By John Sheridan, Digital Business insights >>

CANADA LEADS Australia in economic complexity – 41st to 93^rd – and also with knowledge diffusion – 41st to 72nd.

Which is interesting. But probably not that surprising.

Australia and Canada are both neck-and-neck for knowledge creation – Canada 16th and Australia 17th, but when it comes to sharing knowledge, Canada is 41st and we are 72nd.

We are similar sized countries, both reliant on mineral exports and agriculture to a lesser extent.

But Canada has a bigger population – 40 million, to Australia’s 27 million, and has over 100 universities to Australia’s 42.

And Canada still has a car industry, where Australia made one of the worst decisions ever and closed our car industry down. Weakening our manufacturing sector considerably.  [Editor’s note: Tony Abbott was Prime Minister at the time of this decision].

Rebuilding a manufacturing economy is hard. Rebuilding economic complexity is hard.

And we are not going to do it without becoming a lot better at knowledge diffusion – sharing the knowledge that we create. 

Poor at sharing knowledge

Canada and Australia are both good at creating knowledge, but Australia is bad at sharing it.

We must do better.

We know that knowledge diffusion would help the country considerably. The Productivity Commission spelled that out in 2022:

“While novel, ‘new-to-the-world’, innovation is an important source of economic performance, it relates to only one to 2 percent of Australian firms. The slow accretion of existing knowledge across the economy — diffusion — is often overlooked as a source of productivity. It has the scope to lift the performance of millions of businesses.” – Productivity Commission, 2022.

We must take action

We need to do three things to improve our situation.

1: We need to share knowledge effectively and strategically and remorselessly. Share the knowledge generated in our universities with SMEs and high schools across the country.

Our underfunded universities, need to do what they can to share the innovations and ideas generated within, that could be useful to SMEs across the country. SMEs don’t know what they don’t know. So, we need to orchestrate knowledge diffusions and not just hope for the best.

We do a lot of ‘hoping for the best’ in Australia, but don’t take much action to achieve it.

We know what all the issues are. But we do little to fix them.

2: We need to share knowledge with our startup incubators to provide them with ‘market intelligence’ helping them to better target their innovations and ideas. Customer interest. Competitive advantage.

There are incubators across the country all doing their best to help and support the startups that have “good ideas”. But if we are going to get serious about supporting innovation in this country, we have to improve the model.

We need to share market intelligence nationally. We need to share a better understanding of where Australia could compete. Of where Australia intends to compete.

What is the vision and direction for the economic rebuild? 10 years? 20 years?

We are not just good at selling iron ore and coal. We could also export many other products and services to the world. What does that ‘map of possibility’ look like?

Nobody knows.

There should be a clear vision of that national goal in every business, high school and university across the country.

3: We need to approach innovation in the same way we approach sport in this country. Go for gold. Lots of it.

We need to share case studies of the journey to success. Ask our leading innovative businesses “Who are you?  What do you do?  Customers? Why you began? (What problem did you solve) Reasons for success?  What next?”

We can all be inspired by the story and example of what our successful businesses have achieved. And learn from the example of how they achieved success.

Go for gold, properly

If we managed our sporting potential in the same way we manage our incubators, we would expect that putting a few dollars into sports clubs across the country from time to time is all that it takes to generate and support gold medal winners at the Olympics.

That would be absurd of course. We use the sports clubs as the nurseries for sports potential, but we then select the real potential though competitions. We pick winners. And then nurture them through more competition, and finally through coaching and sports institutes.

We need to do the same with business. Catalyse innovation at the ‘grass roots’ and then pick winners for the ‘Australian Institute of Innovation’ to rebuild the economy and maximise the number of ‘gold medals’ at the ‘Export to the world Olympics’.

We have the brainpower in our universities.

We have the design, branding, coaching and training skills across the country. But all isolated. Insular. Parochial.

Rather than Collaborative. Holistic. Expansive.

It is time to get serious in the way we deliver.

Stop hoping for the best.

Move beyond planning for the best.

Start ‘being’ the best that we can be.

Because we have it all here. The brainpower. The mineral resources. The potential.

We just need to start sharing, collaborating and rebuilding.

93rd is not good enough.

72nd is not good enough.

We can head towards number 1.

Starting today.

