THE COMEBACK OF COMMUNITY – WHERE INNOVATION MEETS THE LOCALS

This article is based on Narelle Kennedy’s presentation to the Economic Development Australia national conference hosted virtually by the City of Liverpool in November 2020.

If 2020 is good for anything, it has shaken up old certainties and encouraged us to be bolder in finding new angles and solutions to big challenges.

Lockdowns, isolation, physical distancing have dramatically affected the mainstays of both home and working life.

They have made us more digitally adept. We rely more on services and facilities in our local neighbourhoods. Businesses are of necessity sourcing locally. More regard for essential work and workers. A greater focus on the relationships and activities that are in walking distance. Closer and continual connections to home and family can bring both delights and challenges.

In short, 2020 has re-set the importance of ‘place’ and heralded the comeback of community.

Can this change be made to work in the interests of the many people and places where jobs and livelihoods have been disrupted, perhaps permanently?

Is there a new way to make local communities more innovative and prosperous? Can we re-think what makes places both smart and liveable?

Here are three insights to help answer these questions.

Innovation is more than high tech breakthroughs and entrepreneurial start-ups, but neither is it just any improvement, bright idea or piece of creativity or agility.

Innovation requires creating value by doing something new. This means putting a novel idea into action, so that it meets an unmet or even, an unarticulated, need in a better way than the alternatives. And, crucially, in doing so, it gains a return, whether in business revenue and profit or in measures of community wellbeing and prosperity.

Innovation is not just the province of high tech, high growth ‘gazelle’ firms. Ordinary mainstream businesses can innovate too. They can innovate through learning by doing, and through learning by interacting with others, by knowledge-sharing and collaboration.

Innovation can take many forms – unique business offerings from bundling products and services together, superior ways of managing your people and supply chains, high-quality customer service and experiences, to name a few.

So, don’t unnecessarily straight jacket the types of innovation open to your community.

Knowledge workers are not necessarily the main source nor the key beneficiaries of innovation. The benefits of innovation can be applied and spread more widely.

Innovation must be managed to benefit the wider population, including those who are most likely to become the casualties of economic transformations.

To do this, pay attention to the essential work and workers of the everyday economy, providing the goods and services that sustain our daily lives.

The everyday economy impacts on innovation because it affects everybody, it is interdependent with knowledge work and workers, and a significant element of the everyday economy is learning, caring and social support work. This work reinforces the social ties and human interactions crucial for social cohesion, resilience and a sense of belonging and community identity.

Strengthening the performance of the everyday economy is an innovation strategy—because it unlocks the untapped potential of communities. This has been referred to as ‘the economics of belonging’.

What makes a place smart is not the location of universities surrounded by tech hubs and industries of the future, or the operation and analysis of smart digital infrastructure. Rather, smart places are the crossroads where different knowledge worlds meet, explore and create something new and valuable to the local community.

To create an innovation precinct or smart place, don’t just seek to mirror Silicon Valley-like enclaves or dense urban knowledge hubs.

Smart places measure themselves on combined economic, social and sustainability outcomes.

They work on building proximity, diversity and interactions across different sectors, disciplines, and areas of knowledge and expertise. They allow for creative collisions of ideas and serve as safe spaces for enterprises to experiment with possible innovations.

They can be a testing ground for alternative imaginative solutions to complex societal problems and the best ways of implementing them.

In short, the message is take advantage of the comeback of community.

Probe beyond the obvious, beyond the usual suspects, into the active ingredients of both innovation and place-making. Delve deeper to understand how these innovation opportunities and capabilities suit your particular local circumstances and conditions.

Here, you can create the pathways that allow ordinary businesses and people to prosper, even in local communities with seemingly poor prospects.

REFERENCES:

Martin Sandbu, The Economics of Belonging, Princeton University Press, June 2020.

John Bessant, Managing Innovation. Creating value from ideas, https://johnbessant.org/2019/06/29 June 2019.

Diane Coyle, The Key to the Productivity Puzzle, Project Syndicate, 13th October 2020.

MAKING THE CONTEST OF IDEAS ‘SHOVEL-READY’

The Australian Government’s 2020/21 Federal Budget and the Opposition’s Budget Reply Speech have been celebrated as a long-awaited, clear contest of ideas.

