AUSTRALIAN business – large and small, strong and struggling – has been waiting for the Federal Government to announce its framework for industry, innovation and start-up support. It happened last week and is – sensibly, for a business sector craving movement as much as stability – more evolution than revolution.

The Industry Innovation and Competitiveness Agenda  strives to provide certainty on issues that have plagued Australian business – such as business migration rules, a draconian approach to employee shares that have stifled start-up technology ventures, lack of early-stage business funding, over-regulation and education and training regimes that lag their real markets – and introduce a more collaborative approach to help drive new ventures.  

The reason is that new and early-stage ventures are where Australia may be able to play to its advantage – and it is where most job growth occurs.

Prime Minister Tony Abbott and Industry Minister Ian Macfarlane jointly released the Industry Innovation and Competitiveness Agenda on October 14. The plan takes a holistic approach to reform, embracing taxation, investment, skilled migration, collaboration, regulation and training in the mix.

For government it is all about trying to drive competitiveness and ‘productivity’. For business it is more about providing a stable and less restrictive environment that will favour innovation and encourage collaboration between researchers and industry – an area in which Australia consistently fails.

And it aims to speed up business growth by unshackling it from unnecessary regulation. An early announcement has been the move to accept international standards and risk assessments for certain product approvals, rather than impose Australia’s own regime.

An example of where this has brought Australia unstuck has been in the biotechnology sector where Australian companies have opted to seek approvals through the US Food and Drug Administration (FDA) rather than navigate the punitive small-market Australian Therapeutic Goods Administration (TGA) process. An FDA approval to a giant market has often been easier than TGA’s stamp to a very small market.

“Building on our deregulation agenda, the government will adopt a new principle that Australian regulators should not impose additional requirements beyond those already applied under trusted international regulation, unless it can be demonstrated there is good reason to do so,” Prime Minister Abbott said. “The government will review existing regulation against this principle.”

Ironically, the loss of car manufacturing in Australia has helped to speed up this process of untying red tape in the automotive and manufacturing sectors.

SHARE ADVANTAGE

Of the government’s six initiatives to boost Australian competitiveness, to be implemented over the next 18 months, the first tick from business was the change to taxation legislation to encourage employee share ownership.

Most successful start-ups in the US use employee share plans to drive development where cash for salaries and services is short – but this has not been an option in Australia due to previous governments’ ‘tax first’ approach and the punitive share options rules introduced in 2009.

Many Australian early stage technology companies ended up developing overseas as a result of the taxation approach in which discounts to share value were taxed and capital gains tax applied. The problem for early stage companies is the difficulty in assessing real share value – and the high risk of failure is not well accounted for.

“The government will change the taxation treatment of employee share schemes to encourage start-ups to attract and retain employees and commercialise good ideas in Australia,” Mr Macfarlane said. “The government will also reverse for all companies the changes made in 2009 to the taxing point for options.”

Also well received in the Industry Innovation and Competitiveness Agenda has been theannouncement of Industry Growth Centres, which are morphing out of the former government’s Industry Innovation Hub approach.

Prime Minister Abbott said the Federal Government would provide $188.5 million to fund Industry Growth Centres in five key sectors: food and agribusiness; mining equipment, technology and services; oil, gas and energy resources; medical technologies and pharmaceuticals; and advanced manufacturing.

“These industry-led centres will foster better use by industry of Australia’s world class researchers so that the community sees stronger commercial returns from the $9.2 billion annual Commonwealth investment in research,” Mr Abbott said.

Mr Abbott said the Agenda was “an important step along the path of economic reform”.

“Its guiding principle is to focus on Australia’s strengths and not prop up poor performers,” he said.

“The Agenda sets out four ambitions that Australia must pursue to ensure job creation and higher living standards: one, a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets; two, a more skilled labour force; three, better economic infrastructure; and four, industry policy that fosters innovation and entrepreneurship.”

EDUCATION AND VET CHALLENGE

There are also reforms coming to Australia’s Vocational Education and Training (VET) system. From July 1, 2015, the Federal Government will invest $200 million each year to establish the new Australian Apprenticeship Support Network to lift apprenticeship completion rates “and provide employers with the skilled and productive employees they need to grow their business”.

Of great interest to regional business is the planned government investment of $38 million to provide 7,500 scholarships in specific regional areas where youth unemployment is high, through the Training for Employment Scholarships.

The new Youth Employment Pathway will also support community programmes for 3000 disengaged 15-18 year olds in regional areas.

