Introduction - Why Does Australia need Health Innovation Ecosystems?

Another major challenge Australia faces, along with other advanced economies, is the escalating cost of healthcare. Health costs are rising, partly due to innovations in drugs and devices that improve outcomes and care options, adding years to our life and life to our years but these advancements come at a price. It should come as no surprise that we can’t get something for nothing. And something as precious as life is worth spending a bit more on. However, the money needs to come from somewhere and it is not clear that we are going to be able to afford the healthcare we expect in the future.

Our understanding of innovation should not be limited to new drugs, devices, and information technology, though these are important; it should also include improvements to how our health systems operate and encompass preventative as well as curative interventions. This means finding the best mix of care, and care settings (including virtual) and integrating them to provide the best outcomes and experiences for Australians equitably, while taking cost out of the health system.

So, why does Australia need Health Innovation Ecosystems? Because capable and connected ecosystems such as precincts and districts, at a place-based level, and national health and life sciences consortia will be how we bring together the diverse talent to meet the health and economic challenges of our day.

While shifting to a knowledge and innovation economy sounds promising, success is not guaranteed. Many countries are pursuing the same goal and have been at it longer. Fortunately, Australia has the talent to meet this challenge. With a strong healthcare system, a highly educated population, a robust university sector, and the ability to attract international talent, we have a solid foundation. However, talent alone is not enough. We must effectively harness this talent, improve our capacity to translate research into practical products and solutions, and ensure they are deployed through viable Australian businesses to achieve the social and economic benefits.

To successfully reorient the Australian economy, we must be thoughtful and strategic, bringing all necessary elements together coherently. We need to put aside the "she'll be right" attitude and be vigilant about potential pitfalls. Being the lucky country has given us the talent and resources for a fighting chance at this, but we must play to our strengths while addressing our weaknesses, or our luck will run out.

Australia is a great place to live, which is why people like me come from all over the world to set up our lives here. Australians enjoy an enviable quality of life, benefiting from excellent life and leisure amenities, (sort of) free healthcare, world-class education, a strong economy that provides well-paid jobs for many (not just a few), “fair go” values, and access to the highest quality coffee I've experienced in all my travels.

However, the "lucky country" may start to feel the pinch if GDP per capita stagnates, the cost of living continues to rise, and the dream of homeownership becomes increasingly out of reach. For many years, the Australian economy has been buoyed by the export of natural resources such as iron ore, coal, and natural gas. While this has served us well, it is not sustainable. Rightly, there is mounting pressure to take action on climate change, and sooner or later, China and other major trading partners, may reduce their reliance on our natural resources.

Ingredient #1: Capability

My first experience of the Australian Healthcare system was through work on patient flow improvement programs in a couple of Sydney hospitals. The issue of patient flow remains a significant challenge for health systems across Australia today. As I write this, Melbourne is grappling with chronic ambulance ramping across many of its hospitals. What surprised me most during my time in this field was the stark contrast between the underinvestment in the necessary capabilities to address these issues and the substantial public funds being directed toward new hospital buildings. This is when I first heard the adage "Utopia isn't a comedy, it’s a documentary” - a phrase I have heard many more times since.

My greatest concern for Australia is that we might repeat this pattern with our emerging health precincts. There is a risk of placing too much emphasis on capital funding for impressive new buildings, while neglecting investment in developing the capabilities needed to tackle the biggest health challenges of our time.

I recently heard a quote that summed this up nicely:

The obvious answer should be to train the monkey as that's the bit that is most likely to fail. If we can't train the monkey, then what's the point in having the plinth? However, I wonder if, in Australia, we have a tendency to become preoccupied with the plinths.

Don't get me wrong, we definitely need the plinths too. Building developments and urban planning are important enablers of innovation. There is good research out there that describe the benefits of concentrating capabilities to create opportunities for innovative “collisions”- see the work of Julie Wagner and the Global Institute on Innovation Districts - but let's not forget that we need to be strategic about the capabilities that we seek to concentrate.

In my opinion, architecture shouldn’t overshadow science and innovation in our precinct plans; too many precinct plans focus too much on building renders and land use and fail to convey much information at all about the excellent science that will take place. We need to focus on being capability-driven and mission-oriented, rather than building- and land-use-driven, in our pursuit of world-leading health innovation.