About the author

John Sheridan is the CEO at Digital Business insights, the company behind the creation of the Regional Economic Development (RED) Toolbox and myRegion Australia. The RED Toolbox has been steadily developed over the past 12 years to provide a collaboration platform for Australian economic development, including a range of showcases that promote national and international trade opportunities and connections. Its latest iterations have adopted the brand myRegion and work closely with regional development authorities nationwide.

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OPINION by John Sheridan, Digital Business insights >>

FORMER TREASURY BOSS Ken Henry said, “something is desperately wrong” with Australia’s economy, which is beset by “structural deficiencies” that cannot be fixed by interest rate cuts or government largesse.

Dr Henry argued the main reason productivity was declining was a lack of business investment in new technology and equipment that increased the efficiency of the workforce.

“Business investment today as a proportion of gross domestic product is almost as low as it was in the depths of the early-90s recession,” Dr Henry said.

“The reason why Australia celebrates a current account surplus today is because business investment is so weak. We should not be celebrating this. This is sending us a signal that there is something desperately wrong in Australia.”

Something is desperately wrong in Australia. 

Not enough investment in new technology. Software, robotics, automation, AI. The tools that extend ‘arm, eye and brain power’ to help us achieve more.

It’s not about people working harder or longer, it’s about people working smarter using the 21st century tools we now have, with them focused on our productive industries.

Our productive industries

Our productive industries are: manufacturing, agriculture, smart trades, mining, professional services, ICT, creative industries, education, media and communications.

Most of the other industry sectors are service and support industries for our productive industries. They help and catalyse the production of goods and services. But they don’t make them.

Of the 13.5 million Australian workforce, our productive industries represent roughly 4.5 million workers across eight industry sectors. These are the industries that generate wealth and exports, providing a platform for future prosperity.

The demand for more ‘productivity’ is regularly delivered by the Business Council of Australia and a variety of business spokespeople, and used to criticise the Australian workforce as a whole, claiming they need to be more productive to justify wage increases.

But statements like these do little to advance solutions to the issues Ken Henry rightly outlines.

There are two things to consider.

One is the lack of business investment in new technology. And the other more nuanced issue stems from what productivity is, how it is measured and what it means in today’s digital economy where well over half the working population is not involved in the production of wealth creating goods and services anyway.

We don’t live in the 19th century any more. We don’t all work in factories, mills, farms and building sites making things to be bought and sold.

Few of us write books, plays, films and software, paint, design and create. 

Most of us don’t dig holes in the ground or drill for oil and gas.

What the majority of us do is service and support workers in productive industries as best we can. 

Productivity shouldn’t be the only goal

In many cases, increased productivity can be viewed as counter-productive.

How do we make teachers more productive? Bigger classes?

How do we make musicians more productive? Bigger audiences?

How do we make politicians more productive? Longer speeches?

How do we make nurses more productive? More patients?

Doing more isn’t always a good thing.

According to the Productivity Commission, “Productivity is a measure of the rate at which output of goods and services are produced per unit of input (labour, capital, raw materials, etc.)

“Productivity is a measure of the efficiency of a person, machine, factory, system etc., in converting inputs into useful outputs.”

A useful definition for the industrial revolution. Not so useful now.

The ABS calculates productivity using a measure of output called gross value added, which is the value of the output produced by the firm minus the intermediate inputs used (materials, services and energy used in production).

But what factors do you include in your multivariate data analysis that make real sense today?

What is ‘labour productivity’ in the middle of a digital revolution when many tasks and even job roles are fulfilled by software and technology in its many forms.

While we continue to accept these definitions as ‘truths’ we will continue to suffer the impacts of the malaise Ken Henry rightly outlines. 

Work harder and you will get more pay

The intrusion of software into every aspect of our economy makes nonsense of the measure of input. 

Estimates of productivity are increasingly pure guesses from the ranks of ‘economists’ cloistered within a variety of government institutions. Emperor’s new clothes.

How does anybody credibly measure the impact of software on our economy, given its multi-national, interconnected and integrated role not just in single organisations but across sectors and supply chains, and its role in information exchange between organisations of all kinds?

Software increases efficiency. It also automates many activities, processes and functions that historically were performed by a person and measured by hours worked and outputs per hour.

And once you add the automation of physical tasks and the management and control of machinery through software and robotics, the issue of measurement becomes more confused. 

