Australian Small Businesses and ‘Engines of Growth’ (22 March, 2015)

This weekend’s Chanticleer column in the AFR reported on a recent RBA organised conference in Sydney which, based on several presented research papers, seemed to conclude that the salvation to Australia’s post mining boom economy may well be found in a upsurge of activity within Australia’s 2 million strong small businesses. Chanticleer concluded that ‘small business is an ‘engine for growth’. Well other economies e.g. South Korea and Taiwan, which are characterised by the existence of millions of small businesses see ‘engines of growth’ in a different context – these are instead a focus on co-investment by government, business and industry on centres of new industry creation underpinned by emerging technologies. These ‘engines of growth’ actually create substantial levels of export revenues and new wealth for their respective nations.

It can be reasonably assumed that Australian economists seem wedded to the view that wealth is created ( and GDP growth measured) by simply increasing the level of activity within the domestic economy, particularly within the services sectors. By way of a simple analogy, no business creates a profit, despite an increase in internal business activity, unless that business creates added value by selling to external customers either products and/or valued added services.

To date, Australia has prospered by generating large levels of revenue from the sale of mineral resources to external custpmers. With these revenues now in decline, other areas of externally sourced revenues must be found, and we would argue that within that mix, ‘value added’ manufacturing must be included in a significant measure, even though it will take a good part of a generation to achieve the levels of revenues enjoyed by other competing developed and developing countries.

Just cranking up existing, internal service industry activity, is not an ‘engine of growth’ strategy, simply an exercise of ‘spinning wheels’!

Firing Up Those Engines of Growth

A meeting on 12th May 2015 with Advanced Manufacturing Industry Growth Chair- Andrew Stevens proved highly instructive from the viewpoint of my understanding that the Government’s Growth Centre strategy is not about ‘rearranging’ the desk chairs on the deck of the ‘ship of state’, but instead putting industry in the driver’s seat to charge up those ‘engines of growth’!

Of all the information that the Department of Industry and Science has made available to date, there is one key diagram that Andrew has pointed out to me that spells out the way in which Australia’s Innovation System is planned to work.

Simply put, it is now understood that the five (5) selected Industry Growth Centre engines will tap into nearly $1 billion of public funding from existing programmes to be made available to Australia’s key research science and research facilities for priorities determined with strong industry input and direction complemented by industry and business co-investment. The allocation of the previously announced $188.5 million dollars to the Industry Growth Centres per se will now fund the means of driving strategically a key part of Australia’s innovation system.

It is also understood the allocation of funding will be prioritised for each of the growth centres across the four areas of required outcomes that have been determined by the Government i.e.

* regulatory reform
* improved access to global supply chains and international markets
* improved engagement between research and business
* improved management and workforce skills

As Andrew explained, advanced (‘high value’ adding) manufacturing has essentially ‘horizontal industry’ dimensions impacting to various degrees on the industry growth centre ‘verticals’ other than just the Advanced Manufacturing Industry Growth Centre (AMIGC) itself – its drivers include digital (ICT) technologies and new and advanced materials which are themselves ‘horizontal’ in their nature of and ability to enabling and transforming existing industries, as well as creating new industries. Andrew’s extensive ICT industry background and experience will be of enormous benefit in understanding the total dimensions of the digital transformation that is now impacting on the global manufacturing sector, and that includes the various additive manufacturing technology platforms.

The Chair recognises that the Advanced Manufacturing IGC can also serve to ‘bridge the gap’ across the well known ‘valley of death’ in the new product development cycle.

The Chair is keen to attract into the AMIGC structure those manufacturing firms and organisations that are key to join as enthusiastic members, and to benefit from the co-investment and market access opportunities that will be created.

Andrew Stevens is an attentive member of this forum and has indicated to me a keen willingness to take on board any questions about this process and to seek input from our members about some key issues where industry input will be required and will help ‘make the difference’.

We are being welcomed aboard! It is surely incumbent on manufacturing firms, industry groups and other key stakeholders such as service providers to embrace this new strategic imperative as a distinct shift away from the essentially disaggregated ‘technology push’ ways of the past!