Capabilities are the core of any innovation ecosystem; without them, innovation is impossible. These capabilities must extend beyond specialised domain knowledge and health research. While Australia is strong in health research, we also need to develop capabilities that bridge the chasm between basic research and establishing viable businesses; including preclinical and clinical development, product development, capital raising, IP, regulatory approvals, pricing and reimbursement, manufacturing and supply chain, market launches ... (the list goes on). Only then will we have the true ingredients for innovation ecosystems that will benefit the Australian economy.

I remain optimistic that as a nation, we can get this right. I’ve spoken to many precinct leaders across Australia who understand this, and I’ve had the privilege of working with some on capability-driven strategies for their precincts. However, I’ve also encountered leaders who are puzzled by the focus on buildings and land use and are not receiving the support they need to develop and implement capability-driven strategies. Federal and state governments are backing Health Innovation Precincts, but I hope they’re also ready to invest in developing the necessary capabilities, even if it means attending media events in old buildings.

"If you want to put a Monkey on a 10ft plinth to recite the complete works for Shakespeare, what do you do first?"

Ingredient #2: Convergence

The same holds true for innovation precincts. You can have all the right capabilities in one place, but they may remain inert unless the precinct takes deliberate steps to spark interaction. Simply co-locating people won’t automatically lead to innovation; intentional mechanisms are needed to bring people together across organisational and disciplinary boundaries.

So, what are these deliberate mechanisms? There’s often talk about transport and urban planning, making it easier for someone from Organization A to walk over to Organization B, or for clinical researchers to move seamlessly between hospital rounds, lab work, investor meetings, and boardrooms. Good accessibility and communal spaces do indeed make innovation easier, but even the best placemaking and foot bridges won’t get people crossing organisational boundaries unless they have a reason to do so.

That reason should be clearly defined by the precinct’s purpose or mission. The purpose acts as a catalyst—it’s what holds Capabilities A and B together to create idea C. A clear purpose provides everyone with a reason to come together and makes it clear what their role in the process is. When people gather with a shared understanding of why they’re there and what part they play, the magic can happen.

Beyond purpose, it’s crucial to ensure that people and organisations can effectively mix. People might have a great conversation, but without trust and commitment to work together, nothing further will happen. Building trusted relationships takes time, but it takes even longer if we don’t actively stir things up. Precincts can organise networking events to repeatedly bring people into the same spaces with relationships and trust building with increasing familiarity. Better still, precincts should encourage people to spend real time in neighbouring organisations. All too often we undervalue the capabilities of other organisations because we simply don’t know enough about their field of expertise to understand the nuances of what they can offer (this is the Dunning-Kruger effect at work). Spending real-time in adjacent organisations can bring a deeper understanding of other players in the ecosystem, laying the groundwork for relationships with the potential for depth and longevity and gaining insight into the various roles ecosystem members can play in a collaborative endeavor. Facilitating secondments is a way to achieve this, and over time, it can lead to joint/hybrid appointments between organisations and institutions. These vital personnel connections are more meaningful bridges for collaboration than those built by civil engineers.

Finally, for collaboration and innovation to truly take off, collaborators need to know they can access funding to move beyond academic conversation. I’ll discuss a supportive funding environment in the next section, but it’s important to recognise the connection between finance and convergence. Just like a magnesium fuse provides the activation energy to trigger a thermite reaction, injecting funding into an innovation environment can incentivise the first collaborators to come together — their successes will then inspire (and hopefully fund) future generations to collaborate.

In conclusion, capabilities are essential, and we absolutely need them in our innovation precincts. But we also need to be deliberate in the mechanisms we use to bring these capabilities together. The built environment is just one part of the puzzle. The more critical piece is understanding human motivations and appealing to them to encourage people to collaborate beyond their organisational and disciplinary boundaries.

An oversimplified definition of an innovation precinct is a cluster of industry, research and education activity in a specific geographic area. But if that’s all a precinct is—a collection of entities simply co-located—then it’s just a bunch of things sitting together in the same place.

As a chemist by background, I know that having the right ingredients in a flask isn’t enough to trigger a reaction. Sometimes, you need to light a magnesium fuse to start a violent exothermic reaction (look up the thermite reaction), or give everything a stir, add a small amount of catalyst, or gently scratch the glass with a spatula to trigger crystallisation. You can have all your reactants in place, but you still need a nudge to get the reaction you’re after.

Ingredient #3: Support

Many commentators on Australia’s life sciences industry eventually say, “We have a strong research sector and a world-class health system, but we face a commercialisation problem.” At first glance, this may seem like an insurmountable obstacle. The U.S., where many Australian companies end up, offers greater access to investment capital, a larger market, and the prestige of FDA approval, which often outweighs the credibility of a Therapeutic Goods Administration (TGA) approval. With such a strong pull, is it inevitable that our most promising companies will move to the U.S.?

