Australian focus on innovation to navigate global challenges
AUSTRALIAN business is having to re-think its approach to innovation in response to existing global conditions and – perhaps more importantly – those anticipated to come.
Three leaders in innovation – Vlada Majanovic from Cisco Systems in Silicon Valley, Australian CSIRO principal scientist Dr Stefan Hajkowicz and Deloitte Australia chief strategy officer, Gerhard Vorster – issued both warnings and encouragement to Australian business at the recent Innovation Series event in Sydney.
All three, using a wide variety of examples, including those of the most successful technology innovation area of all, Silicon Valley – urged Australian organisations to look long and hard at what they are doing, how they are doing it and – vitally – who is driving their organisations forward, in order to bring through game-changing innovation.
Many Deloittes’ clients have revelled in the benefits of Mr Vorster’s astute appraisals of where opportunity may emerge. This usually occurs, he said, by going back to basics and examining internal and external perceptions of their businesses.
Acknowledging the work of Nassim Nicholas Taleb’s book, The Black Swan – a black swan is an event, positive or negative, that is viewed as improbable yet causes massive consequences – Mr Vorster said business leaders had to realise that perceptions can change and be changed.
When they do change, he said, these events can have a profound impact on business and industry that offers threats and opportunities.
He gave a crucial example in the ICT sector, which until a few years ago discounted India’s abilities to “cut code” and create a vast industry of world-class software developers.
“It happened all right,” he said. “And once something like this happens, you don’t go back to how it was before.”
Mr Vorster said in too many ways Australian organisations were looking back longingly “at how it used to be” rather than embracing the opportunities to innovate and change. And innovation had to happen rapidly to be successful.
Australia had to up-shift its mind set, he said, away from the attitudes that hold it back.
He summed those attitudes up with an ironic phrase: “That may be okay in practice, but it will never work in theory.”
In his experience, successful innovators looked to the restless ones in their organisations who were tired of the old ways and were continually looking for better methods.
“These are often the troublemakers, dissatisfied with the status quo, who are usually the most innovative,” Mr Vorster warned.
But organisations were usually too quick to consider these people as being non-aligned with the company’s goals when, in fact, they may help lead the company to new areas of success.
“People are satisfied (in most organisations) when there is a sense of growth,” Mr Vorster said. This was the atmosphere Australian organisations must foster in order to become more innovative, he said, and it was not just about everyone’s financial growth.
“I say, let’s make a profit, but not at the expense of society,” he said. “Even better for your employees if you can benefit society – sometimes these are the reasons why people work harder for an organisation – it’s not even about the money a lot of the time.”
He said Australia was facing a crisis in this regard, as recent international surveys showed that about 74 percent of companies, internationally, regarded themselves as being innovative. Yet the figure was just 55 percent in Australia.
Mr Vorster said Australian business leaders had to understand that the new key performance indicators (KPIs) are different from the old – and it was crazy to apply old KPIs to new business models.
He said that was the price necessary for creating better things, new experiences and greater services. In Deloittes’ case, he said, their goal was to redefine the way professional services were experienced – and to achieve that they had set as a KPI having 30 percent different service offerings every two years.
“But it has to translate to hard work,” Mr Voster said. “That is what innovation is all about. Innovation is doing work.”
The future was with those innovators “who do it, not prove it,” he said.
WHY SILICON VALLEY WORKS
Vlada Majanovic said many Australian organisations and entrepreneurs had decent reputations for being innovative, but there was much it could learn from Silicon Valley, both in what to adopt and, perhaps, some elements to avoid.
Mr Majanovic, who is senior director for the Strategic Transformations division of Cisco Services Sales, said there was no doubt Silicon Valley was “the most successful innovation area” in the world “and the one that has made the most money”.
“Basically, in this context, there is Silicon Valley – and everyone else.”
He said the ways to fund innovative technology start-ups ranged from government grants, to business-enabled systems such as the IOS developer program and on to education initiatives such as technology development centres, boot camps and start-up labs.
“It is all part of the ecosystem,” Mr Majanovic said, “but then there is Silicon Valley.”
He said Silicon Valley was so successful – and so powerful – that few Australian tech. start-ups could avoid it and none could ignore it.
Mr Majanovic said ‘raids’ on tech. start-ups by Silicon Valley organisations were becoming more prevalent, as the region needed to feed a successful development system that accelerated promising start-ups to almost certain success.
It was a successful but imperfect system that revolved around “Build. Fund. Execute. Exit. Repeat …” Mr Majanovic said.
“All follow this path,” he said, “be quick, be quick …swim or sink fast. That is the thing. It is unique – people focus on IT – and there is very much an exit focus. People that are trusted are onboard fast.
“It is extremely local. In many cases companies will go from start-up to IPO in two years.”
He said it was ironic that Silicon Valley operates in a way that is opposite to the high technologies it promotes. He described the region as “a people network in 30sqkm”.
