2013 Australia s premier rail research centre
Presentation Overview RIA spin-off from Rail CRC OzECP (electronically controlled pneumatic brakes) Case Study: - Getting parties together - Hurdles on the way - Impact and benefits from the project Lessons to be learned Exploiting Australia s advantages for growing engineering innovation implications for R&D policies
RIA Stakeholders
RIA: to be or not to be why would you bother? Risk averse culture: start-ups almost always fail Barriers to owning shares in a start-up : - difficulties of compliance for market-listed companies - bureaucratic obstacles in governmentowned organisations - preference of some universities to get royalties instead of shares because of R&D KPIs - Limited equity funding available for risky ventures
Would we miss the opportunity? 15 items in the IP Register with some labtested prototypes Established (>$200K p.a. ) royalty streams from educational programs Expected royalties from software sale $1M QLD Smart State grant for OzECP brakes New CRC with focus on technology adoption and broader non-engineering research Desire to demonstrate value and realise benefits from Rail CRC s research
Self-Funded Model Rail CRC Participants Exclusive IP Licence RIA Shares Rail Innovation Australia Pty Ltd $$$ from R&D Grants, Royalties, Consultancies
OzECP Brakes Project Case Study
Before we started ECP technology : But: - Critical for improving safety and lifting productivity of heavy haul railways, and increasing capacity of rail networks - Platform for intelligent on-board solutions - High costs of retrofitting existing fleets - Expensive and not perfect existing products - Oligopoly of two US-based suppliers of black box products reluctant to cooperate with customers and fixing the price
Project Background Initiated by QR engineers after trials of existing ECP products Aimed to develop a unique solution for retrofitting existing pneumatic brakes Provisional patent lodged in 2003 Proof of concept trials of developed prototypes in 2006-07 $6B global market ($300M in Australia) Develop commercial safety-critical product Full train field trials in commercial traffic to determine efficiency and economic benefits
OzECP Brakes Prototypes
OzECP Static Tests
RIA: Getting Parties Together Technology User s Cons : - R&D is not our business - Potential disruption to busy rail operations - Risks of field tests because of a safetycritical product Technology User s Pros : - A new customised and open platform product with local engineering input and support - A third trusted supplier of ECP in the market - Significance of potential economic benefits from the project
RIA: Getting Parties Together Manufacturer s perspective: The opportunity to become a third supplier in the growing multi-billion dollar market No opportunity to develop ECP products in Europe Unique opportunity to develop an interoperable ECP product in Australia Exploit outputs from Faiveley s prior research and patents overlapping with those of Rail CRC
Project Arrangements 2 years $4M project Background IP and input from RIA, Faiveley and QR Project IP owned by parties as tenants in common in equal shares A special purchase option to QR An exclusive licence to the manufacturer in return to royalties or other agreed remuneration
Hurdles on the Way Challenge to build a coherent team focussing on key economic and technical objectives Challenge of IP dispute initiated by a largest competitor Restructurings in both Faiveley and QR with new management in charge Major changes to project teams
Key Factors that Helped Us to Break through Size of the opportunity (access to and change of the dynamics of the global ECP market ) Relationship and communication QLD Government grant to the project
OzECP Brakes On Train in NSW
Project Impact so far Faiveley Australia (FA) established as the leading ECP R&D and sales group of Faiveley Transport Growth of FA s R&D and other staff Purchase by FA of an electronics company in Melbourne and new lab facilities in Sydney Much broader spectrum of products for rail CQUni engineers became well-recognised experts in ECP and established their own spin-out company
Project Impact in the near future OzECP to be used by Aurizon for improving productivity and network capacity Remuneration to be received by project parties from Faiveley Re-investment of royalties/ remuneration into Australian R&D New collaborative R&D projects between the parties are in the pipeline Integration of CQUni research & FA product development
Observations Many large companies are operationally oriented and are not attuned to collaboration with suppliers Many global manufacturers do not undertake R&D in Australia Engineering innovation is 95% incremental (as proven by existing patents) and based on background IP Cooperation between global manufacturers and Australian research providers is crucial for engineering innovation and benefits to the economy from research
Lessons to be Learned Involvement of a manufacturer early in R&D is critical for success Innovation is often driven by a business opportunity and not only by formal intellectual property (patents) Opportunities to develop new products in cooperation with technology users would help attracting more R&D activities to Australia Collaboration would help to link Australian publicly funded research with international manufacturing supply chain Capturing and maximising value to Australia via specific conditions of the grant
Implications for Policies Incentives to technology users (R&D deductions & concessions) Ongoing $$$ grant support to user-driven projects Active involvement of local research providers in product development Entitlement of all parties to ownership of the final product Opportunities for further research linked to completed projects Other conditions to maximise benefits to Australia
What is Next for RIA? New projects with FA and Aurizon Involving other technology users, RIA stakeholders in cooperation Attracting other global manufacturers to Australia
Reason - Needs and opportunities Research Risk and Reward Relationships Policy Focus Create an environment / context / reason Provide incentives and drivers
Time consuming Bureaucratic processes Complex Not end-user / customer focused Need to support collaborative / cooperative approaches Push for frontend or early involvement from end-user / manufacturer / supplier
Links with public sector research to grow productivity Public Sector Research Collaborative Relationship s Social Private Sector Competitive Cooperative Formal / Legal Market Public Good Government Policy Company Reason Grow Productivity Do more with less Do new things Market Size National Market maturity International Market dynamics National / State Enabling Constraining Risk Reward Funding Tax Support Products Education / Training Manufacturing Hardware / Software