It’s not about research, it is about commercial discipline.
Recent policy roundtables have reignited familiar calls for “Australian Fraunhofers” – applied research institutes that can supposedly bridge our innovation gap. These proposals sound compelling, until you examine what makes the model successful.
Guess what… it is not research relevance. Germany doesn’t have a monopoly on brilliant scientists or breakthrough technologies. The secret to Fraunhofer’s success lies in something Australian policy makers consistently overlook…, commercial discipline.
Academic misdiagnosis
Suggestions of turning CSIRO into an Australian Fraunhofer institute represent a fundamental misunderstanding of design. While CSIRO and Fraunhofer were established in the 1940s, they were formed for different purposes, mandates that shaped each organisation’s DNA.
CSIRO was founded as Australia’s national science agency with the mission to conduct research for national benefit, build scientific capability, and advance knowledge across critical domains. CSIRO has been extraordinarily successful at this purpose – delivering world-class research, building Australia’s scientific reputation, and providing the research foundation that underpins our economic prosperity.
Fraunhofer was founded as a commercial research organisation with the explicit mission to translate research into industry applications and generate revenue through commercial partnerships. From inception, Fraunhofer was designed with commercial governance, market accountability, and customer-focused operations.
Research excellence and commercial success require fundamentally different organisational purposes, competencies, and performance frameworks.
The real Fraunhofer success formula
The German system succeeds because it was purpose-built for commercial success, not because it conducts world-class applied research. Founded in 1949, Fraunhofer was explicitly designed as a commercial organisation that engages research, not a research organisation attempting commercial activities.
Achieving 70% of funding from industry isn’t a performance target, it is a requirement built into Fraunhofer’s organisational design. When the purpose of an institution is to generate commercial revenue, it creates an entirely different set of capabilities compared to one founded on research for national benefit.
Fraunhofer institutes employ business development teams, account managers, and commercial strategists, because commercial revenue was always the organisational purpose. These aren’t researchers trying to be something else, they are commercial professionals hired for commercial expertise.
Industry revenue drives commercial outcomes
Research priorities determined by market need reflect Fraunhofer’s commercial design, commercial contracts fund technology development that solves real industry problems. Performance measured by customer satisfaction, revenue generation, and market penetration, which reflects organisational purpose. Fraunhofer was not designed for research excellence, publications or academic reputation – it was designed to optimise for commercial translation.
CSIRO’s Research Excellence Success
CSIRO has also achieved extraordinary success in its designed purpose – research excellence for national benefit. The percentage of CSIRO’s industry revenue doesn’t represent failure; it demonstrates clear focus on research rather than commercial activities. CSIRO should maintain this focus because Australia needs world-class research institutions doing what they do best.
Commercial Governance vs Academic Excellence
The critical insight is that commercial success requires commercial governance from inception, not academic governance attempting commercial activities.
These competencies are developed through entirely different career paths with incompatible performance frameworks. Commercial risk management focuses on market opportunity with revenue accountability. Academic risk management focuses on research integrity with publication outcomes. Both are essential for a sophisticated economy, but a mistake to expect one organisation to achieve both simultaneously.
Australian commercial success
We don’t need to look abroad for examples of commercial leadership driving technology translation success. Back home many of Australia’s largest and most successful technology companies demonstrate this principle repeatedly.
Cochlear for example was founded by commercial professionals who understood global medical device markets. Cochlear now generates $2 billion+ annual revenue through sustained commercial development. The company’s success reflects market-driven R&D investment, customer-focused innovation strategies, and international scaling capabilities built from commercial inception. ResMed’s $3.7 billion annual revenue demonstrates how commercial professionals with industry experience translate research into global market solutions. ResMed succeeded through commercial governance, market accountability, and customer-driven technology development.
CSL’s $13 billion+ revenue reflects commercial decision-making and market discipline applied to biotechnology innovation. Commercial professionals manage global market entry, customer relationships, and technology scaling.
These companies succeeded because commercial professionals made market-driven investment decisions into research with commercial accountability from inception.
The Australian Opportunity
Institutional coordination advocates assume that better research partnerships will solve commercialisation challenges. This approach overlooks the simple fact commercialisation requires commercial capabilities, not improved coordination.
Applied research institute frameworks suggest creating institutes modelled on Fraunhofer overlook the significance of Fraunhofer’s commercial DNA. Unfortunately, you cannot simply retrofit commercial performance into research institutions. It is a mistake to expect research institutions to develop commercial competencies that conflict with their organisational design and performance requirements.
The good news is there are other ways Australia can achieve Fraunhofer-style success. We can start by addressing the policy gap in support for Australian companies, those who already deliver products and services with proven commercial capabilities. We don’t need to disrupt or distract our world leading research institutes to create impact.
Australia has many successful companies, with existing customer bases, technical integration capabilities, international market access, and proven revenue generation. Companies like Orica, Worley and Nufarm already possess the commercial maturity in country needed for systematic technology translation.
The Policy Fix
Australia can replicate Fraunhofer success through commercial discipline, not research infrastructure expansion. The solution isn’t breaking our world class research institution to try and replicate Fraunhofer. CSIRO succeeds at its mission precisely because it maintains focus on research excellence rather than commercial activities.
What Australian innovation policy needs is to provide systematic support for our local companies to become Australia’s next technology translation engines. A system where technology opportunities get identified through market need rather than research availability. Success gets measured through revenue generation, customer satisfaction, and market penetration rather than publications and patents.
We need to bridge the gap with an organisation led by commercial leaders, with proven track records in global market development and revenue generation. The result will create systematic connections between research excellence and commercial capability, without forcing either to compromise their core strengths.
Real Fraunhofer success comes from commercial discipline and market accountability, not from research institutions attempting commercial activities. If Australia wants to replicate German performance, we need to recognise that commercial translation is a commercial competency requiring commercial professionals.
Our research excellence is undisputed. Our commercial translation performance needs enhancement through dedicated commercial organisations, not more research infrastructure managed by research institutions