Inputs and outputs can be measured, but what role does a person play in that equation to be rewarded for increased productivity by employers? In fact, removing the person makes measurement easier.

Add the automation of software (artificial intelligence, AI) into the mix and we will diminish the role a person plays in outputs even further.

Where does the work take place in an increasingly interconnected and integrated world?

In the data centre? On the device? What is the input? Where is the output? Ask the tax office. They don’t know either.

Where do we deliver the increase in wages for increased productivity? To the robot? To the AI? To the software developer? To Google? To Microsoft? To Amazon?

This conundrum will become even more complicated over the next decade and beyond.

We lack the tools to measure what is happening. We lack the means to understand it. Or control and manage it. Which is a problem. Who is ‘steering the ship of state?’

It is the 21st century not the 20th any more, and our thinking needs to match the changes imposed by the digital revolution not lag light years behind.

Government always lags technological change. And the government organisations that should be serving our interests, aren’t. And can’t.

It is not their fault. That is just the way it has always been.

The Productivity Commission. Jobs and Skills Australia. The ABS. And all departments of industry and development. They follow technology developments. They don’t and can’t lead.

By default, direction for government is offered by ‘big tech’ and consultants of many flavours. It’s one of the reasons government spending on consultants has gone through the roof.

Single business productivity growth

For single businesses it is an easier proposition.

For single businesses, productivity growth is important because providing more goods and services to customers translates to higher profits. As productivity increases, an organisation can turn resources into revenues, paying stakeholders and retaining cash flows for future growth and expansion.

The result of adding more software into the business mix can be measured. But as technology is incorporated, allocating reward becomes more difficult. 

Is it the person or the software? Does it matter?

In the crudest way, we know that bringing more technology and software into a business reduces bottom line costs – wages. Organisations can be leaner and meaner. Even smarter and more strategic.

Productivity is important. But it is not the key factor in most industry sectors.

Productivity in different industry sectors means different things. 

At the macro level we have 19 industry sectors divided into hundreds of individual business categories, many with unique characteristics. Cane farmers are not like high school teachers. Lawyers are not like fabricated steel manufacturers. General practitioners are not like real estate agents. They do different things, in different ways, using different tools.

And their outputs and performance are measured differently as well. Or should be.

More than half of our industry sectors are not productive industries.

In broad terms we have primary industries, secondary, tertiary and quaternary.

Primary industries include agriculture, forestry, fishing and mining.

Secondary or manufacturing industry plus energy and construction.

Tertiary includes the service industries of finance, real estate, wholesale, retail, transport, professional services, accommodation and catering, entertainment, repair, health, administration and defence.

Quaternary includes ICT, research and education.

We can group these industry sectors into those that produce a product or service and those that service and support the industries producing a product or service.

We dig up minerals and drill for oil and gas – then sell them. Automation and software have improved productivity in mining enormously and continue to do so.

We grow plants and animals and sell them as raw or processed goods. Automation and software are improving productivity in agriculture offsetting many limitations on supply of farm workers.

We manufacture a range of products and sell them domestically and overseas. Automation and software continue to drive improvements.

We sell professional services overseas. Engineering, architecture, design and other services increasingly driven by software.

We provide education for students from overseas with online learning becoming ubiquitous due to COVID, learning management software and videoconferencing.

These activities all generate wealth for Australia. We can add value and improve the outputs through innovation, design, branding and advertising to increase price and support jobs.

And many of the service industries support these activities directly or indirectly.

New technology, equipment, design, branding and advertising can help create new products and services and open up new markets through export.

Producing productively, servicing effectively

Productive industries are productive.

But our service and support industries don’t offer the same opportunities. And they should not be considered or measured in the same way.

In many service industries we don’t want workers to be more productive – nurses, firemen, police, defence personnel, aged care and childcare workers etc. We want them to be effective, which is not usually a function of efficiency, speed or output.

The value is measured in other ways, and not always in a spreadsheet – satisfaction, happiness, health, safety, smiles, understanding, reassurance, sharing of experience, legislation, regulation.

The support industries – public administration, retail, accommodation and food, administrative services, transport, wholesale, personal services, finance, rental and real estate and utilities – support productive industries.

Over a million people work in the retail sector and productivity is not the key issue. Customer acquisition is, and software has made that process more efficient, with COVID driving online sales and out of store delivery creating a retail environment where productivity is all due to software.