Not necessarily. While the lure of the U.S. is strong, Australia has the potential to create an environment where high-value companies can not only be founded here but also thrive.

Let’s first address the regulatory environment. There is no rule saying companies must be headquartered in the U.S. to obtain FDA approval. If that were the case, no pharmaceutical company outside the U.S. would exist, which we know isn’t true. Companies can develop products anywhere and still seek FDA approval to enter the U.S. market. What’s crucial is ensuring that the company’s research and development (R&D) and regulatory strategies focus on achieving FDA approval. So, if this can be done without moving, why do so many companies relocate? The answer most likely comes down to funding.

Biotech and medtech companies benefit greatly from the abundant capital in the U.S., where funding is available at all stages of development. Australia has some excellent initiatives supporting early-stage companies, and venture capital can sometimes back them up to phase 2b clinical trials. However, this pales in comparison to the scale of funding available in the U.S.

Moreover, there is a significant gap in late-stage clinical development funding in Australia. The scarcity of venture capital is evident from the large number of biotech companies that list on the ASX at early stages. At the time of writing, there are 80 companies listed under the “Pharmaceuticals, Biotechnology and Life Sciences” category on the ASX. Of these, only one (CSL) would be considered a large-cap stock, and just three more would be mid-cap (over $2 billion). The rest are small-cap (13 companies), micro-cap (18), and over half are nano-cap (45), with a market cap under $50 million.

For these companies to raise the funds they need through public markets, they rely on individual and institutional investors who understand that investing in life sciences is a long-term game with inherent risks but potentially high rewards. However, this is a complex industry, and many investors are unwilling to ride the ups and downs of trial results. As a result, companies can stagnate as public companies or else compromise their clinical development paths to satisfy the short-term demands of investors.

What’s needed are sophisticated investors who understand the sector and can provide long-term support. Therefore, Australia either needs more venture capitalists with the expertise and deeper pockets to back this sector, or other investors, including institutions and family offices, with a better understanding of the industry. There is capital in Australia, and eventually, investment in other sectors, such as mining, will become less attractive. Life sciences offer a promising alternative, provided investors understand the stakes and can make informed decisions.

Returning to the point about strong research but weak commercialisation, we know that much of this is due to the funding environment, but are our universities truly acting as the innovation engines we need? Australia has some of the brightest minds at universities that are highly ranked internationally. But given the calibre of these institutions, are we seeing the innovation output we should expect? Many people I’ve spoken with don’t think so, and they cite several reasons.

A major issue is the lack of university-industry partnerships, which often stems from an unwillingness to collaborate. Anecdotally, I’ve heard industry professionals express frustration that university researchers are happy to accept funding but rarely seek genuine partnerships with industry. They are also often reluctant to part with equity in the companies they’ve founded, despite the significant investment needed to bring a product to market. Of course, there are exceptions, and some fantastic industry-academic partnerships exist, often through research institutes specifically set up to foster innovation with industry.

Additionally, the “publish or perish” culture in universities encourages risk-averse behaviour. Understandably, researchers focus on projects that offer incremental advancements, ensuring a steady stream of publications and, by extension, job security. This comes at the expense of true innovation. Genuine breakthroughs can take years to generate publishable results, if at all, and with job security on the line, it’s no surprise that few are willing to take that risk.

If this is the case, we can improve the productivity of our innovation engines by adjusting incentive structures. Providing innovative researchers with long-term funding and support to advance promising work, without a guarantee of success, may seem risky on an individual level. However, as a nation, if we place enough bets like this, we are more likely to produce industry-shaping innovations. A longer-term funding approach would also free up researchers from spending countless hours applying for grants and piecemeal funding just to keep projects alive. This time could be better spent on research itself.

Universities and governments have the power to shift the focus towards groundbreaking innovations rather than incremental improvements. We don’t need to eliminate incremental research, but the balance is currently skewed too heavily toward low-risk, low-reward projects compared to our global counterparts. We also need to foster a culture among university entrepreneurs that welcomes industry support. Private sector organisations, especially those with a global reach, offer more than just capital—they bring expertise and access to global markets that individual researchers cannot replicate in the timeframe needed to bring a product to market.

