Creating Wealth through Technology and Innovation [Draft #2]
Draft #1

Making It Happen

Fifteen Years of Indifferent Progress

It has been widely known for over 15 years that to compete effectively in world trade Australia has needed to fundamentally change its economic and technological direction - because its traditional exports of simple commodities are subject to booms and busts and slower overall demand growth than high value-added manufactures and services.

Creating a more knowledge-based economy has been recognized as an option, because a community's ability to create or identify technological advances and exploit them through innovation can be an important source of transitory competitive advantages enabling enterprises to achieve sustained higher productivity.

Technological advance and innovation require the collaborative efforts of many persons and organizations with different capabilities (eg technology, finance, production, research, marketing).

The Need for Collaboration: "Even the dogs may eat the crumbs which fall from the rich man's table, and in these days, when the rich in knowledge eat such specialised foods at such separate tables, only the dogs have a chance of getting a balanced diet." Sir Geoffrey Vickers

Such a package of capabilities does not automatically or easily emerge in an economy because the viability of each element depends to some extent on the existence of all of the others, and much of the required knowledge and skills can only be learned from experience.

Thus concerted action (requiring long term commitment, planning and collaboration on the part of business, government and educational institutions, and well as grass-roots community understanding and support) has been needed to create the critical mass of persons and organizations with the complementary skills needed for technological advances and innovation.

Firms of many different types have needed a framework to work together, and also in partnership with governments, in which they could imagine an industrial future in quite concrete terms (eg in terms of markets, industrial structure, supportive business and educational functions), and then take many complementary initiatives simultaneously. [Dr Jenny Stewart, ANU, 1991].

For example such a collaborative effort has long been recognized to be vital to identifying and developing the skill base required by such an economy. This was pointed out by OECD Visiting Team in Science and Technology in 1974, by the Myers Committee in 1979-80, and by the OECD Review of Science and Technology in Australia in 1985. An increase in education and training participation rates can otherwise merely mask a failure to develop the skills that will be actually required by major industries as a consequence of the effect of anticipated technological change.

Similar recommendations are believed to have been made to the federal government in the early 1990s by McKinsey and Co, particularly with respect to regional development. And in 1997 Australia's Chief Scientist, Professor John Stocker, suggested that:

The Government should articulate a preferred vision for Australia's development towards national goals in the sphere of economic and industry development, quality of the environment and social well being. ... The proper, albeit medium to long term approach is to develop an industry policy for Australia which will foster the development of knowledge based industries, which in turn will improve the demand for science, engineering and other graduates. Such an industry structure is the conditio sine qua non of Australia's future prosperity'.

While governments like those in Australia can not themselves constructively state an 'industry policy' because of the interest group pressures they are subject to, it has none the less been necessary to develop institutional capabilities whereby a collaborative vision can emerge that allows all those at the coal face to transform the overall capabilities and workings of the economy.

In practice, in the absence of such initiatives, there has been indifferent progress.

After years of market liberalization, privatization and global integration, Australia's export wealth remains tied to biological and mineral commodities, while domestic wealth creation is based on consumer goods, housing and services. To maintain and enhance Australia's economic ranking in future such accomplishments are necessary but not sufficient.

There have been frequent calls for a new round of economic reform in Australia because the impetus to productivity gains from market liberalization in the 1980s and 1990s has weakened. Symptoms of the need for further reform include:

However there has also been increasing evidence of the need for a transformation of Australia's economy towards one that not only increases wealth, but also promotes the just distribution of that wealth. There have unfortunately been adverse social consequences as a result of past strategies. For example:

Moreover, competitive market theory has been applied to public services, CSIRO and universities in an attempt to boost efficiency in producing their services. This has had the unwanted effect of devaluing knowledge and wisdom because it has been assumed that informed judgments should take second place to customer demands. There has been a loss of: mutual commitment between employer and employees; esperit de corps; morale; institutional memory; and training capabilities (particularly for technicians).

The overall effect has been to 'dumb down' Australia's key institutions.  In universities for example, there has been an erosion of collegiality, respect for individuals / disciples (eg consider Arts / Science conflicts over scarce funds), and support for senior scholars which severely inhibits intellectual collaboration and staff / student interaction. At Australia's oldest university, Sydney University, the staff club (long regarded as a key centre for town / gown collaboration) has closed because staff have no time to participate in such activities. The cumulative effect of such deterioration is to block the effective performance of their core functions.

Furthermore innovation systems within Australia's economy, which are critical to economic diversification, remain weak and poorly integrated. For example:

There is thus clearly a need to establish a more effective framework for the development and application of knowledge-intensive functions in Australia's economy. If such collaborative effort is beyond Australians then they should cease aspiring to a well developed and highly productive economy and hope that their luck does not run out, and that reliance on farm and quarry exports will be enough to keep them.