Same with wholesale, with Amazon leading the way in automating the role of humans in warehouses to the optimal extent, before moving totally into robotics.

Workplace health and safety, road safety and traffic rules are the only constraints to more productivity in transport operations. The ‘holy grail’ of fully automated transport delivery is still an idea, but inevitable.

And the same for the other services industries, where productivity only delivers limited benefits within the organisation and is often meaningless to the world outside.

Services are there to support productive industry. New technology and equipment can increase efficiency and profit to productive industries, and help support industries deliver more effective support to the wealth generators in the economy – the productive industry sectors. 

We need efficiency in both. But not necessarily productivity.

Increasing productivity in our productive industries offers the biggest economic benefit to Australia.

It can and will lead to greater diversification in our economy and steadily diminish our over-reliance on mining, food, education and tourism. 

These sectors are very important and will remain important for a long time. But we can’t afford to have all our eggs in one basket. We need more baskets (markets) and more eggs (products and services). Australia lacks economic complexity.

At the moment, we are too reliant on one basket (China) and two big eggs (mining and education). Diversification diminishes risk.

The support industries are there to support the productive industries.

But our productive industries need to grow. And that won’t happen on its own.

Mining is productive backbone of Australia

At the moment mining is the backbone of the Australian economy and has been for years.

Mining produces royalties. Mining encourages development of new technology. Mining leads the way in robotics development and AI.

But we now need to leverage the intellectual horsepower of CSIRO, Data61 and our 38 research-based universities and apply that creative energy of ideas and experimentation across the whole spectrum of our productive industries.

Not just to support the miners and mining related manufacturers, but to generate new productive industries of our own. OEMs. Original equipment manufacturers.

For our productive industries are where we can generate opportunity with new products and services, diversify our economy, expand our overseas markets and create a more resilient foundation for Australia’s future. For our kids and grandkids.

We have generated deep knowledge from the mining industry, which can be applied elsewhere – water, pollution control, safety, waste management, space, recycling, robotics, off road vehicle automation, energy, remote control systems, AI and drones.

Much of this knowledge is valuable in countries facing similar issues to us. Especially issues with energy, water, pollution, environment, safety and remote-control systems = Export.

And we can apply that same intellectual horsepower to other industries – assistive technology, disability services, aged care, energy, waste management, soil health, aquaculture, housing, preventative medicine, manufacturing, sport and recreation = More Export.

Universities must get down to business

However, we need to connect our universities to business in a more effective and impactful way.

The lack of synchronisation between business and academia in Australia is criminal. 

Universities are funded, measured and rewarded for teaching and publishing, but not for engagement with industry. The funding model for industry engagement is clumsy and frugal. Government has made it hard, not easy, for universities to engage. Universities should be rewarded for helping to create a more diversified economy.

Some universities have made a point of engaging with local business anyway. 

And the benefits are obvious. Students gain experience of engaging with real business problems and possible job offers. Business owners gain new insight, perspectives and ideas.

Applied systematically and universally, this approach could turbo charge the whole spectrum of productive industries in Australia. Not just in the capital cities, but in areas surrounding regional universities, and in rural and remote areas through online webinars and conferencing.

We have all the pieces to the big picture. They have just never been assembled in the right order. 

Innovation in our productive industries is where our future should be built.

In energy, waste management, pollution control, water, automation and robotics, arts and crafts, fashion, manufacturing, ICT, education, space, mining services, defence, assistive technology and ag-tech.

These are industries that will help us manage climate change. These are the industries that will deliver high reward jobs and employment opportunities.

These are the industries that will provide products and services that can be exported to the world.

In 2023.

And 2023 is here.

Time to put the pieces together and turn the big picture into reality.

www.redtoolbox.org

About the author

John Sheridan is the CEO at Digital Business insights, the company behind the creation of the Regional Economic Development (RED) Toolbox. The RED Toolbox has been steadily developed over the past 10 years to provide a collaboration platform for Australian economic development, including a range of showcases that promote national and international trade opportunities and connections.

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By Patrice Pandeleos, Seven Communications >>

EVERY WORKING AUSTRALIAN invests in superannuation and has the right to understand where and how their money is being invested. Yet the default position by super funds seems to be that once the money is entrusted to them, investors lose that transparency.

