Crossing the Management Chasm: Professionalising the Business of Australian Innovation
- Dr John H Howard
- Dec 9
- 9 min read
John H Howard, 8 December 2025
Australia's innovation ecosystem faces a structural "Management Chasm"—the disconnect between the skills of discovery ("the miracle") and the systems of execution ("the business"). This Insight argues that the transition from startup to scale-up and a sustainable commercial enterprise requires a decisive shift from amateur enthusiasm to professional management, a challenge shared by private SMEs and university spin-outs alike.
It critiques the prevailing "capability-building" policy, suggesting that retraining deep specialists as generalist CEOs creates a "capability trap" that misdiagnoses a management deficit as a lack of technical absorptive capacity. The Insight concludes by suggesting support for Executive Derisking within place-based ecosystem development. Funds would be used to tap into a pool of executive talent, seasoned CEOs, CFOs, and product architects, deployed into promising spin-outs on a fractional or rotational basis.
There is a great paradox in the innovation economy: brilliant, obsessive founders conceive a world-changing idea, build a product against all odds, and may attract a few million in startup venture capital. Then, just as the company begins to scale, the board replaces them. The visionary who created the miracle may be considered not up to the task of managing the fledgling business that has been created.
This is not a rare event; it is a structural feature of the innovation ecosystem. It represents a deep divide between the skills of discovery and the skills of execution. We can call this the Management Chasm.
While this phenomenon is often discussed in the context of the commercialisation of university research, it is a challenge that pervades the entire small to medium enterprise (SME) sector.
The transition from a raw startup or a promising SME to a professionally managed business enterprise is not a smooth continuum. It is a violent jump. Whether the founder is a garage entrepreneur or a distinguished professor, the chasm is defined and enforced by the very capital that innovators seek.
These observations are made notwithstanding the truism that most businesses grow slowly, and their principal source of growth finance is their customers. Finding and selling to customers is the principal act of entrepreneurship.
Nascent businesses may, of course, want to grow more quickly, particularly those without paying customers, by accessing government grants and venture financing. There are now many players in this realm of venture finance, particularly at the early-stage.
The Two Worlds of Venture Investment
To understand the management chasm, it is necessary to look at the drivers of investment at different stages of the venture investment cycle and understand that investors can be playing two completely different games.
At the early stage, there is a seed investor, or miracle hunter. They are placing many small bets on startups in the full knowledge that most will fail, searching for signals of vision and velocity. They look for an obsessive founding team and signs of user engagement and indications that the market may love the product or services. Their capital provides just enough runway to prove that the miracle exists. In the process, they may create another unicorn, although this is very rare.
Multiple incubators and accelerators across the nation are preparing startup founders for their pitch to these seed investors, including angel investors. Increasingly, angel investors are coming together in Early-Stage Venture Capital Limited Partnerships and later-stage VCLPs, which invest in venture capital seed funds and scale-up funds.
As the startup matures, the game changes. The scale-up investor is a business builder. They arrive after the miracle has been validated and have no interest in funding an experiment. Their role is to buy upside predictability, investing in execution and the professionalisation of the vision. Their diligence is almost entirely quantitative, focusing on unit economics, customer acquisition costs, and predictable revenue. This scale-up investor is the one who most often forces the founder-manager to step aside.
But more significantly, this is also the precise point where Australia's capital markets fail to provide a robust pool of expansion capital and investment expertise, leading many high-potential startups to migrate offshore.
The Universal SME Management Challenge: Professionalisation
For the broader economy, the challenge is how to inject this business-building capability into early-stage firms without killing their entrepreneurial spirit. Most founders, whether in software, manufacturing, or deep tech, struggle to cross this gap. They are often resistant to implementing the professional governance and systems required to scale. They like the culture of the startup. Of course, many enterprises at this stage do not wish to grow, preferring a comfortable lifestyle and moderate income.
A key strategic imperative for Australia is the professionalisation of startup and SME management. We need to move away from the romanticised notion that a founder must be the CEO forever. Instead, we must recognise that bypassing the founder, by installing professional CEOs or surrounding them with experienced executive teams including CFOs, is often a necessary and rational path for growth. This is not necessarily about removing the founder, but about respecting the division of labour between innovation and execution.
The Adoption Paradox
This management deficit manifests visibly at the doorsteps of our major research facilities. We frequently observe founders and SME owners who are convinced that a specific technology, whether advanced manufacturing, AI, or robotics, is the "silver bullet" for their business. They approach these facilities seeking help with implementation, yet they lack the fundamental business acumen to actually adopt or apply the technology.
This is the Adoption Paradox. These founders believe they have a technology problem, but they actually have a management problem. They are attempting to graft complex, high-velocity research outputs onto an enterprise that lacks basic operational discipline or commercial strategy.
For the research facility, this presents a dilemma. They can deliver the technical solution, but without a professional technology management structure on the receiving end to integrate it, the technology will likely fail to generate value. The facility risks becoming a crutch for amateur management, rather than a partner in innovation. This reinforces the reality that absorptive capacity, the ability to use new knowledge, is fundamentally a function of management quality, not just technical literacy.
History demonstrates that deeply specialised scientists and engineers can transition into successful business leaders. However, this success relies on their capacity to build and lead teams of experts across marketing, design, finance, and legal functions. This specific capability represents the craft of general management, a practice-based discipline acquired through experience. This differs significantly from the concept of generalist management.
The Cult of the Gifted Amateur
This management deficit can be compounded by a cultural reliance on the "generalist" archetype: the idea of the gifted amateur, which is deeply ingrained in British and Australian administrative traditions. This view assumes that a sharp mind and a broad education are sufficient to manage any domain.
