Last month I attended a gathering to mark the release of "Inside the Innovation Matrix", the latest publication from the Australian Business Foundation. The Hon. Craig Emerson MP had been invited to say a few words to launch the book.

He was armed with the full vocabulary of innovation speak to throw at us: vision, daring, connectivity, clustering, inter-disciplinary communities, innovation...the list goes on.

Over the last 30yrs I've participated in various initiatives concerned with promoting innovation, and what I heard felt strikingly similar to what I've heard before. It was a little like hearing an echo of Ministers past.  

Successive governments have tried to encourage or cajole us to be more innovative. Yet the Australian business community including small to medium enterprises (SMEs) as well as big business have consistently failed to fulfil our leaders' vision.

We have been shown the light so many times before. Now this government has handed us The Cutler & Gershon Reports: like a teacher continuing to repeat themselves to a class of recalcitrant, naughty students.

Why? What are we doing wrong?

As somebody who has spent 40yrs in the SME space, I've been fortunate enough to work with some exceptional people and lead a group of companies that have innovated and created whole industry sectors: I feel I have earned the right to have an opinion.

In my view, there is absolutely nothing wrong with the innovative spirit of Australian companies. It's just that they are businesses, not charities, and there is no market here for them.

The last 40yrs has seen a large number of start-ups from around the world become significant global players in the IT and communications sectors.

Why are there so few Australian companies among them?

1) A lack of access to commercial markets means there is no sensible justification for entrepreneurs to invest in Australian innovation.

2) A widespread downgrading of the Australian subsidiaries of large overseas companies to mere regional office status means we have lost our connections to head offices. Research and development (R&D) budgets are managed from head offices. R&D projects are normally assigned to locations in close geographical proximity to head offices. That is unless there is an opportunity for them to be heavily subsidised by local governments to go elsewhere, and even then they have a limited life unless those governments are prepared to subsidise them long term.

3) Globalisation means that these R&D plans are organised far in advance, within huge organisations to which Australian companies do not have the right access point. Companies like Intel, Microsoft and Cisco develop their research programs years in to the future. The best we can do is guess at their plans, let alone have a comprehensive understanding of where industry is headed internationally. Because we are locked out of the planning process we can't identify for ourselves a part in the global technology of the future.

Only through relationships with large global companies will Australian companies be positioned to achieve the scale of output required to find a place for their innovations in the global marketplace.

How do I see an ideal world for Australian innovation?

In a connected world, I see it happening by building relevance for multi-nationals to want to engage with Australian companies. There is only one thing that will motivate them to want this, and that is access to our markets. Government needs to understand that the only bargaining chip of any value in today's economy is being somebody's customer.

There has to be a real incentive for international big business to embrace the concept of working with Australian companies. Only through co-ordinating government purchasing, with a pro-active strategy of demanding that these companies operate in our market, that we will succeed on a global scale. We're just too small to do it otherwise.

This should be made concrete policy.  

All the talk about "innovation" misses the point that when there is no market there can be no product.  The government has the power to create the market. If they do this, they won't need a report to tell Australian businesses to innovate; they'll already be doing it.

Peter Fritz AM is Managing Director of Global Access Partners, and Group Managing Director of TCG - a diverse group of companies which over the last 38 years has produced many breakthrough discoveries in computer and communication technologies. He chairs a number of influential government and private enterprise boards and is active in the international arena, including having represented Australia on the OECD Small and Medium Size Enterprise Committee.