The Federal Government and other Council of Australian Governments (COAG) members have also highlighted a number of priority actions to achieve a modern and responsive national regulatory system for the VET sector, Mr Macfarlane said.

One issue being address is the promotion of science, technology, engineering and mathematics (STEM) skills in schools One program being developed is a ‘mathematics by inquiry’ program for primary and secondary schools and providing seed funding for an innovation-focused ‘P-TECH’ pilot program, based on the successful US Pathways in Technology Early Career High college system.

INTERNATIONAL COMPETITIVENESS

Enhancing the 457 and investor visa programs are a key ingredient to boosting international competitiveness, according to the government. For technology businesses and start-ups, it may help to change the landscape in terms of developing global businesses in Australia.

The Federal Government wants to improve the Significant Investor Visa program by involving Austrade in the process of determining eligible complying investments, aligning qualifying investments with Australia’s five investment priorities and introducing a premium stream for people investing more than $15 million.

The Federal Government will reform the 457 visa program for skilled migrants, while “improving program integrity to ensure that sponsored workers on 457 visas are a supplement to, and not a substitute for, the local workforce”. That may help allay the political fears about the scheme, but it is also a sensible economic approach.

“Consistent with the recommendations of an Independent Integrity Review, the government will reform sponsorship requirements; streamline arrangements for existing approved sponsors; reform English language requirements and move to a risk-based approach for compliance and monitoring,” Mr Macfarlane said. 

“Safeguards will remain in place to ensure that the 457 visa programme is not rorted. It will continue to be a requirement that a foreign worker receives the same market rates and conditions that are paid to an Australian doing the same job in the same workplace.”

Mr Macfarlane said the new agenda is part of the evolution necessary for the Australian economy to meet its many challenges.

“We’ve already scrapped the carbon and mining taxes; cut over 10,000 pieces of unnecessary legislation and regulations; commenced the largest infrastructure construction program in Australian history and signed free trade agreements with Japan and Korea,” he said. “Job creation, growth and competitiveness need constant attention.

“The competitiveness challenge is an ongoing one, and further reforms to promote the Agenda’s ambitions will be developed over the longer term.”

Mr Macfarlane said the Federal Government would host a series of roundtables around Australia over coming months to consult the business community, industry associations and peak bodies, as well as academia, on the policy directions outlined in the Competitiveness Agenda.

Sessions are to be chaired by ministers and co-chaired by business leaders, including the heads of the Business Council of Australia, ACCI and Infrastructure Partnerships Australia, he said.

www.industry.gov.au/growthcentres

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DEEPER with Brad Skelton >>

FROM my perspective as a mere shipping bloke, my view of what’s happening with mining in Australia and Canada isn’t a crash as some of my younger clients think, it’s actually a ‘normalisation’.

At the risk of showing my age I have been through a downturn or cycle like this before and it’s deja vu for me.

The mother of all mining booms has played out over the last 10 years or so driven by big demand from China, which is still large, however the accompanying investment boom in mining has slowed radically to what I consider to be more normal non-boom dynamics.

Commodity prices are down and while most contracts are written in US dollars, miners in Canada and Australia are suffering from historically high exchange rates when they repatriate their profits. 

On top of that, the OH&S environment is out of control and salaries have been too.

I am not saying safety isn’t important but insane and completely non-commercial things have been going on that only serve to increase production costs and feed the voracious ‘Safety’ industry.

In Australia, sadly, we are seeing lots of people losing their jobs and salaries ‘normalising’ too.

Paying plant operators circa $140,000-plus is simply not sustainable, and anybody on these sorts of salaries surely must have considered this wouldn’t last for them?

From a shipping perspective, the amount of mining equipment moving is well down.

No wonder really with the amount of gear parked up or mothballed currently.

A client in Perth told me there are over 500 mining trucks idle right now in Western Australia.

We are seeing increased exports of equipment which could gain pace if the Australian dollar would normalise too.

 But ... which market in the world could possibly consume this much gear? 

The Depth Logistics Shipping Index for May and June is very telling.

May recorded a 68 percent drop from the previous 12 month high and the index just released for June recorded the lowest import value of equipment into Australia in the history of the index. Only $147 million!

To put this into perspective, some of my clients bigger trucks can cost $4 million each.

I was talking to a mate in Canada (in August). He is very nervous about the Canadian stock market as basically the Canadian index overall is doing well but the miners, who traditionally have contributed greatly to the strength of the index, are not.

