We've the brains and funds, but lack the connections.
Australia is at a crossroads like the one facing Apple when Steve Jobs returned to the company in 1996 and changed it from a producer of software platforms and computers into the centre of a new digital industry, according to CSIRO's chief executive Larry Marshall.
Jobs returned to Apple in late 1996 as the company was facing a major competitive challenge from Microsoft and its Windows system. But instead of simply pushing Apple to catch up, Jobs re-imagined the entire marketplace. 
Dr Marshall came back to Australia this year from a successful career in both research and venture capitalism in Silicon Valley to head Australia's venerable science and research institution.
With the federal government last week identifying the CSIRO as the linchpin of its plans to link scientific researchers and business as part of its looming innovation statement, Dr Marshall will be one of the key figures in translating Prime Minister Malcolm Turnbull's rhetoric about Australia being an "agile" and "nimble" nation into reality.
"When Jobs came back to Apple, the whole landscape had changed," Dr Marshall says. "He created a whole new ecosystem. He completely reformed what the computer was about. He made it about mobility and connectivity. He created a marketplace for apps and digital media.
"The iPhone would not have been one of the most successful products ever developed without that ecosystem.
"Australia reminds me a lot of that moment in time. The question for us is: how do we pivot the country and create an ecosystem?
"Australia really is at a pivotal point. We have an amazing invention ecosystem. But the problem is translating that into innovation in industry."
Dr Marshall argues that Australia has two things going for it that other nations don't have, yet these positives are not exploited.
There is the track record in invention and deep technology, and there is $2 trillion sitting in superannuation funds that could be tapped for making something of these inventions.
"Silicon Valley and Israel [often cited as examples for Australia to follow] had the technology but not the $2 trillion. We often get caught up in the negative and don't see these positives. We are an inventive nation and we have a lot of capital."
The Prime Minister referred last week to the "valley of death" between early development of a product and its commercial take-up.
Dr Marshall believes that more can be done to smooth the ride through that tough phase, but this requires a change of thinking.
"We think the hard work is at the invention stage, whereas the hard work is in creating a product.
"We're serving up science, not products. We have to get it off the lab bench and into a shape where industry can see tangible benefits.
Dr Marshall echoes the view often ascribed to Silicon Valley that there is no such thing as failure.
"I did a project for Steve [Jobs] three to four years before the iPhone. He asked one of my companies to develop a laser-based projector system. It was a good idea but it didn't work.
"But that doesn't mean you don't try it. We have to get over a fear of failure and redefine how we think about it to say: 'There is no such thing as failure, because failure is a great teacher.' I ran six companies which all had their moments of failure."
Another attitude that he believes needs to change is the approach to collaboration. Australia boasts the sorry record of having the worst collaboration record in the OECD.
"Innovation is a team sport, whereas invention a solo act," he says. "Technology is too hard these days to be anything other than multidisciplinary. The really interesting breakthroughs come at the intersections between disciplines."
That's where the CSIRO can come in he says. It works with 3000 companies and partners 41 universities.
"We are in the best position to be the partner bridge," he says
Dr Marshall doesn't want to go into universities and steer them in particular directions or change what they do. But he says CSIRO can provide those 41 universities with paths to market.
That means giving more uni students the opportunity to work in the CSIRO's labs, giving them exposure to companies and what they need.
Significantly, CSIRO is bringing in successful entrepreneurs and venture capitalists from Silicon Valley and Australia to develop its own crop of start-up ideas based in the organisation.
Dr Marshall believes the first crop of start-up ideas will be ready to go at the end of the year, and the plan is to open up the scheme to all universities.
"This really will be a case of Team Australia," he says. "Creating a network to connect every university to this network is crucial."
CSIRO is establishing its own venture capital fund drawing on its $450 million Wi-Fi patent windfall, of which up to $100 million is yet to be invested.
While there is a renewed interest in government in looking at success stories in innovation in places like Israel and Singapore, Dr Marshall warns against blind imitation: "I get worried when we compare ourselves to others. The risk is we try to copy, which is the antithesis of innovation."
Having said that, he observes that "Silicon Valley and Israel didn't happen by accident".
"We can't leave it to market forces alone," Dr Marshall says.
But it is interesting that the sorts of government interventions in both locations that he believes made a big difference were not the sort of tax concessions often mentioned in relation to boosting R&D.
Dr Marshall observes that the development of both countries' innovation "ecosystems" was built on the back of massive investment in military technology by the US and Israeli governments, respectively.
It's a point that brings home just how important the next submarine contract could be in providing an investment platform and ecosystem for a more innovative economy in Australia.