The Dark Side of Innovation:
From Black Skivvies to Black Arm-Bands

Dr. Terry Cutler

Originally published: Business Review Weekly01 June 2001

Even congenital optimists like myself regularly confront the dark side of innovation and change.

I remember one occasion in Melbourne when a brilliant young entrepreneur explained that what drove him was "showing everyone that we are right ". In many ways this is the cri de coeur from the depths of all innovators and change agents, from Gallileo to

But where is the trauma unit for the survivors or victims when new ventures crash. Where are the rehabilitation units for the temporarily disabled or the relief for the innocent victims of collateral damage? With road carnage, we respond with expensive campaigns and "black spot" programmes. We fill the dangerous pot holes. We differentiate between the innocent victims and the reckless.

Too many talented young Australians currently resemble the youthful and shell-shocked troops returning from the trenches of World War 1, or Vietnam veterans returning to a hostile or un-welcoming homecoming. A whole generation is scarred, and human potential is wasted. We risk the same today.

Rudyard Kipling, that great apologist for imperial entrepreneurialism, provides an apt epitaph for the living dead amongst the technology carnage:

"For what is sunk will hardly swim, Not with this wind blowing, and this tide".

Confronting the dark place of things going wrong takes courage.

Failure is especially hard to take when it appears to come from nowhere. This year one struggling new venture I know, developing a potentially revolutionary online technology, has been scrambling to survive after a totally risk averse venture capital firm pulled out the day before funds were due to be transferred to the bank. A leading United States firm of consultants described the behaviour of this Australian would-be venture capitalist as "the most destructive" they had ever encountered.

With the current wind blowing, it sometimes seems easier for a start-up to get money from a traditional bank than a venture capitalist. I seriously worry that the gains we had been making in growing a venture capital culture in Australia are being written off. In the mid-1990s we made some real breakthroughs in Australia, with the Commonwealth being a major catalyst through its Industry Innovation Fund initiative to underwrite new early-stage private equity activity. This was reinforced by reform to the capital gains tax regime. Having been directly involved in promoting these initiatives I feel incredibly disappointed to see the fall out from the stock market correction.

Inexperienced fund managers are sitting on money rather than investing. Other have diverted to the "vulture capital" of bottom feeding off the tech wrecks. Institutions who were crow-barred into taking private equities seriously are now congratulating themselves on their caution. It will be hard to rekindle the interest and enthusiasm.

Few attempt to understand the thin red line between creativity and innovation on the one hand, and adventurism and exploitation on the other. Here in Australia a small cadre of high profile "digital shonks" and self-serving opportunists have given all new technology ventures and entrepreneurialism a bad name.

Just a few days ago a leading television producer told me that the young people in her unit were now walking away from opportunities to work on online media. The reason? They are saying that "after the crash, there is no future in this digital stuff".

Not long ago a twenty's something young CEO who became the collateral victim of a plunging share price explained to me that he did not want to pursue a new opportunity I had identified. He explained he needed to retreat to the big end of town to rehabilitate himself.

A really bright young man who used to work with me recently gave up the struggle to find funding for the e-business software applications he had worked on. He abandoned his parents-in-law's garage — yes, it was a Bill Gates look-alike set up — and returned to a big firm.

At the same time I continue to find myself at industry forums and task force meetings where industry leaders - usually sitting in very comfortable corporate positions - piously bemoan Australia's lack of an innovative and entrepreneurial culture. The monotonous chant is that Australia's young talent must be encouraged to be more entrepreneurial.

As industry leaders, corporate Pharisee's preaching to the young, we might start by setting an example (instead of just hastily changing our black skivvies for the more comfortable white shirt and tie). At the very least we might cross the road and tend to the wounds of our young victims of technology road rage. Provide some help with rehabiliation, grief counselling, and practical assistance so that these talented Australian's can dust themselves off and have another go.

Let's help our young people learn from the failures, and encourage them to keep aiming high. Otherwise we will never have a creative culture and an entrepreneurial future.