Currently, research shows 66 percent of Australians have no idea where or which industries their super is invested in. Without your knowledge, your superannuation fund could potentially be investing in a range of unethical practices that don’t align with your values. 

A recent study from World Animal Protection found that 90 percent of super funds do not have a public animal welfare policy in place that prevents them from investing in live exports, factory farming or cosmetic testing on animals. The shocking data revealed that out of the top 200 superannuation funds in Australia, only 16 have current public animal welfare policies in place.  

This is the dark secret of the super industry. From intensive factory farming, to cosmetic testing on animals or live animal exports – your money could be supporting these cruel and disturbing practices. 

Superannuation sector at a glance

The Australian superannuation sector currently manages more than $3 trillion worth of assets, with the industry increasingly looking to invest in agricultural industries. The thing is, domestic equity markets can’t absorb this amount of investment, which is compelling super funds to invest in both offshore and unlisted (private) companies, and provide direct lending to private and listed entities.

To put it simply, unlisted private companies represent the majority of Australian agriculture, and are subject to much less public scrutiny than companies listed on the stock exchange.

The animal cruelty practices your super could be investing in

Without your knowledge, your super fund could be investing in live animal exports.

Millions of Australian sheep and cattle suffer unnecessarily during live export journeys every year. Thousands of animals die in transit because of the unbearable conditions on board the ships.

Many of those that survive the journey are handled roughly at their destination, killed while fully conscious and too many suffer outright brutality. 

Or perhaps it is cosmetic testing that they invest in? Thousands of terrified rabbits, mice and other animals are still being used for cosmetic testing across the world.

Cosmetic chemicals are cruelly put into their eyes or smeared onto their skin. While cosmetic companies don’t test their products on Australian animals, many brands that do test their products on animals overseas sell their products in Australia.

Industrial factory farming is also one of the leading causes of animal suffering that super funds invest in. Hundreds of millions of farmed animals are cruelly bred and raised in industrial factory farms to feed the insatiable demand for meat. 

Antibiotics are used to prevent confined and stressed animals from getting sick thanks to the poor conditions in which they are kept. Overuse of antibiotics on factory farms can and does lead to antibiotic-resistant superbugs that puts human health at risk, according to the World Health Organisation.  

Steps to being more transparent

Research by the Responsible Investment Association Australasia shows that most Australians, (66%), want a super fund that does not invest in animal cruelty.

The first step to knowing where your money is being invested, is asking your super fund about their animal welfare policy. If they don’t have one, ask why.  Also ask them what options they can provide to you if you don’t want your superannuation savings supporting cruel industries and practices.

Superannuation is something that many Australians forget about. But unless you provide your fund with guidance around industries you want to avoid, your fund can invest your money wherever they like.

They’ll listen to their customers too. With many super funds claiming to put customers at the core of what they do, Australians need to start putting pressure on them and demand transparency. 

How can I make the switch to an ethical super fund?

If you think you might need some independent advice about your investment choices, it may be a good idea to consult a certified financial adviser or you can contact the Australian Taxation Office (ATO) to switch your super to another fund via the ATO.

The ATO makes it easy to switch your super to another fund.

It is time for the superannuation sector to be more transparent about where they are investing your hard-earned money. Your superannuation savings are not only shaping your personal future, but the future of animals and our planet.

About the author

Patrice Pandeleos is the founder of Seven Communications and has more than 21 years experience working in some of Australia’s highest profile media organisations including Channel 7, SCA, ARN and News Digital. Ms Padelos also has a solid understanding of the Australian political landscape, having campaigned to win the seats of Sydney and Heffron in two state elections for the Liberal Party.  www.sevencommunications.com.au

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OPINION:  Authored by Praveen Tomy >>

THE CONSTRUCTION sector has been getting bad press lately.

With high-profile insolvencies, project delays, and supply chain issues blowing budgets out, the past two years have brought incredible and unprecedented challenges to the sector.

The July Australian Constructors Association report says that double digit inflation in a single digit margin industry raises new issues for constructors. Fixed prices set several years in advance leave little room for manoeuvre in unpredictable markets.

If you can capture the right information and build on it, you can make the future far more predictable.

