Australia’s ability to rely on natural resources for prosperity is diminishing, and almost half of jobs are at risk from digital disruption.
In light of this changing ecosystem, Sammy Kumar, PwC Managing Partner for Strategy and Transformation, discusses the steps that must be taken in order to ensure the nation can face the challenges and seize the opportunities that lie ahead.
An important part of every executive’s job is to steer their organisation through the prevailing issues of the day. But increasingly, we are also being assessed on our ability to anticipate what lies ahead in order to ensure our business is fit and ready to meet those challenges.
There are a number of megatrends affecting our world: demographic and social changes, shifts in economic power, rapid urbanisation, scarcity of resources, regulation, and technological breakthroughs. Disruption can come from any of these, but the effect of technology is perhaps the most immediately evident.
Around 3 billion people are online, with 75 billion devices – almost ten per person – anticipated by 2020. In addition, our obsession with digitally interacting with each other continues to grow rapidly. Right now, there are over half a million interactions taking place every second on social networks and by 2020, mobile data traffic is forecast to have increased ninefold.
Technology is enabling industries to be re-imagined at lightning speed. No industry is immune, not even love – Tinder is swiped 1.2 billion times a day. Trust has eroded from institutions and lies in the hands of customers, who seek opinions from peers over information from retailers.
This evolving ecosystem presents great challenges but also unparalleled opportunities for businesses.
As an economy, Australia has relied heavily on our own natural resources to fuel recent prosperity but on current trajectory, we’re forecast to drop out of the G20 by 2050. We must now adapt to the changing landscape and embrace innovation as the new global currency.
Opportunities for business
More than 80% of Australian business leaders believe innovation is the main driver to creating a competitive economy and improving our country’s productivity.
Many of the world’s strongest economies are driven by innovation and investments in knowledge capital. They’re underpinned by a thriving ecosystem where collaboration doesn’t just happen between individuals but also between institutions within government, higher education and businesses.
In 2013 Australia missed out on $48 billion of potential data-driven productivity improvements, particularly within government, health and agriculture. Yet a thriving innovation ecosystem has the potential to increase Australia’s productivity and raise GDP by $37 billion in 2024.
Investing in knowledge capital and Asia
Although Australia’s local ecosystem is developing, we’re still significantly lagging behind when it comes to the amount of capital available to drive this push. The US spends seven times more than Australia in venture capital investment per capita. Canada spends two-and-a-half times.
In research and development, Australia is ranked 15th by the OECD. Most of our R&D is tied up in manufacturing and mining – physical, rather than knowledge capital.
We are of course a small market, which is what makes Asia such an important opportunity. But Australian organisations are currently letting this opportunity pass them by. Only 9% of our companies currently operate in the region, despite the fact that intra-Asian trade is predicted to become the world’s largest trading network by next year.
Finding and retaining talent
Nearly half of today’s jobs are set to be affected by digital disruption. Without significant investment, Australia will continue to see home-grown talent move offshore to find scale and opportunity. We must build a workforce that can compete and win on a global basis, which will require a different mix of skills from what we have today.
The importance of STEM skills to the future economy cannot be ignored yet the percentage of Australian higher education graduates with STEM degrees is currently less than a third of those in Singapore.
This is a problem worth solving. 75% of the fastest growing occupations require STEM skills and PwC analysis suggests that by shifting just 1% of our workforce, we could generate a $58 billion improvement to GDP.
In the short to medium term, we need to figure out how to reskill a workforce coming out of our resources and manufacturing sectors. Over the longer term, we need to ensure our youth understand the importance and attractiveness of STEM related careers. This will require the collaborative efforts of government, educational institutions and business.
Beyond STEM, design should also be a highly valued skill in today’s businesses because it is often the key ingredient that drives a product or service to viral success. As a core capability, few in the modern age have mastered this as well as Apple. Its products have always had utility but it’s in the design that Apple has captured the hearts and minds of its customers.
The key message here is diversity – not just in attributes such as gender, but diversity of thought, skills and experiences.
Leadership for prosperity
Together, we must build a nation renowned for solving important problems and creating an innovation experience that is world class.
If we really want Australia to achieve this, leaders must drive this vision, both in the areas that are most dear to them but also for the broader ecosystem; strong leaders that have foresight and can stay the course.
I have talked about Asia, STEM and the GDP opportunity. Context is great and the numbers compelling, but innovation is not born from context or numbers – it comes from actually taking the next step. Together, we can position Australia as a place that does exactly that.
This editorial is taken from Sammy Kumar’s opening speech to Anticipating Tomorrow – Who drives the innovation agenda?, the CEO Panel at Amplify festival for business and innovation.
Additional commentary by Jean-Paul Seow.