Ingredient #4: Attracting talent

Any conversation about innovation hubs inevitably turns to Silicon Valley, a name that has become synonymous with groundbreaking advancements in the computing and high-technology industries. Originally dubbed for its pioneering work in silicon-based semiconductors, Silicon Valley is an undeniable success story. However, it wasn’t built overnight. It started with a small core of extraordinary talent, which attracted more talent, creating a chain reaction of innovation and world-changing products.

One of Silicon Valley’s early pioneers was William Shockley, the Nobel Prize-winning inventor of the transistor and founder of Shockley Semiconductors. His revolutionary work in transistor technology drew some of the brightest PhD graduates of the time to his company. Unfortunately (or perhaps fortunately), Shockley’s management style was notoriously difficult, prompting many of his brightest employees to leave and form a rival start-up, Fairchild Semiconductor. These so-called "traitorous eight" would later go on to establish other Silicon Valley giants, creating a legacy that many of today’s tech titans trace back to.

Many innovation hubs, districts, and precincts worldwide have attempted to replicate Silicon Valley’s success, but few have come close. While some of this may be due to the unique circumstances that favored Silicon Valley - including substantial government and military funding during the Cold War and the Space Race - there is a more critical factor at play: the cultivation of an unrivaled talent pool, generation after generation.

If Australia is serious about creating innovation ecosystems that will revolutionise the health and life sciences industries globally, we need to focus on attracting the right talent. The key lesson from Silicon Valley is that to attract talent, you first need to start with exceptional talent.

At first glance, the idea that "to attract talent, you need talent" might seem circular. However, Australia already has a wealth of talented researchers and industry leaders. Precincts need to identify their key talent, invest in their endeavors, and showcase them as examples to attract the best and brightest minds from across the nation and the globe. This means we must get comfortable with recognising and celebrating exceptional talent - something that the Australian “tall poppy syndrome” doesn’t always encourage. People don’t relocate their lives for a nice building; they do it to be around the smartest people in their field. Therefore, we need to prioritise investment in talent over investment in infrastructure.

One strategy to enhance the talent pool of a new innovation district or precinct is to attract a major company to establish a significant portion of its operations there. These so-called “anchor organisations” can be invaluable if their people are integrated into the broader capabilities of the district (see my previous articles on capability and convergence).

However, it’s important to note that major multinational corporations often understand their value to a local community and may leverage this to negotiate favorable deals that enhance their profitability without necessarily benefiting the local economy or residents. That said, if we can avoid being drawn into a bad deal, securing an anchor organisation can be highly beneficial. But we must remember that every advanced nation, city, and precinct is vying for the same anchors. So, how do we attract them?

In my view, the most critical factor is mission alignment. A precinct with a clear mission - a defined goal of what it intends to achieve - can focus its search for anchor institutions that align with that mission. Not only does this narrow the field to a select few organisations, but it also provides a compelling reason for the target anchor institution to move their operations to a new city or even a new country. When the pitch centers on mission alignment rather than mere tax incentives, collaboration with other organisations within the precinct becomes not just a nice-to-have, but the very reason the anchor institution chose to locate in the precinct in the first place.

Of course, my views on talent attraction are influenced by my own experiences and values. I chose to complete my PhD at Imperial College London to be around the most talented organic chemists in the UK, when I could have stayed at my undergraduate university, which had just invested heavily in a new laboratory building. For me, being with the brightest minds - and, admittedly, the prestige - was the most important factor. But as time passes, values change, and so do the motivations that drive people.

Given that developing innovation ecosystems is a multi-decade endeavor, we also need to think about how we are going to attract talent from Gen Z and, to some extent, Gen Alpha (though I don’t know anything about that generation's characteristics, despite having two of them living in my house).

A common misconception about Gen Z is that they are lazy and unwilling to work hard. However, this misunderstands Gen Z completely. They’ve realised that the traditional promise of "grinding it out" to get on the housing ladder and set the foundation for family and career is no longer viable. Gen Z also has greater awareness of career options and more channels to seek opportunities. They are more attuned to the serious challenges facing humanity, particularly climate change. In short, Gen Z has different priorities and options compared to their Millennial, Gen X, and Boomer predecessors.

To attract talented Gen Z’ers to our health innovation ecosystems, we need to offer them a life filled with purpose and joy. This includes engaging them with meaningful work that aligns with their values - underscoring the importance of having a clear purpose or mission for innovation precincts. Gen Z also seeks support to advance and flourish in their chosen fields, which requires fostering a positive and collaborative culture for innovation. Today’s workforce is less tolerant of authoritarian management styles and will leave toxic cultures quickly.

