Island(s) of innovation

Have you felt a little depressed lately about the state of the world and wondered where it might all be going? Take it from me, go spend a couple of weeks in Australia and you might find yourself regaining your optimism for the world once again!

The first thing that strikes me whenever I am home is how upbeat everyone is. On my most recent trip back to Australia this month I found many of the same concerns exist around growing inequalities and other social, political and economic factors. However, they pale to insignificance when compared to the recent mood in the USA, Europe or the UK. Case in point: I had the opportunity to speak at the Green Cities Conference in Sydney where 500 participants exchanged ideas on how to make their Australian cities smarter and more resilient.  In attendance was the exciting Melbourne Future Crunch group who surveyed the audience on degrees of optimism about the country. This Australian audience was generally pretty positive on the state of the country and its direction, with few exceptions.  

I soon experienced this positive outlook in other meetings I had across the country, for example with the Committee for Sydney or when presenting to non-executive directors. This is in contrast to what I see elsewhere, and is quite extraordinary in today’s world of geopolitical uncertainty, growing nationalism and protectionism, and the acute concern for rising inequality.

And don’t just take my word for it. Martin Enault of the premier Canadian events company C2 Montreal was in Melbourne last week and had a similar experience. I met with him to discuss the upcoming EY/ C2 Innovation Realized retreat which next month will explore how to drive innovation in a rapidly changing world. As an Australian I am probably biased, but Martin and I both felt that Australia has the right ingredients to respond creatively to the challenges of the 21st century.

In particular, resourcefulness and resilience have long been attributes required to survive in Australia’s beautiful but at times harsh environment. These same qualities are also exactly what’s needed in today’s changing world. New business models, jobs, solutions to complex problems etc. are emerging every day and today as in the past, parts of Australia are well ahead in creatively re-inventing the future.

Returning home after some time away, I was struck by several key ingredients likely contributing to this:

• High integration of Western and Eastern cultures producing a unique perspective on many issues. With so many cultures and customs blending across the country, it creates a depth of multiple cultures in everyday life that distinguishes contemporary Australia. At a time where the importance of diversity in business performance, problem solving and innovation is starting to be recognized, greater cultural integration creates a greater tolerance for contrasting ideas. This is a real differentiator for Australia.
• Fintech innovation is taking place here, led by both established players and a myriad of start-ups, all focused on block chain, cognitive computing and artificial intelligence. Debra Walton from Thomson Reuters, another Australian living abroad, recently observed the same in her blog remarking that “Australia continues to ’punch well above its weight’ in terms of the innovation it is delivering to the financial markets”.
• New infrastructure everywhere. Sydney, Melbourne and other cities are in the midst of building booms with creative architecture emerging everywhere. They are also creating  start-up and innovation/ knowledge hubs that are vibrant and simultaneously industry-specific and industry-convergent, focusing for example on creative digital technology, financial services, medical technology, transport/ logistics and more.
• Rapid changes in EY’s Australian firm illustrate how business in the country is responding to the technology revolution. On this visit, I met behavioral scientists, engineers, designers, data analysts and technologists – all relatively recent joiners to EY and all engaged in intellectual ecosystems developing new solutions to long-standing problems. As my EY colleague Lynn Kraus remarked so pointedly at one of our all staff town-halls “this is not your grandma’s accounting firm”. She is right. Instead it is a business that is transforming itself with people who bring a refreshingly different mix of skills and backgrounds that drive innovation. I was also excited about our new Sydney office which, through its design, facilitates agility and collaboration. I was equally impressed by our Melbourne Design Studio in which EY clients work across a range of dimensions to find the upside of disruption, and design parallel business strategies for today’s business, and at the same time course-correcting for technological changes.

However, Australia’s islands of innovation do not yet add up to a systematic strategy due to some real barriers. These include:

• Current threats to globalization underscore Australia’s vulnerability to rising trade barriers, knock-on effects to global economic growth and potential slowdown in international exchange in innovation and services. The World Economic Forum Global Competitiveness Index (2016-2017) highlights systematic innovation as Australia’s key challenge. Australia as a whole is starting to lag behind as its global rankings have slipped in both business sophistication (28th, down one place) and innovation (26th, down three places).
• Broadband infrastructure is a real issue. Australian internet speeds rank only 51st globally with average speeds of 9.6 Mbps and a quarter of the population with average speeds below 4 Mbps. As a comparison, South Korea is at 26.3 Mbps and Seoul at 80 plus Mbps. A recent OECD report on the same issue confirms this by placing Australia in fourth last position out of 32.
• R&D spending needs addressing. It is an important issue that reflects a country’s commitment to innovate.  The top five OECD countries spend on average 3.7% of GDP on R&D. Australia only spends 2.1%.   
  

Australia needs to urgently address these limitations. Unlike many other leading global economies, it has some of the right policies in place on innovation, climate change, the increasing prominence of Asia in the global economy and renewable energy. However, it falls short on implementation.

It needs to connect its patches of exciting innovation and build on its inherent cultural strengths. It needs to deliberately position itself as the innovation hub of Asia Pacific. In order for Australia to continue to be a global leader and beacon for optimism it must bring governments and businesses closer together to:

• Create a compelling narrative about the importance of innovation – for the future prosperity of the country and to engage its citizens in a transparent conversation about the challenges and opportunities ahead
• Grow innovation industries – to bolster competitiveness, productivity and to promote economic diversification
• Invest in world-class digital infrastructure – this is a necessary pre-condition to foster innovation
• Increase R&D spending – as the foundation of a smarter economy, and
• Rapidly improve educational outcomes, particularly in STEM – to build innovative capabilities.

Describing the current state of the world, international author and futurist, Joshua Cooper Ramo recently said, “We live in a world that is both terribly exciting and awfully unsettling. Global ecosystems seem beyond repair. But by understanding how countries work and network, we can begin to shape this age”. Importantly, we need to let the world know that Australia is not just the “lucky country” but a modern, creative, technology savvy nation with a unique cultural diversity, ready to lead and solve the problems of the 21st century.

For more, please visit www.uschischreiber.com and follow me on Twitter: @UschiSchreiber. 

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The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.