Oligopoly structures in finance, insurance and supermarkets have encouraged an inward-focused business sector that is holding back the shift to an innovation economy, according to the Silicon Valley technology entrepreneur hired by the federal government to build new digital industries.
Adrian Turner, the chief executive of CSIRO subsidiary Data61, said in an exclusive interview with The Australian Financial Review that business needs to follow the lead of companies in Israel and Silicon Valley and look outward to global markets.
Speaking in Israel while on a trade mission led by assistant innovation minister Wyatt Roy, Mr Turner said Australia was well placed to capitalise on the next wave of computing, but it needed to shake off its "defensive" approach to research and development.
"Australia is very inward-focused, and it's a product of the oligopoly market structures in banking, insurance and supermarkets," he said. 
"The consequence is that we have tended to look at R&D for defence not offence - it's to protect a market rather than create a whole new global market. There are exceptions but generally not.
"There is a culture mindset of scarcity in Australia, where because of what I have described we knew the opportunity was finite.

Valley 'mindset of abundance'
"In the valley it is a mindset of abundance, so people are very willing to collaborate because they would rather have a smaller part of something that is much larger.
"In the valley there is a sense we can create a new market and a new opportunity, and that's very different."
Mr Turner said the fastest-growing trend in world technology was the creation of data-driven technology businesses that benefited from "platform economics".
He said prime examples of this trend were Facebook, Uber and Salesforce.com.
"There is a reason Facebook was the fastest-growing company to get a $250 billion market cap," he said.
"It's platform economics - it's the fact you have got data-driven businesses with algorithms that sit at the centre of them that become smarter with data feedback loops.
"The participants in the platform are creating value on top of the platform that makes it more valuable to every other participant.
"So you think about Facebook - the more of my friends are on Facebook, the more invested I am in that platform. So other people are creating value on top and that is only just starting to be understood.
"In the valley that's where all these businesses are coming from."

Data61 and platform economics
Mr Turner said these new economic structures could be applied to Data61, which has about 1000 staff working on data analytics.
"The key element of the strategy is viewing Data61 as a network or a platform, and applying platform economics to solve systemically the challenge of commercialising innovation and invention," he said.
"The way that happens is creating an ecosystem of relationships around us to help inform where we invest our time.
"It's not us developing something and pushing it into the market, it's a lot of collaboration and co-ordination."
However, he says the success of Data61 will hinge on the willingness of Australian business to outsource a portion of their R&D budgets.
"Every company around the world is trying to figure out how their industry boundaries and definitions are changing. Apple is becoming a healthcare company and Tesla with its batteries is becoming an energy company," he said.
"These companies are grappling with it and I know from the work I do with Accenture's CTO advisory board that they are grappling with it.
"And I don't think they are going to be able to recruit the talent quickly enough to transform their business, because they are competing with Apple and Google and Tesla and other companies for talent.
"So, the bet is they can't solve it alone and they will need to outsource pieces [of R&D]. That's potentially controversial for a company ??? but it was controversial for them to outsource IT infrastructure as well."
Mr Turner, who has maintained equity interests in two technology companies in Silicon Valley (Mocana and SaltGrid), said he returned to Australia after 18 years overseas because he saw an opportunity to help the country transform itself.

Australia well placed
"I think Australia is well placed to capitalise on this next wave of computing, which will be about technology and data disrupting the industries that have traditionally been our strength," he said.
"We understand the customer needs and have access to the domestic and internal technology resources to transform them ourselves, and then export the result globally.
"Our university system is strong and produces world-class talent, we have a strong IP protection infrastructure, and we have entrepreneurs that can compete globally.
"I think Data61 has a role to play in collaborating with the universities and partnering to bridge invention and research from unis into industry."
But he said there were some structural problems to overcome which were a legacy of investment by multinationals.
"The global corporations view Australia as a sales and marketing arm," he said.
"We don't do product management.
"What we have is project management, where we deliver to one customer a set of deliverables and outcomes. But we lack understanding of how to serve a market, product management, having feedback loops and having global context."

Lessons from Silicon Valley, Israel
Mr Turner said Australia could draw lessons from Silicon Valley and Israel.
"I think there are two parallels between Silicon Valley and Israel," he said.
"One is, I think, there is a cultural attribute here in Israel that people aren't satisfied - there is an agitation to want to continue to move forward and not stand still.
"There is a constant dissatisfaction with the status quo, and people challenging and getting agitated. They see something broken and they fix it.
"The other parallel is the relationship with time.
"So there's an opportunity cost to time, there's the stock option vesting schedule, there's the life of a fund, just the pace and that means the relationship with time is different to anywhere else in the world.
"This [Israel] is the first place that I have seen that is closest to that.
"So there's a sense here that we have got to move quickly because we don't know what tomorrow is going to be like."

'A national stretch goal'
Mr Turner said Australia should probably follow the lead of US president John F. Kennedy in the 1960s and come up with a "moon shot" stretch target for innovation.
"We need a national stretch goal that is underpinned by science and technology," he said.
"This will drive alignment across innovation ecosystem participants, spawn new industries and inspire kids to follow a career path of entrepreneurship and risk-taking in the field of science and technology. It will also focus on the importance of outcomes."
He said he has a formative idea of what this target should be, but he is still testing it out among stakeholders.
Whether the target is adopted or not, Mr Turner believes Australia has to effect systemic change in order to build new technology-based businesses.
"I figure we have three to five years to make real progress, and I'm on a mission with Data61 to be a major part of the solution."
The trade mission to Israel was organised by the Australia-Israel Chamber of Commerce and is jointly led by Mr Roy and Marita Cheng, the founder of MR2 Robotics. The mission includes 45 people including state Liberal MPs Matthew Taylor from Western Australia and Tim Smith from Victoria, 17 chief executives, venture capital investors and former Queensland Premier Campbell Newman.