He and his buddies are waiting for the correction and with a ‘seemingly’ recovering US economy they think the next move up with US interest rates will be the trigger. Perhaps Australia will be the same?

Meantime, space on ships for my clients is pretty easy to come by and freight rates are still at historically low, 1980s-type levels.

-- Brad Skelton, 2014.

BACKGROUND

Brad Skelton has come a long way indeed from his childhood in Brisbane, when he dreamed of following in his father’s footsteps of owning his own business, while playing with Tonka trucks in the backyard sandpit. Those dreams eventually led him to shipping the real thing, and other heavy cargo, all over the world through his own companies – seeing revenues top $140 million and with 200-plus employees operating in Australia, Japan, New Zealand, Hong Kong and the Netherlands. His ongoing insights and commentary on business experiences have made him known around the world asThe Shipping Bloke. Like most entrepreneurs Brad Skelton has had some setbacks, too, but these have served to provide tremendous lessons along the way and he believes he is a better businessman for those challenging experiences.

Today Brad Skelton is developing, guiding and investing in new businesses under the Depth Industries brand in accordance with the new rules of a truly globalised and constantly restructuring economy. Talking about and helping business leaders to navigate this tumultuous era of business change is his current passion. A past graduate of the prestigious Birthing of Giants programme at MIT in Boston, a current member of the Young Presidents Organisation (YPO), a Fellow of the Australian Institute of Company Directors and a director of companies other than his own, plus a former member and chapter chair of the Entrepreneurs Organisation (EO) in Brisbane, Brad Skelton provides regular astute insights for business leaders on his web log at www.theshippingbloke.com

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DEEPER with Brad Skelton >>

I HAVE been regularly talking about global business changing rapidly and how the internet and modern transportation methods have impacted the landscape of competition for numerous industries. Distance does not matter anymore.

If your overhead structure and prices are not globally competitive you had better get your skates on and make them so before the freight train runs you over.  

To say it again, regardless of international borders, overseas competitors are now able to take you and your company on at home and are doing so.

I follow the McKinsey Global Institute and recently they released a research report with some stats that you cannot afford to ignore. 

Here they are:

• There was a $26 trillion flow of goods, services and finance in 2012 which is equivalent to 36 percent of global GDP.
• By 2025 it is estimated that cross border business flow will reach $85 trillion.
• Global GDP will grow by an estimated $450 billion each year.
• There was an 18-times increase in internet traffic from 2005 to 2012.
• About 90 percent of commercial sellers on eBay export their goods to other countries vs 25 percent of traditional businesses.
• There has been a 500 percent increase in Skype call minutes since 2008.
• In 2012, China accounted for 12 percent of global trade in goods which was up from 2 percent in 1990.
• In 2012, emerging economies accounted for 38 percent of the total cross-border flow of goods, services and finance, which was up from 14 percent in 1990.

These confirm the trends I have been writing about in this blog for quite some time now about how global competition is developing.

All of the businesses I am growing in Depth Industries are geared to help companies stay globally competitive by accessing the goods and services that will help them not only survive, but prosper in this landscape of truly international competition.

Time to face the brutal fact: International competition is commoditising goods and services more than ever before in history and, whether you like it or not, price is increasingly the driver in the decision making process.

Are you globally competitive and chasing down international markets? If not, why not?

There are some great opportunities if you are rigged the right way.

-- Brad Skelton, 2014.

BACKGROUND

Brad Skelton has come a long way indeed from his childhood in Brisbane, when he dreamed of following in his father’s footsteps of owning his own business, while playing with Tonka trucks in the backyard sandpit. Those dreams eventually led him to shipping the real thing, and other heavy cargo, all over the world through his own companies – seeing revenues top $140 million and with 200-plus employees operating in Australia, Japan, New Zealand, Hong Kong and the Netherlands. His ongoing insights and commentary on business experiences have made him known around the world as The Shipping Bloke. Like most entrepreneurs Brad Skelton has had some setbacks, too, but these have served to provide tremendous lessons along the way and he believes he is a better businessman for those challenging experiences.