The C0VID-19 pandemic recession has changed the rules. Record spending and long-term debt have been accepted as the price of economic ‘life support’. But, there are fundamentally different prescriptions for the path to recovery.

Author and journalist, George Megalogenis, describes it as a contest of ideals:

“The (Liberal/National Party) Coalition stands for incentive and reward for effort. Labor is the party of the safety net and active government.”

Megalogenis reports that for the Coalition, the recovery will be driven by business. He quotes the Prime Minister as saying the massive spending is for this year only. “It’s not used as an opportunity to bulk up all sorts of public spending for years and years, employing more and more public servants.”

The Labor Opposition, on the other hand, sees the Government’s unwillingness to take direct responsibility for vital services as a blind spot that leaves behind many ordinary Australians who are excluded from economic prosperity through no fault of their own. Labor opts for a government safety net.

Child care is a case in point. Lack of affordable child care is the single greatest barrier to workforce participation for young families, especially women. Labor pledges to make quality, affordable child care universal. Similarly, Opposition policies favour making work more secure, lifting the level of income support to the unemployed, and shifting the emphasis from private provision of services in aged care and in higher education.

In short, the contest of ideas goes to incentives versus safety nets, private sector versus government as primary service providers.

These political differences of substance are in contrast to disquiet with indistinguishable policies in ‘small target’ elections, or populist policies from focus groups and social media fads, or political in-fighting and ideological mavericks with policies serving sectional interests, not the common good.

Hence, the contest of ideas across the political spectrum is welcomed as a genuine choice in Australian democracy. But, is a choice of credible alternative policies the best we can do? The challenge is whether we can bridge this legitimate divide with policies that lift the standard of public debate and allow for new ways of working and intelligent compromises.

Sadly, there are few avenues to bridge this gap.

Big, definitive and diverse ideas are one thing. Finding workable solutions and making them a reality is another.

It requires expertise in informed, collaborative problem-solving. Not quick fixes or partisan answers, but fresh ideas and practical solutions drawn from well-managed analysis of research and evidence, critical thinking and insights from diverse points of view. It is not enough to generate bright ideas. It is necessary to make these answers to complex issues ready for implementation.

This means being connected to the people, organisations, skills and know-how to put solutions into action in a timely way.

One not-for-profit organisation well-placed to serve this need is the Eidos Institute Ltd. Eidos has a track record as a pioneer of collaborative problem-solving and expertise as an impartial broker of ideas and action across diverse interest groups, with credible results.

Eidos aims to improve the way Australia’s complex social and economic challenges are solved. From the contest of ideas to building support for new insightful solutions ready for implementation, it is a job worth doing.

In the vernacular, Eidos has a mission to help make big, innovative ideas ‘shovel-ready’.

REFERENCES:

Narelle Kennedy serves as Chair of the Eidos Institute Ltd, see website at www.eidos.org.au

George Megalogenis, ‘The contest of ideals we’ve been waiting for’, Sydney Morning Herald, 10th and 11th October 2020.

RETHINKING WHAT’S ESSENTIAL – the importance of the everyday economy

Are efforts to attract innovative, entrepreneurial companies and their highly qualified knowledge workers misplaced?

A common focus of many national economic and industry development plans are strategies to attract and grow high-performance, innovative, globally competitive companies and industries and high value jobs.

This is seen as the best pathway to prosperity. Is it the right path?

These well-known investment attraction and innovation strategies give priority to globally mobile, highly skilled, technology-adept and knowledge-intensive economic activities, often concentrating on financial and information technology services, urban renewal and property development and the highly productive traded sectors of the economy. 

These have an in-built bias favouring cities and metropolitan centres, and the asset-rich and professional and creative segments of the population. Left behind are those in lowly-paid, low-skill or insecure employment, areas affected by de-industrialisation or those in outer suburban, rural or remote regions. 

Inequalities result. Analysts and policymakers have been concerned about the damaging disparities in jobs, income and opportunities across cities, regions and communities.

The ‘trickle down’ effect does not seem to be working. This leaves many in our society pessimistic about their opportunities to get ahead, and feeling alienated and disengaged. Further, there is much doubt that politics and politicians can solve the problem.

Then comes the COVID-19 pandemic, which starkly forces a rethink of what constitutes essential work and essential workers. It makes sense to shift attention from elite industries and jobs to vital activities of the ‘everyday economy’.

