Is Australia an innovative tech nation?

Leading technology executives from Accenture; Arrow ECS ANZ; Capgemini; Deloitte; EY; KPMG and PwC debate innovation in Australia.

By James Henderson Jan 28th 2019

Artificial intelligence, the Internet of Things and cognitive, alongside blockchain, machine learning and digital transformation.

The shopping list of emerging technologies set to disrupt Australian businesses is long, endless and evolving. Businesses are placing bets, but future investment levels vary, depending on size, sector and scope.

Today, technology buyers are seeking guidance on how to capitalise, amid a noisy market crammed with new offerings and solutions.

This exclusive IDG Business Leaders Circle - a first of its kind in Australia - outlined key emerging technologies set to disrupt the Australian market, assessing the priorities of business and the opportunities for future market growth.

In the first edition of this two-part editorial series, the country’s leading technology executives debate the question - Is Australia an innovative tech nation?

“There’s an argument that Australia is innovative, and one that we’re not,” observed Kate Eriksson, partner of Digital Innovation and Growth at PwC. “The most helpful frame to have is the confidence we can be, with the realisation that we’re well under our potential performance.

“Innovation is now widely recognised as a central driver of economic growth and development.”

A quick-fire assessment of the country's credentials often serves up the same cliched answer, that in most cases, Australia is a nation of early adopters.

In embracing technology, that is case for consumers, but in the public and private sectors, an alarmingly lag exists, according to Eriksson.

“But we are at risk of slipping behind the world in digital readiness, especially when it comes to business,” Eriksson added.

Australia is ranked 18th on the World Economic Forum’s Network Readiness Index, slipping two places from the previous year.

The index measures the capacity of countries to leverage information and communications technology to improve competitiveness and well-being.

“To say it’s an important one for the future is an understatement,” Eriksson said. “If we fell this far in the Olympic medal tally, there would be an outcry.”

To achieve economic growth at a basic level - two per cent annual GDP growth - Eriksson said the country’s $1.6 trillion economy needs an extra $32 billion pumped into it every year.

“Compounded by an ageing population, we’re not even close to that,” Eriksson warned.

In progressing the conversation further, Nick Verykios - managing director of Arrow ECS ANZ - cited a disconnect between government priorities and market realities as a key blocker to innovative growth.

“The Federal Government talks up a strong innovation focus, but it’s not supported with appropriate budget and most funding is allocated to infrastructure upgrades, re-worded as innovation,” he said.

“Australia has no shortage of locally bred and developed innovative talent, however most head offshore to seek funding and support where their ideas are rewarded.”

Yet the challenge of innovation is not unique to Australia, with EY’s Global Disruption Readiness report in 2018 highlighting that 67 per cent of investors want companies to undertake potentially disruptive innovation projects even if they are risky and may not deliver short-term returns.

Furthermore, 50 per cent of CEOs indicate they are not well prepared to take advantage of disruptive change and opportunity.

“Australia is an entrepreneurial nation however more can be done if we wish to be considered an innovative nation,” added Andrew Garner, lead partner of Oceania Technology Services at EY.

Supporting World Economic Forum sentiment, the Australia National Innovation System Study 2017, found that across a range of metrics on collaboration for innovation, Australia ranks in the bottom half of the Organisation for Economic Co-operation and Development (OECD).

“When it comes to innovation Australian firms tend to specialise in modifying innovations introduced by other domestic firms, while new-to-market innovations are not as common,” Garner said.

“As Australia’s traditional sectors of economic growth change and evolve, boards and senior leadership teams should be actively engaging in robust debate on how they are going to leverage innovation to drive growth.”

Challenging standards

Australia has always valued ingenuity, possessing an ability to solve problems differently through thinking outside of the proverbial box, cited as key hallmarks of an entrepreneurial nation.

Yet in echoing the opening observations of Eriksson, standards are slipping.

“Our relative geographic isolation, captive market and small population have meant local businesses have been able to enjoy a period of relatively low disruption, particularly over the last two decades,” outlined Harshu Deshpande, leader of Custom Dev and Open Source at Accenture.

“As clear winners of disruption (through both digital and new business models) emerge from overseas markets and the costs and the barriers to entry in the Australian market decrease rapidly, there is a significant need for local businesses to look to transform themselves and adapt.

“Despite all the rhetoric from parts of the market around the innovation agenda, there is a genuine need for Australia to wake from its slumber to progress innovation from discussion through to execution.”

In assessing the local market, Deshpande identified three key challenges that continue to hamper innovation efforts across the country.

Firstly, continuous innovation requires significant changes to the operating model. Secondly, innovation cannot be driven via the traditional yearly budget cycle and thirdly, a re-imagining of the future workforce is required.

“CIOs face the challenge that only pockets of their organisation have embraced agility and flexibility, with most of their core systems still slow, expensive, hard to manage, and perceived as inflexible,” Deshpande explained.

“While there has been a marked shift towards organisations adopting agile and DevOps practices, businesses continue to have their financial processes stuck to the traditional one-year funding cycles.

“Also, despite all the talk of technology disruption changing the nature of the business and the impact on the workforce, organisations are still not sufficiently investing in re-training and re-skilling their workforce.”

For Verykios, another contributing factor centres around the current education system failing to nurture innovative thinking and creativity.

“Our education sector needs to focus on critical thinking and inventiveness that sets our children on that path of success,” he said. “It’s critical as they will be competing globally now against people coming from innovation driven education and support systems like the USA, China and Eastern Europe.