A Framework for Developing Technological and Innovation Capabilities in Australia

The capacity of an industry or regional economy to innovate depends on many interrelated elements working together. Though there there is not just one path to innovation the required capabilities would include, for example:

The key elements of such a system are as illustrated in the following diagram.

[   ]

As resources are always limited (and because Australia in particular is only a small part of the global economy), these elements need to be linked mainly through the mechanisms of a competitive market economy which will tend to ensure that limited resources are productively focused.

In considering the challenge of developing Australia's embryonic innovation capabilities within a competitive market economy, it is useful to recognize that while innovation can be the result of either 'technology push' (where a breakthrough resulting from research or invention creates a new opportunity) or 'market-pull' (where market research identifies a need and the innovation process is directed towards meeting it). The latter emphasis is likely to be easiest and to lead to fastest progress. It would intrinsically generate the energy and resources needed to drive change, while automatically providing a relevant sense of direction.  Then, over a period of time, the capabilities would emerge to commercialize the results of technological breakthroughs (eg those derived from basic research).

Thus in Australia's case effective innovation capabilities need to be emphasized initially in relation to well established industries (ie those with a critical mass of firms having real markets, brands and distribution networks). This could then logically be extended by a process to envision the support capabilities needed for innovation by globally-oriented SMEs.

The opportunities such firms might require support in developing could be in areas such as: biotechnology; medical technology; food technology; minerals and energy; information and communication technology; nanotechnology; environmental science; and defense science. 

However not all of the support required for innovation can come through a competitive market system. Part needs to come from government (eg in the form of education or basic research funding) and it is important that the priorities set by government are compatible with the the requirements of industry.

For example, Australian industry tends to innovate mainly by adaptation of others' technology, but the relative emphasis on adaptation and R&D various for different technologies. Moreover the types of skills required for innovation via adaptation and innovation via R&D are not the same. Advice about such practical concerns needs to be able to be conveyed to governments  

[[AMIRA - CRCs]]??

Things to be Done

In order to stimulate the accelerated evolution of a more knowledge-based economic system in Australia the following steps would be required

Making it Happen

Proposal for an independent institution modelled on Lowy Foreign Affairs Institute and the Dusseldorp Skills Forum. Clearly the proposed Institute would be complementary to these bodies especially in creating high level collaborative policy capabilities.

Recently proposals for meaningful federal - state collaboration in a new national reform agenda emerged from Victoria. Those proposals address: further competition reforms; a preventative emphasis for healthcare; renewed emphasis on education; and tax and welfare changes to provide work incentives. Clearly this could provide a governmental interface for a new approach to the development of a knowledge economy. Victoria's Premier also took a leading role in establishing ANZSOG.


Where we are Now

Clearly these constraints need to be studied in an ongoing manner by an experienced professional team eg engineers, MBAs

Major fields of technology

in 2005 the following appear to be the major areas of technology relevant to Australia.

Technology and the Innovation Process

In the previous nominated fields the balance between Australian R&D and adaptation / modification of overseas technology in the innovation process are:

At the national level in allocating research funds the balance between R&D and technological adaptation over the major fields needs to be considered as well as considering the structure of Australian industry and the preponderance of SMEs.

In forecasts of skills required the R&D and adaptation over the major fields and the preponderance of SMEs are clearly significant factors in considering the balance of technical skills required.

For SMEs it is probable that a blend of consulting R&D specialists and permanent total technology skills would be most appropriate.

Clearly there needs to be a forum in which such matters can be evaluated and debated comprehensively.

For adaptation, it is likely that technology skills would dominate, while for R&D research degrees in science would be more important.

 

In 1993 a seminar was convened in Canberra by the Institution of Engineers (Australia) on the theme of Wealth Creation and Social Justice. Key speakers were drawn from EPAC, industry and education (TAFE / universities). There were three notable events:

Comments:

 

Erosion of Community Resources

Loss of community expertise

Loss of coordinated, collaboration and cooperation in the community

After 15 years of:

social researchers, notably Hugh Mackay, find overwork fatigue, apathy, cynicism, disillusionment, uncertainty, division, isolation, individualism and lack of community concern to be widespread in the Australian society.

As well as the above, the inappropriate / extreme application of 'business models' to the Commonwealth Service (and other state public services), CSIRO and the universities has been characterised by inefficient staff mobility / loss. In these three sectors there has been also a loss of

Further to all of the above, in the universities there has been an erosion of

Comment: I suggest not referring to 'economic rationalism'. There is no agreement about what it means. No one claims to be an economic rationalist. It is a term of abuse. Its meaning can vary from belief in liberal markets to merely being economical (ie not spending excessively). A recent critique of economic rationalism was an argument in favour of unrestricted spending without worrying about income.