In practice, the craft of general management differs significantly from this generalist concept. Where the generalist may possess a broad but often superficial familiarity with many areas, the true general manager exercises the architectural skill necessary to integrate distinct and technologically complex areas of expertise. In the high-stakes world of deep technology, where product and process are inseparable, the generalist's detachment from the underlying "craft" of the industry is a fatal liability.
This structural flaw is visible in Australia's missing middle: while we rank highly for startup creation, our scale-up survival rate is poor. It is further evidenced by the tendency of deep-tech investors to import CEOs from overseas markets, effectively casting a vote of no confidence in the local management pool. This suggests our primary constraint is not a lack of entrepreneurial spirit (we have plenty of founders), but a lack of architectural competence (we have few business builders). The generalist is adept at presiding over a steady state, but they cannot engineer the complex transition from discovery to industry.
The generalist approach creates a specific vulnerability in the innovation economy. It encourages a separation of management from the "craft" of the industry (or policy from administration).
This distinction is critical, as innovation demands the orchestration of deep specialists rather than generic administrative oversight.
The University Context: A Specific Case of the Chasm
Nowhere is this management chasm more acute than in the university sector. Here, the founder is often a career academic, and the "product" is complex intellectual property. In this environment, we observe two distinct philosophies for managing the translation of the IP towards impact.
The first, broadly used in the UK and by the Group of Eight and several of the ATN universities, is the Assertive Asset Manager model. This mirrors the private equity approach: the institution (acting as the asset manager) retains control and inserts professional management around the IP to bypass academic inexperience.
The second philosophy, currently gaining traction in other Australian universities, is the capability-building model. This approach bets on the founder. It assumes that with enough mentoring and financial literacy training, the researcher can be transformed into a Scientist-Entrepreneur capable of courting and sustaining venture investment.
Later stage Venture investors can spot this immediately. They do not fund experiments led by management amateurs learning on the job; they require de-risked assets managed by professionals. Expecting a deep specialist or accomplished engineer, whether a researcher or a technical SME owner, to master complex commercial execution is a strategic error. It is a waste of talent to force a miracle builder to become a business builder within a very short time frame.
Towards Best Practice: A General Manager's Perspective
Establishing a clear understanding of aspirations is the first step towards best practice. At the earliest stage, a General Manager must sit down with the academic founder to map out their personal goals. Experience suggests that in the vast majority of cases, the founder has no desire to hold the Chief Executive Officer position. Instead, they typically prefer a technical leadership role, such as CTO, allowing them to retain their substantive university position.
However, there are exceptions. Those founders who do seek the CEO role are often acutely aware of their skill gaps. They tend to be receptive to guidance and pragmatic about their tenure, acknowledging they may not lead the company indefinitely. To bridge this capability gap, some pursue an International MBA. Progressive universities may even agree to invest in this education, recognising both the individual’s potential and the long-term value to the institution.
The optimal structural model pairs the lead researcher with an experienced operator to manage commercialisation. This relationship relies heavily on trust, an attribute that is usually built over a long period of shared history. This "marriage" of a gifted researcher committed to the start-up journey and a commercial general manager creates a powerful combination. Yet, its success remains entirely contingent on the strength of the interpersonal bond.
Some General Managers actively seek out top-flight academics who demonstrate a genuine desire to partner. They prioritise working with individuals where personal rapport exists, as this accelerates the development of necessary trust.
Conversely, "injecting" professional management while expecting the founder to immediately take a backseat is fraught with danger. Without context and established trust, this transition can be jarring. When handled clumsily, it often leads to adverse outcomes, including the premature exit of the founder. The risk profile increases the longer this transition is delayed, particularly if the researcher fails to recognise their own managerial limitations.
A Systemic Solution: Building Management Capacity in Place-based Innovation Ecosystems
We cannot bridge the management chasm by simply adding commercial expectations to the workloads of academic founders. Nor can we expect every university Technology Transfer Office to recruit a full suite of investment-grade executives. The solution requires a shared, high-velocity utility model that respects the fundamental division of labour.
Current approaches often fall into a capability-building trap of trying to train researchers to be managers. While well-intentioned, this creates a distraction. Instead, we must move toward injecting seasoned management professionals into the enterprise at the critical scale-up junction. The goal is to liberate the innovator to lead the science, while empowering professionals to build the business.
To achieve this, consideration should be given to financial and other support for Executive DeRisking within place-based ecosystem development. These mechanisms would subsidise the commercial salaries of professional management teams for accredited deep-tech ventures. Funds would be used to tap into a pool of executive talent, seasoned CEOs, CFOs, and product architects, deployed into promising spin-outs on a fractional or rotational basis. They could be known as business architects.
This approach would ensure that public investment supports the management and organisational infrastructure of a growing business, rather than just the science of the discovery. It would replace the administrative hope that a scientist can do it all with the management reality required to thrive in global markets. It would sit alongside the development of incubators and accelerators as a critical component of a place-based innovation ecosystem.
Crucially, this model acknowledges that private providers are already attempting to offer this kind of service. Policy should recognise this market activity and create a pathway to fund beneficial private-sector engagement. This would ensure that the proposed solution works with market forces rather than displacing them.
Finally, we must examine the structure of grant funding. Too often, researchers utilise grants solely for science, without considering commercial risks or pathways to adoption, application, and use in either a commercial or a national benefit setting. By mandating or encouraging expenditure on building the architecture of a business, we can protect the public investment and significantly increase the likelihood of commercial success.
This Insight Emerged from conversations at the National Innovation Policy Forum on 3 November 2025. The contributions and assistance of Jane Fitzpatrick, CEO of the ANFF, and Victor Pantano on earlier drafts of this Insight are greatly appreciated.
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