“The second challenge is a lack of investment from both Federal Government and the private sector to support the long-term investment that is fundamental to successfully delivering innovation beyond a short-term budget decision by the government of the day.”

In providing advisory and implementation services for customers seeking to internally embed innovation into business practices, Peter Meliniotis - director of Digital Strategy and Transformation at Capgemini - believes the corporate world is hamstrung by two overriding issues.

“The two key challenges that we often see is that of having the expertise to drive the culture of innovation within existing organisations and cultivating innovative ideas so they can be realised,” Meliniotis documented.

“The later challenge in some instances stems from the fact that a lot of organisations think 'locally' when it comes to new innovations which often leads to ideas not being viable.

“Australian organisations need to think more globally in order to tap into a larger market which would allow new innovations to be viable.”

Through the work Capgemini carries out with customers, Meliniotis was quick to stress that despite industry challenges, it remains clear that Australia is "definitely an innovative nation".

“Whether it be our enterprise clients all the way to the start-up scene, it’s clear that innovation is a big theme in Australia,” Meliniotis clarified.

Such sentiment is echoed by Richard Marrison - national leader of Technology Advisory at KPMG - in acknowledging that Australia displays a “huge appetite” as a nation to embrace new technologies from a societal perspective.

“But real innovation is often stifled because of a lack of a real burning platform (such as competition), which dilutes any kind of compelling need in our large corporates to drive innovation hard,” Marrison said.

“The key challenges associated with creating an innovative culture within Australia centres around a lack of available capital; poor digital infrastructure and a relatively small market forcing most offshore to achieve real growth.”

Renewed appetite

While businesses in Australia posses a strong reputation for being early adopters of global innovation trends - adhering to a much repeated cliche - focus must now extend to establishing the right conditions for being creators of innovations as well.

“A lot of that will happen due to a natural need to find the next threshold for productivity,” said Amberjit Endow, senior partner of Cognitive and Automation at Deloitte. “Businesses need to create the right capacity and headspace for innovators to be on top of the next wave of technology enabled innovation.

“This is easier said than done without deliberate investments in a programmatic approach to breeding new ideas and activations.”

According to Deshpande, Australian businesses both large and small are looking to “significantly change their posture” and are now aggressively establishing innovation programs within their organisation.

“Organisations are starting to realise that they need to change from an approach of just enabling innovation in a small pocket, to a more holistic approach which enables employees and teams to be bold and creative,” Deshpande said.

“Similarly, investment in innovation programs is starting to ramp-up, with boards starting to realise that shifting to an aggressive stance to develop new products and services, will help them stay relevant in a rapidly shifting market and that this may mean cannibalising a lucrative part of the existing business.”

In looking through the technology supply chain, and down into the ever-evolving end-user landscape, Verykios maintains the theme that in general, businesses are increasing adoption of innovative technology.

“This is within their own business and focusing on how they can apply the principles of innovation within their own business, to remain competitive,” he explained.

“In addition, the capital markets maturity in Australia is still in its infancy, which also limits the ability for innovation in start-ups to get off the ground and gain momentum, a sector where innovation is fundamental.”

Delving deeper, Garner accepted that local innovation has always remained healthy, but questioned the country’s inability to take advantage, exposing misalignment between the stages of idea and execution.

“The ‘conviction’ to pursue multiple types of innovation and to ‘stay on course’ in order to realise the value of innovation is a challenge facing Australia’s business community,” Garner stressed. “Innovation takes time and there needs to be greater awareness that the realisation of value is not a linear process.

“In addition to this, innovation can be difficult to embed in business operations and moving past the concept and idea phase can be challenging.”

Optimism ahead

There are however impressive pockets of innovation, reminded Eriksson; "Sydney is home to Australia’s largest collection of fintechs."

Meanwhile, Melbourne’s biotechnology hubs, for example, are world-leading with a collection of over 650 companies, 12 major medical institutes, 10 teaching hospitals and nine universities collaborating to employ around 23,000 people and generating more than $12 billion in revenue.

“Examples include customised 3D-printed surgical implants and the mind-controlled robotic prosthetic arm,” Eriksson outlined. “Atlassian is another great example.

“Australia’s new Space program is promising; as well some high performing Australian marketplaces expanding globally such as CarSales, Seek, and Envato.”

The innovation list, and the new and emerging products housed within it, is expanding despite ongoing challenges, offering cause for optimism as businesses embark on new transformation strategies.

“But we have to do more here on,” Endow warned. “We are a country that is punching above its weight and when you look a bit beyond just the ‘technology race’ and think qualitatively - our overall sense of wellbeing and quality of life as a nation is credible proof that innovation has played its part to date to enable and sustain this.

“We constantly find trends where businesses in Australia are solving problems uniquely - several examples in mining, agriculture, education and government service delivery (e.g. our state and federal digital services rank amongst some of the best globally).”

Australia is however, according to Endow, facing off into an era of technological advancement, creating a need to equip and embrace technology as a key innovation lever to maintain a competitive edge.

“Up until recently, our production across many sectors have fetched a premium demand (and therefore price) in the global markets,” he explained.

“That position is being challenged by nations that are able to adopt exponential technologies, ways of working and ecosystem-based business models to deliver similar outcomes with much lower effort (and therefore price).

“We are at a tipping point, where technology augmented innovation needs to drive higher thresholds of productivity and creativity.”