For example, insolvencies are often the product of underbidding, as a firm will struggle to accurately quote their work without long-term certainty on project costs. In the absence of accurate data, underbidding will continue to be a risk.

Maybe you can’t see exactly where a bushfire will start, or how long the damages of a flood will last, but you can build up a comprehensive plan that is resilient to these factors, and will bring you as close to predicting the future as possible. 

A good project plan counters risk head on, and shares information between design and strategy, supply chain acquisitions, engineering, labour hire, training, construction management and more.

Data for pre-empting crises

According to the Reserve Bank of Australia (RBA), the sector is facing rising prices, supply chain constraints, and skilled labour shortages. The sector is looking for new ways to build predictability and counter these risks.

Predictability is a requirement for a cost and time-effective project. This requires visibility across the entire lifecycle, from design to implementation. Few builders, designers, or subcontractors have implemented the kind of tech needed to get this. This has knock-on effects to how these parties quote their bids.

If a firm needs to undercut a competitor to win work, and doesn’t have accurate costings, the risks are astronomical.

Adapting is much easier than many believe. The future of work depends on constantly improving productivity, which sounds hard. But the technology already exists to side-step these issues.

Data science has become as crucial to construction as engineering. In fact, it makes for better engineering.

Starting a project without full data visualisation is like building a skyscraper from the top down – it’s expensive and probably won’t work.

Bidding for projects

Data is underused in the construction sector, with firms following dated methods to calculate costs. It could be argued that insolvencies from underbidding often come down to calculation errors.

Calculating a bid price involves assessing the strengths and weaknesses of the entire supply chain, including subcontractors and skilled labour availability. Firms also need to manage safety concerns across the entire business. This is usually based on an assessment of subcontractor past performance, using data silos or Excel spreadsheets.

But these spreadsheets fail to capture the whole scale of interconnectedness between supply chains, business units and staff. Every element has a price, and unless you can get a visualisation over the lifespan of a project, you’re not basing quotes on enough information.

Variables span safety compliance, emissions released in construction, the cost of sponsoring visas for expert qualified staff, and even impacts of weather disruptions and climate change.

Without good insight into these factors, builders attempting to win work by lowering costs wind up seriously undervaluing themselves. Cutting profit margins and aggressively pricing work leaves a very slim gap for error.

There’s no cookie-cutter approach to bidding on projects. Every piece of work is different.

Even within a single company, a truly accurate price for similar projects is going to vary wildly – but the costs will impact the whole business. It is dangerous to rely on old habits, or old underperforming supply chains.

Value for money does not equal lowest cost

Ultimately, a company that can clearly demonstrate value for money is going to be the best placed to lead a project to completion. This involves showing exactly what costs are involved and providing full transparency. It also means gaining visibility over unnecessary costs and liabilities.

Data helps. Once a firm has established high-quality data analytics for its costings, proving their value will be simple.

Effective project visualisation provides clever insights into what is holding a firm back. It could be an unproductive supply chain partner, or even funding poor fuel efficiency vehicles – every litre of diesel counts.

A plan involving data is more responsive and resilient, and massively reduces business risk. This value proposition can help ease hesitations from consumers.

Builders could use artificial intelligence (AI) to demonstrate a build scenario. This allows firms to fully visualise a project from start to finish, and quickly identify any quirks or errors that might exist.

Meanwhile, remote communications enables teams to collaborate across the business, creating a fully transparent workspace – one where no hidden cost goes undiscovered.

Once a project is off the ground, having access to up-to-date data informs better and faster decision making. If you’ve got a water leak on one floor, knowing exactly what was done could help mitigate the problem for the rest of the building before it becomes unsalvageable.

This quick thinking could be the difference between project failure and success.

Operating in extreme circumstances is a challenge for any business, and predicting these circumstances is even harder. Building in resilience throughout the entire project lifecycle is more than just guessing at the future, it’s about understanding how the whole business – and its projects – click together and operate.

If the construction sector continues to operate on pre-pandemic mindsets, we may see these issues continue to plague the industry.

For the sector to weather black swan events, an internal transformation is imperative. Habits need to be broken, and firms need to understand – not assume – risks and rewards. Firms can no longer neglect the role of data in this context.

As they say, the data poor pay twice. 

Based in Sydney, Praveen Tomy is the regional director for the Asia-Pacific region (APAC) at Autodesk Construction.

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