Larry Marshall is an oldcolleague of mine from theworld of start-ups and venturecapital. Along with others who

know Larry and have had dealingswith CSIRO, I was quite surprised latelast year when Larry was announcedas the new CEO of CSIRO. However,not unpleasantly surprised.

CSIRO has a history of unusualCEO appointments. For example, thethree prior appointments were MeganClark, previously Vice President,Health, Safety, Environment,Community and Sustainability at BHP;Geoff Garrett, who was head of theSouth African CSIR, the South Africanequivalent to CSIRO; and Colin Adam,who was head of commercialisation inCSIRO prior to becoming CEO, butbefore that had been in the corporatesector.

These are ‘unusual’ appointmentsbecause none was an internalappointment of a candidate with a longhistory within CSIRO. An organisationthat is performing strongly tends tohave processes to identify and groominternal CEO candidates. Often acandidate who does become CEO hasbeen employed in the organisation for

decades, in many different roles. Somecurrent well-known examples are TimCook of Apple, who has been theresince 1998, and Jeffrey Immelt of GE,who has been at the company since1982. These internal CEO candidatescarry the culture and vision of theorganisation with them into their CEOroles in a way that external candidatescannot. The very choice of an externalCEO candidate is often a tacitrecognition that the organisation needsa new culture and vision.

‘Shaping the future’ in ashifting economyFrom an outsider’s perspective, itappears that CSIRO has struggled tofind relevance after the deregulationof the Australian economy in the1980s and the subsequent changestherein. Since this period, there hasbeen a dramatic shift in our economytowards the (science-agnostic)services sector, which now generates68% of our GDP. CSIRO, with its mainfocus on science, is primarily leftserving the resources and agriculturalsectors, plus some other sectors at thefringes of economic importance inAustralia.

Another change that we saw in thelate 1980s was the deregulation of theAustralian university sector, which ledto these organisations becomingwilling and able to work with theAustralian private sector. Before this,they had, for various reasons, beenless interested in doing so. In fact, thefederal government, through theLinkage grant scheme, the CRCprogram and other schemes, activelyencouraged university and ‘industry’engagement. The expanding universitysector effectively began to competewith CSIRO in what was a shrinkingmarket for outsourced scientificservices in Australia.

Any perusal of CSIRO’s website, orany article written by CSIROstrategists, quickly reveals that CSIROsees itself as a purveyor of scientificservices and science-derivedoutcomes. That is, the ‘S’ and ‘R’ inCSIRO dominate their thinking. Forexample, at the CSIRO website the‘About us’ by-line reads: ‘At CSIRO weshape the future. We do this by usingscience to solve real issues.’

This focus on science is at a timewhen the global high-growthtechnology business sectors (in which

Chemistry in Australia18 | July 2015

Larryand the

science factory

Australia is seriously lagging) areincreasingly being driven byengineering and IT technologies, andless so by science. With CSIRO’s focuson ‘scientific services and outcomes’in Australia, their TAM (total availablemarket) is even further reducedcompared to a scenario in which theyalso had a serious focus on IT andengineering.

Little wonder that with a reliance onover $0.75 billion in federal fundingper annum, the CSIRO leadership hasbeen desperate to find a role thateither is more profitable or at leastgenerates enough positive publicity sothat government funding is secure.However, despite over two decades ofrestructuring and unusual CEOappointments, it could be plausiblyargued that the organisation is nocloser to finding a secure place in theAustralian economy.

The organisation has had decadesof constant organisational restructures,a matrix management structure thatfew believe in, and an oversupply of‘managerialism’ emanating from headoffice. Recent cuts have culled$111 million off the CSIRO budget overfour years and resulted in the loss of

July 2015

After meeting withnew CEO LarryMarshall, IanMaxwell looks atCSIRO’s placeamong public andprivate interests,and the options fromhere.

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around 700 jobs. In 1996, CSIROemployed 7400 people; by 2015 thenumber is closer to 5000.

CSIRO, rather confusingly, variablyfocuses on nine National Flagships,Science Excellence and Preparedness,Deep Collaboration and Connection,and being an Innovation Organisationand a Trusted Advisor. CSIRO alsooperates three lines of business – the‘National Facilities and Collections’,CSIRO services, and theaforementioned nine NationalFlagships, which are Agriculture,Biosecurity, Digital Productivity, Energy,Food and Nutrition, Land and Water,Manufacturing, Mineral Resources, andOceans and Atmosphere. It is arguablewhether all of these activities are worldclass, but more importantly it is alsoarguable whether a local capabilitydeep in the science of all these areashas relevance to Australia in 2015.

Repurposing scienceIt is worthwhile considering whathappened way back when themanagement of CSIRO announcedthese nine Flagships for the first time.