Today Brad Skelton is developing, guiding and investing in new businesses under the Depth Industries brand in accordance with the new rules of a truly globalised and constantly restructuring economy. Talking about and helping business leaders to navigate this tumultuous era of business change is his current passion. A past graduate of the prestigious Birthing of Giants programme at MIT in Boston, a current member of the Young Presidents Organisation (YPO), a Fellow of the Australian Institute of Company Directors and a director of companies other than his own, plus a former member and chapter chair of the Entrepreneurs Organisation (EO) in Brisbane, Brad Skelton provides regular astute insights for business leaders on his web log at www.theshippingbloke.com

ends

Ends

EXTRA: PROCLAIMING  products to be ‘Australian made’ is nowhere near enough to win Aussie customers according to a leading local food manufacturer.

Kez’s Kitchen founder and managing director, Michael Carp, has found that even though researchby Roy Morgan shows Australians have become more conscientious consumers of locally made food products, it is hardly carrying through to sales. 

Mr Carp said in his experience, ‘Australian-made’ food brands needed to better understand their customers, know the value of branding, be innovative in their product development, and deliver on promises more than ever.

To fail on those six vital points will see Australian food brands become less competitive and lose market share.

“Consumers may well be more aware that ‘Australian made’ gives them the freshest shelf ingredients, supports local jobs, and helps the economy, but with customers being more committed to buying Australian made, local food brands risk becoming less active in their product development and marketing,” Mr Carp said. “ Being ‘Australian made’ is only one factor among many that influences a customer’s choice to purchase, as well as a buyer’s decision to stock the product on shelves.”

 Mr Carp said local businesses must maximise the advantages of being Australian made.

“A major advantage is easier access to buyers,” he said. “For instance, Kez’s Kitchen recently received confirmation by a major supermarket for five new lines and will have products on the shelves in a couple of weeks.

“If we were importing, we’d lose this lead time in the shipping alone. Always deliver on promises to buyers, because if they’ve had a bad experience with you once, it’s not easy to win them back.”

Having manufactured locally for more than 23 years, and carved a strong market share and buyer loyalty, Mr Carp is well positioned to point out where local manufacturers – particularly the new brands – make their mistakes.

He highlighted six common product and branding mistakes Australian-made companies make: 

1. They don’t offer anything different. Consumers look out for new products that will excite and engage them.

“If ‘Australian-made’ brands offer products that emulate many others produced locally, there’s little motivation for consumers to switch brands,” Mr Carp said. “They will go with a lower cost item or the one they’ve always been buying. Food businesses must remain innovative. An example at Kez’s Kitchen is our development of the Taking Cafe Home range, which unlike other snack products on the market, brings the café experience to your own home.”

2. They focus on price, not quality. Consumers don’t always go for the lowest price shelf item – and the recent research that more Australians are buying locally made regardless of price, is proof.

 “Businesses need to be less concerned about reducing shelf prices and instead focus on producing a product of high quality, with a unique point of difference. A quality product is one that incorporates the best ingredients, is high in taste and texture and sometimes even offers a health benefit,” Mr Carp said

3. They don’t work on their brand. If consumers and buyers know and trust a brand, they’re more likely to buy. But these days, strong brands go further: they tell a story. Brands with a story can better engage customers, and create brand loyalty.

“Many businesses have a great story but don’t tell it,” Mr Carp said. “Ours is the growth of a biscuit business that my sister Kez began in my mum’s kitchen 23 years ago – and we take just as much pride in our products today. If food businesses don’t develop their brand image – whether they have a story or not – they’ll have a tough time reaching consumers, as major supermarkets will be less likely to stock their products. Strong brands can set a higher price and remain confident that buyers and consumers will purchase.

4. They don’t deliver on promises. If your brand and packaging makes bold statements about the products inside, you need to follow through.

“At Kez’s Kitchen, our key brand message is that we’re all about the taste, and we deliver this by producing high-flavour foods that we’re passionate about and consumers know and love. As this is a promise to consumers, we never make sacrifices on ingredients.

5. They don’t invest in packaging. While delivering on promises helps ensure repeat purchases, it’s the packaging that initially draws consumers in.

“Packaging is the most visible part of a food business, and businesses need to invest in research, development and design of the packaging,” Mr Carp said. “The packaging is also the most important platform for telling your brand story.”

6. They don’t adapt to change. Perhaps the easiest mistake is simply standing still.

“Not only are consumer needs and tastes changing, but competitors are getting better at what they’re offering. If you don’t adapt your brand and product you’ll be left behind. In a country as competitive as Australia, we need to get out of our comfort zones to continually improve.”

www.kezs.com.au

ENDS

Extra research:

1. Roy Morgan research: http://www.australianmade.com.au/media/299171/1309%20Consumer%20research%20summary.pdf