Finally, Gen Z rightly wants to live good lives now. With the first rung of the housing ladder increasingly out of reach, they are focusing on enjoying their lives today. This means having access to quality rental homes, places to start and raise families, and amenities and leisure facilities - and having the time to enjoy them.

The precincts that succeed in the competition for talent will be those that have a clear mission and identity around a core specialism, can claim the greatest minds in that specialism, and will offer an environment for talented individuals to thrive inside and outside of work hours.

Conclusion: Addressing our weaknesses will lead to our biggest gains

If you’ve read this far down, you’ve likely endured my previous rants on the state of our innovation ecosystem. I’m not sure whether to be grateful or apologetic — probably a bit of both. Throughout my writing, I’ve aimed to convey my optimism about Australia’s potential as a global leader in health and life sciences innovation. We have so much going for us as a nation, and if we get this right, we can secure both our future prosperity and our health.

However, I’ve also highlighted areas of weakness. This isn’t because I’m a cynic — though, as a scientist by training, I always maintain a healthy dose of scepticism. I’ve pointed out our shortcomings because addressing them is where we stand to make the most significant gains.

This might sound profound, but I’ve actually borrowed the idea from a popular running app. The coach in my ear was encouraging me to focus on my running weaknesses (in my case, pacing) to see the greatest improvements. As soon as I heard it, I forgot all about running and realised the same principle applies here. Yes, Australia has areas of strength, but focusing solely on them will only yield marginal gains. However, being honest about where we fall behind gives us a unique opportunity. We can make meaningful strides in developing our innovation ecosystems and position ourselves among the global leaders.

This thinking applies equally at the national, state, and local levels.

If One Component Is Missing: Four Scenarios

Above, I explored the key ingredients for a successful innovation ecosystem. As a thought experiment, let’s consider what happens when any one of these components is missing.

1. Missing Capability: The Problem of White Elephants

Imagine building an innovation precinct without solid research and development foundations. You might secure plenty of government funding to construct state-of-the-art facilities, hire top urban planners to design inviting spaces, and invest in local amenities to create a wonderful living environment. But without the research capability to back it up, you won’t attract serious researchers — whether clinical, academic, or industrial. Such a project would likely fail to become a true innovation precinct and instead become an expensive white elephant (or perhaps be repurposed into luxury high-rise apartments).

2. No Convergence: When Innovation Precincts Become Paper Mills

Imagine we had the best minds across various fields but they never interacted with one another. We might still see interesting research and high-quality publications, but innovation thrives on the combination of diverse perspectives — what’s known as the Medici Effect, where blending different disciplines sparks new ideas. Without convergence, we’d likely produce a steady stream of solid but unremarkable work, with little genuine innovation.

3. No Support: Innovations That Wither on the Vine

Finally, imagine we had the capability, the convergence, and the appeal to attract people, but lacked the capital to support development. We’d likely generate many promising early-stage innovations, but without the means to commercialise them, they’d wither on the vine or be sold off to entities outside the country for a fraction of their potential value. Apologies if this scenario no longer feels hypothetical.

4. No Attraction: Avoiding Innovation Ghost Towns

Suppose we managed to gather the best minds with a compelling mission and all the necessary finance, but the location was a miserable place to live. The first generation might produce good work, driven by a sense of mission, but the precinct would struggle to attract younger innovators as the founders retire. Over time, the talent pool would dry up, and what was once a hub of innovation could turn into a deserted ghost town.

Getting It Right: Building a Virtuous Cycle

Now, imagine we got everything right. Imagine we championed our exemplary capabilities, set meaningful missions to bring talented innovators together, created mechanisms for their convergence, provided attractive spaces that serve as magnets for the best and brightest generation after generation, and ensured that governments, universities, and investors supported our greatest innovations from idea to commercialisation.

If we could achieve all of this, we’d have an innovation ecosystem that truly punches above its weight and sets Australia up for a prosperous future — without relying on exporting natural resources. What’s more, success breeds success. We’d see a virtuous cycle where each component feeds into the success of the next: greater capabilities provide more opportunities for convergence, more convergent ecosystems attract additional funding and support, well-funded ecosystems attract the best and brightest, and the cycle continues.

The point is this, for our innovation ecosystems to be successful we need all the ingredients in place. By identifying where we are weakest, we can address our gaps and create environments where Australian innovation thrives. Whether you’re a policymaker, academic, developer, health leader, precinct leader or investor, now is the time to work out where the weaknesses lie and do something to address them.