Every scientist in the organisationsimply chose which Flagship theywere in, or the choice was made forthem or against them. However,scientists cannot simply adopt a newdiscipline at the drop of a hat;whatever choices were made, theyremained as chemists, physicists ormathematicians with a primary focusin a very specific sub-field within theirdiscipline. In the modern era, it takes ascientist decades to build up aportfolio of publications and areputation within a specific and tightfield of activity. It can be veryinconvenient to have an employer likeCSIRO suggest to the chemist that sheabandons, say, a life-long focus on aspecific new type of radical chemistry,in which she is a world expert, in orderto chase some unrelated agriculturalchemistry challenge that will likely bea victim of the next restructure.

The point I am making is that anorganisation with science as itsprimary focus is the single mostunlikely candidate for successfulrepurposing. Efforts to do so, as havebeen seen at CSIRO since the 1980s,

just make the scientists unnecessarilystressed and sometimes also passivelyuncooperative, and as a result theorganisation is even less likely to besuccessful in an innovative orentrepreneurial sense.

The new CEOEnter Dr Larry R. Marshall. Larry is aserial entrepreneur credited withmany successful start-ups in areas asdiverse as biotechnology, photonicsand semiconductors. Some of thesecompanies have been successfullysold to larger operating companiesand one went onto an Initial PublicOffering. Larry has also been a venturecapitalist and a private investor. He hashad significant business dealings inChina and the US, and in bothcountries he is extraordinarily wellconnected to leaders in the techsectors. He is a serial inventor namedon around 20 patent families and hassomehow managed to find the time tobe an author on over 100 researchpublications. This is a non-trivial set ofpolymath achievements, quite rare inits breadth and depth. However, none

Chemistry in Australia20 | July 2015

The appointment of Dr LarryMarshall as the new ChiefExecutive of CSIRO wasannounced in October 2014 bythe Chairman of the CSIROBoard, Simon McKeon.

‘Dr Marshall has animpeccable record as ascientist, a technologyinnovator and business leader,’McKeon said.

‘The Chief Executive ofCSIRO is probably the mostimportant position in nationalscience administration, so weconducted an extensive globalsearch for an innovativescientist with strong businessleadership qualities, and more

than 70 candidates wereconsidered.

‘The Board is confident thatDr Marshall will lead CSIRO ina manner which ensures thatit continues to provide adviceof the highest quality toGovernment as well as providebest practice collaborationwith the private sector.’

McKeon also thankedcurrent Chief Executive DrMegan Clark for her leadershipof CSIRO for the past sixyears.

Marshall joined CSIRO inJanuary. He was previouslyManaging Director of SouthernCross Venture Partners, an

early-stage venture capitalfirm specialising in creatingAustralian technologycompanies and growingthem globally in Asia andthe US.

Marshall was educatedat Macquarie University(Sydney) where he took adoctorate in physics. Hebegan his career in theDefence Science andTechnology Organisationand has 25 years experience asan international technologyentrepreneur and holds20 patents protectingcommercial products. He hasfounded six successful US

companies in biotechnology,photonics,telecommunications andsemiconductors.CSIRO

Changing of the guard at CSIRO

of it speaks directly to the skillsneeded to turn around a large andunprofitable organisation that is inneed of something dramatic just tosurvive.

CSIRO generally has five-year plansand it is due for a new one right now. Isuspect that this federal government,or any federal government, would liketo define success for CSIRO as zerofederal funding requirements. I find itquite remarkable that CSIRO alreadyattracts about one-third of its operatingcosts from commercial activities; theyshould be applauded for thisachievement. However, given the sizeof the market for ‘scientific servicesand outcomes’ in Australia I wouldsuggest that any attempts to grow thismarket with today’s pricing structuremay be up against the Pareto rule, i.e.the cost of acquiring new customerswill become higher and higher, to the

point of unprofitability, as its marketshare becomes even more dominant.

In this context, and assumingcontinued pressure on its publicfunding, CSIRO has two stark options –to reduce in size, commensurate withits genuine market revenues, or to findentirely new sources of revenues.

Larry’s entrepreneurial backgroundwould suggest that he would ratherattempt to achieve great success atCSIRO than oversee a transition to amuch smaller and more securescientific services provider.

Larry himself has signalled that thesources of new revenue might involvea more entrepreneurial focus: ‘… Ican’t promise that change is now over… We’ve got to focus our efforts …We’ve got to be more entrepreneurialand agile … We’ve got to get ouroverheads down … we’ve got to createsome more headroom for exploration

… I have learned a lot about leaninnovation and focusing on where weare unique.’

It was in this context that Larry and Ishared a beer in mid-March of thisyear. He told me that he is still in theprocess of formulating his thinking onhis role as CEO of CSIRO. His bigpriority is to oversee the new five-yearstrategic plan that is due this year.Rather than report on our discussion,which would be a little unfair to Larrygiven the early stage of hisengagement, I’ve adopted more of anopinion piece. Commentary on theoptions ahead for CSIRO can be foundin the rest of this article, atchemaust.raci.org.au.

Ian A. Maxwell is a serial (and sometimes parallel)entrepreneur, venture capitalist and AdjunctProfessor in Electrical and Computer Engineering atRMIT University, who started out his career as aphysical polymer chemist.

Chemistry in Australia 21|July 2015

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