“Think of a factory that makes silicon chips. Now think of a mine that produces iron ore. Which of the two is more innovative?”

“The answer is, it depends.”

Australia’s Chief Scientist, Dr Alan Finkel, spoke at the AFR Innovation Summit on the need for metrics to more fully capture Australia’s innovation activities, beyond –Silicon Valley Technology’. The speech has been turned into an article,which was published in the Australian Financial Review on 20 September.

The full text of the article is available below.

Think of a factory that makes silicon chips. Now think of a mine that produces iron ore. Which of the two is more innovative?

The answer is “it depends”.

If you’re mining with shovels, then hands down the factory wins.

If you’re mining the Australian way, it’s a different story.

Take Rio Tinto’s “Mine of the Future” in the Pilbara, run remotely from Perth. More than 400 operators track 3D visualisations of every piece of equipment on mine sites 1500 kilometres away, including the world’s largest fleet of autonomous trucks.

I struggle to think of a factory working closer to the frontiers of big data, automation, materials engineering or industrial chemistry.

But here’s the rub: the better we get at mining ore, the worse we look in the Global Innovation Index (GII).

Why? The GII includes a metric for “high-tech exports”, expressed as a proportion of total exports. Silicon chips add to both the top and bottom lines of the ratio, thereby increasing the metric. Iron ore only contributes to the bottom line, thereby decreasing the metric.

Mining certainly is measured elsewhere in the GII. It is a major contributor to patents, research investment and high-skill employment. Without that effort, we would not be the mining powerhouse we are today. Nor would Australia have sustained an economic growth streak unequalled by any other nation on record.

But those other metrics do not scale with production volume, so we under-count our impact and risk under-valuing our efforts.

I call that gap “embodied innovation”. It’s one of four gaps in the global innovation map that we need to explore.

The second gap is “hidden innovation”: creativity beyond its high-tech forms.

The GII counts creativity in metrics such as ICT exports, Wikipedia edits and YouTube uploads. It tries to find the path to Silicon Valley.

But what about an innovation like smashed avocado?

A decade ago, avocado was used for salad and guacamole. To develop the industry, we had to reimagine the fruit: as an all-round indispensable daily staple.

Farmers reengineered the production chain to raise the quality, ensure supply and lower the price. At the same time, caf̩s built the Aussie brunch into a global brand, with the avocado as the undisputed star Рon bread, in smoothies, in baking.

In just a decade, the retail value of the Australian avocado industry has almost trebled, from $340 million to $920 million. It’s the definition of creativity plus capability delivering success. That’s innovation, but where do we count it?

The third gap is social innovation, covering innovation that takes place outside the commercial realm.

If Toyota’s engineers make a factory more efficient, it registers in metrics such as innovation-active firms and business R&D investment. If the same engineers cut the wait times in a soup kitchen – as they did in New York – it doesn’t count.

Did it improve people’s lives? Absolutely. The fact that its objectives were social, not economic, shouldn’t lead us to ignore it.

The fourth gap is incremental innovation, recognising that not every change that matters occurs in a single leap.

Look at our universities. Since 2001, the total number of students, domestic and international, has more than doubled to 1.3 million.

That stunning growth was achieved without sacrificing Australia’s quality brand. It is a mark of a service industry with the agility to pivot, an eye for new technologies and a sophisticated grasp of the global market.

But how often do we count university vice-chancellors amongst the gurus of innovation?

Consistent striving is no less innovative – or important – than surging start-ups. Our metrics should help us to recognise and learn from long-run success.

Some might argue that all measures are imperfect. Yet what happens when we consistently under-rate our performance?

We struggle to motivate ourselves to improve, we discount the programs that are genuinely working, and, if taken too far, we start to question the need for innovation policy at all.

After all, if we’re not innovating, and our economy is apparently thriving, why bother?

The truth is we are doing better than we give ourselves credit. We are innovating – but we need to look for it to see it. And once we see it, we’ll have the evidence and the encouragement to continue to improve.