Australia needs to wake up and smell the disruption

23 JUN 2015
Business Spectator

Hector and Han, two bottlenose dolphins being researched at the Roatán Institute for Marine Sciences on an island off Honduras, are wowing scientists with their capacity to think and communicate.
According to National Geographic’s May cover story, when given a hand signal to “innovate”, the dolphins understand that they should try some new behaviour, to not repeat anything they’ve done previously in their repertoire. More incredibly, they do this in unison with the other.
If only other species of arguably less evolved mammals — Australian business (and policy) leaders — had that ability.
After more than two decades of accelerated technological change globally, an outbreak of innovation and entrepreneurship not seen since the industrial revolution, Australian leaders are still blowing bubbles, waiting for the command to innovate.
At least that was the overwhelming takeaway from last Friday’s CEDA luncheon in Sydney to discuss its research, The Future Workforce.
The report’s headline findings include some scary stuff: some five million Australian jobs are at risk of extinction in 10 to 15 years and, if we “don’t embrace massive economic reform and focus on incentivising innovation”, we will be big losers in a global, tech-driven economy.
Surprisingly then, CEDA’s ‘expert’ panel discussion, which followed a nuanced, though mostly upbeat keynote from Federal Communications Minister Malcolm Turnbull, exhibited no real sense of fear or urgency for change.
In plentiful supply however, was the intellectual detachment and competitive complacency that has gripped Australian leadership and business culture in recent decades. And judging by the lacklustre audience interaction, most of the 450-strong throng were there to schmooze, or snooze, rather than to learn and debate something new.
Waiting time’s up. Right now we are struggling to find new sources of wealth after an end to the mining boom, the closing of car manufacturing and the invasion of ‘digital’ solutions up-ending media business models and retail revenues. More disruption in other industries and the stripping of jobs in the process is inevitable and coming fast.
The report, a collection of essays from Australia’s leading thinkers and practitioners, does a fair job of exploring our changing labour market, ageing demographics and the challenges this second machine age poses for our small economy.
It also references numerous other international reports which explain the ‘winner takes all’ economics of the digital age versus the ‘spread the wealth’ economics of the old industrial one. Put very simply, this means that those who develop and commercialise intellectual property reap the bulk of new wealth.
Australia generates a tiny fraction of its GDP from IP commercialisation, so on that metric alone, how are we not in trouble?
Other forces shaping global economies include the hollowing out of the middle classes; the replacement of low-skilled and increasingly complex jobs by robotics and ever advancing computational power and the growing disparity in pay between the new classes of highly-skilled knowledge workers (engineers, tech-savvy designers and computer scientists) and the rest of us.
Australia’s relatively low level of investment in technology and in growing globally-scaled innovative organisations makes us vulnerable.
In its Compete to Prosper report commissioned by the Business Council of Australia and released a year ago, McKinsey warned that Australian companies are “behind on technology, uptake, external orientation, innovation and learning” and that we “have a pervasive competitiveness problem”.
McKinsey Australia Managing Partner John Lydon was part of CEDA’s expert panel, along with NBN Co’s chair Ziggy Switkowski, Myer Holdings’ recently appointed CEO Richard Umbers and Sue Beitz, a contributing author of the report and former General Manager of the Australian Workforce and Productivity Group. Yet, none seemed willing to dig deep and debate the core issues raised in the report.
Why? Are we afraid we may offend ourselves?
One increasingly obvious reason is that when we discuss challenges and opportunities brought about by technology and globalisation we hear from the same big business, government and public sector voices.
While these voices are important, they should not be the only ones. Not least because they tend to be the last to see disruption coming and they’re also the least likely to innovate before real crisis points.
Yet, here we were again discussing ‘disruption’ without any representation from those ambitious 21st century tech-centric start-ups, venture capitalists and SMEs that are living and breathing it. It is a scene that is played out time and time again in Australian business fora.
Is it so hard for our esteemed business associations and think tanks to mix it up a bit?
Report after report in Australia and elsewhere emphasises the critical importance of new forms of collaboration between all parties in an innovation driven economy — big business, academia, research, start-ups, SMEs and government.
But when the CEDA panellists were asked: “What have each of you done lately to better engage with entrepreneurs and SMEs?” for a long while there were just awkward glances and silence.
NBN Co’s Switkowski’s quip that he was chair of “Australia’s most ambitious start-up”, drew a few chuckles from the audience and Sue Beitz assured us that “not having representation from start-ups or SMEs wasn’t deliberate or intentional”.
The point is, collaboration with diverse sectors and individuals has to be deliberate and intentional. If Australian business and government leaders don’t yet know who these innovators are, they must go out of their way to find them.
They may not exist in large numbers, but they are there. Many are the Generation Xers and Millennials who have grown up with the internet and myriad disruptive technologies. Talent spotters and venture capitalists from the US and other countries seem to have no trouble finding them.
Just one example is Silicon Valley VC firm, Accel Partners. It has invested more than $US200m in Australian tech start-ups in the last five years, beginning with a $US60m investment in Atlassian. It followed this with investments in design marketplace 99designs and Invoice2go (its mobile app simplifies cash flow and invoice management for small businesses).
Accel was also part of a $US250m investment in e-marketing company Campaign Monitor and it forked out another $US70m for online foreign exchange platform OzForex, which it divested in 2013 when the company listed on the ASX.
Accel Partner, Ryan Sweeney says: “These guys (Atlassian’s founders) are every bit as good as we see in Silicon Valley and we needed to have them in our (investment) portfolio regardless of what it takes. And that is true of a lot of other Aussie entrepreneurs we’ve met since. The intellect is there, the education is there and the hard work ethic needed to scale companies is also there.”
All this may sound small fry compared to the measurable billions earned in resources but these start-ups represent the skills, the revenue and the jobs of the future. Their ‘born global’ mindset is a huge plus for Australia. It helps to solve the critical question: How does Australia successfully compete, rather than always being behind the curve?
But for a truly virtuous cycle to develop — the positive feedback loop that occurs as individual companies achieve success and engage more with investors, big companies, research institutions and other start-ups — leaders from Australia’s big end of town need to stop talking to themselves and get out more.
If they don’t, they risk extinction themselves. As that great line in Cormac McCarthy’s No Country for Old Men says, you can’t stop what’s coming.

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