But Mr Majanovic criticised Silicon Valley for its short-term mentality.
He described one of the ongoing problems as “money does not understand technology. There is lots of hype,” he said, but a lack of focus on long-term value.
“I call it Wall St at its worst,” Mr Majanovic said.
Mr Majanovic acknowledged the views of Deloittes’ Mr Vorster in this space, saying, “If you cannot execute, you have nothing.”
Mr Majanovic said while there were issues with Silicon Valley, anyone in the world serious about a tech. start-up would be advised to plan for a presence in Silicon Valley well in advance.
He used his own experiences with Cisco Systems as an example.
“I am buying IP and I know how to protect it,” he said. “The only way I can really protect it is through my court in California.”
A good example was the recent Apple case against Samsung, which was overturned in a California court in Apple’s favour.
Mr Majanovic said Australian organisations either had to join the Silicon Valley ecosystem, where they had access to the world’s leading venture capital funds, or emulate that model locally.
He said the Silicon Valley mind set explained why Cisco Systems thrived from there and why the organisation spent $5.5 billion a year on research and development, constantly innovating..
Cisco grows, he said, through a series of processes that can be summed up as: ‘Build. Buy. Partner. Integrate.’
In the last 25 years Cisco Systems has bought more than 160 companies – and most have come through recommendations from its sales force, which is trained to seek out best-of-breed technology companies.
“Cisco sales people, when they are out and about and they hear of an interesting company, are trained to ask, ‘What was the name of that company again?’”
That information is precious and relayed through the organisation.
Mr Majanovic said increasingly Cisco has bought or partnered with new companies or in new markets, working to its credo of being a global business, with local people and global competition.
“We need them (partnerships) to get in to certain markets,” he said, “or to accelerate in those markets.”
Mr Majanovic said innovators and technology start-ups should remember that “the world is flat in the software business”.
“If you cannot execute, you have nothing,” he said.
MEGA TRENDS AFFECT AUSTRALIA
CSIRO scientist Dr Stefan Hajkowicz not only highlighted the ‘mega trends’ Australian organisations must navigate, he gave the issue of innovation a sense of great urgency, calling it Australia’s “innovation imperative”.
“Australia must make the jump … or it is stuffed,” he said. Australia’s competitors are already occupying what has been our economic and industrial space.
CSIRO research has identified key Mega Trends and ‘Mega Shocks’ that will directly impact Australian business in its report Our Future World: An analysis of global trends, shocks and scenarios. Dr Hajkowicz, its author, explained in his address to the Innovation Series Sydney that even the way CSIRO had developed the report, and its successor, was an innovation that had come out of an unexpected opportunity.
Dr Hajkowicz had been asked to present for CSIRO at a futures conference, because someone from a private consultancy could not attend. He took the opportunity to gather the views of 200 scientists on what they saw as the major economic, social, industrial and technological trends affecting the world. These were subsequently qualified into Mega Trends and the CSIRO developed further research.
It was an example of something he now advocates, “The best way to understand your sector is to spend time outside it.”
Dr Hajkowicz said the biggest single shift going on right now is the GDP shift from the developed to the developing world.
This was highlighted by the fact that 1.02 billion Asians will soon be classified as ‘middle class’ mainly in China and South East Asia.
The traditional leading East Asian economy, Japan, will have more than 40 percent of its population aged over 70 by 2020, and other developed economies are not far behind.
The US and Australian economies are similarly being weighed down by health costs for ageing populations.
“Retirement may cease to exist in the future,” Dr Hajkowicz posed.
But in this, like other Mega Trends, Dr Hajkowicz sees opportunity for innovative Australian businesses, such as medical technologies. Plus, healthier ageing populations have a greater propensity for travel.
Australia’s tourism sector, which has been hit by high dollar costs, could also be on the verge of a boom from new markets being created by the young and active Asian middle class. In fact, CSIRO has identified a market called Flashpackers that Australia may exploit – people who are active, cashed up and ready to travel to places on the recommendations of friends through social media, such as Facebook.
The CSIRO-identified Mega Trends also bode well for Australia’s agribusiness sector, with developing countries focused on providing food security. Australia’s potential in agribusiness is only limited by water availability, Dr Hajkowicz said.
Meanwhile Australia’s minerals sector may be tapering off, but its natural gas industries are only just starting to produce and may provide an energy advantage for Australia. Mining may go to cheaper source countries, but Australia’s innovative mining services may yet benefit, if companies can make the shift internationally.
“Growth for Australia may instead come from selling the know-how of mining.” Dr Hajkowicz said.
While Australian organisations may need to follow new business overseas, Australia will surely benefit from the fact that the weight of economic development is coming our way.
Dr Hajkowicz said in 1980 the world’s economic centre of gravity was in the mid Atlantic – but by 2030 that epicentre will be somewhere between India and China.
“Again, the big thing to watch is the GDP shift to the developing world,” he said.