The everyday economy describes sectors that are immobile and relatively protected from competition, but that provide what has been called “the services, production, consumption and social goods that sustain our daily lives. Its core activities include transport, childcare and adult care, health, education, utilities, broadband, social benefits and the low wage sectors of hospitality, retail, food processing and distribution”. (Reeves, Tomaney and Williams, 2019).

Essential workers are, among others, truckies, “warehouse workers, delivery workers, police officers, fire fighters, utility maintenance workers, sanitation workers, supermarket cashiers, stock clerks, nurse assistants, hospital orderlies and home care providers”. (Sandel, 2020).

The everyday economy is significant because everyone, regardless of income, participates in the everyday economy – in the public, private and social sectors and distributed across all cities, regions and hinterlands. 

The message is that to enhance prosperity and wellbeing, it is just as important to secure the everyday economy, as it is to foster the traditionally-acknowledged engines of growth and productivity. 

There is also a message for people in places losing out in the wealth and job-creating knowledge economy. Don’t just imitate the strategies of strong, large urban regions, but build on your own strengths and capabilities to create lasting local sources of competitive advantage. By making the most of what you have locally, you can lock in investment, industries and jobs. You can also reduce the risk of exposure to footloose capital and short-lived incentives. 

The task is to invest in existing skills, talents, capabilities, assets and infrastructure, involving a range of political and civic actors and a diverse mix of policies and programs tailored to getting the best results from local conditions. This includes strengthening the performance of the everyday economy and in particular, serving its unmet needs. (Tomaney and Pike, 2019).

The activities of the everyday economy include lowly-paid, but highly necessary, caring and learning functions. These are often not captured in measures of productivity, but they are central to human connections and social ties that are essential for a sense of belonging, resilience and identity in communities. The everyday economy has even been described as “the economics of belonging”.

Greater attention to the everyday economy can unlock the untapped potential in communities to drive both their economic and social wellbeing.

REFERENCES:

Reeves, J. Tomany and K. Williams, The Everyday Economy: why it matters and how to rebuild it, London School of Economics and Political Science, 7th April 2019, see blogs.lse.ac.uk

Tomaney and A. Pike, The economics of belonging: the hidden costs behind large cities, Prospect Magazine, 19th September 2019, see https://www.prospectmagazine.co.uk

Institute of Public Administration Australia, NSW, IGNITE newsletter, COVID-19 and the frailty of the social contract, reprinted from Financial Times, accessed on 16th April 2020.

M.J. Sandel, Are We All in This Together?, The New York Times, 13th April 2020, see https://www.nytimes.com/2020/04/13/opinion/covid-workers-healthcare-fairness.html?smid=em-share

 

A NEW DEAL FOR AUSTRALIAN MANUFACTURING POLICY

It is no surprise that Australian manufacturers are strong early responders to the global COVID-19 crisis.

Research into Australian manufacturing shows it is an industry in transformation, not decline, in the face of fundamental structural and technological disruptions.

Manufacturers have demonstrated their ability to re-tool or pivot quickly and to supply vital health and protective equipment and products. The Advanced Manufacturing Growth Centre reported that in less than a week, over 1300 manufacturers had registered their capability to supply essential goods and services to fight COVID-19.

It is plain now that manufacturing matters to Australia, not only for economic self-sufficiency and security, but for the contribution it makes to the resilience and sustainability of the wider economy. 

It is time for a new deal for Australia’s manufacturing policy, one that reflects this renewed recognition of the value of manufacturing and moves beyond the general inaction and disinterest of governments over recent decades.

But first, a cautionary note. A new deal manufacturing policy for Australia should not be a return to past glory days, nor should it be a plan for some idealized future of a manufacturing resurgence. Rather, the new deal must be framed by realism and pragmatism, an innovation in policy that builds on Australian manufacturing’s competitive strengths and redresses its weaknesses and limitations.

Past bail-outs, protection or favoured treatment for manufacturing, based on a diagnosis of Australian manufacturing in terminal decline, should not feature in this new deal. Rather, new manufacturing policy should be built on strength. Manufacturing is valued as an irreplaceable sector of the Australian economy, but one which warrants strategic support to adapt, evolve and grow.

The task is to bolster Australian manufacturing so it can continue and expand its contribution to Australia’s success as a small, open, free market economy, even in times of crisis and volatility.

This means action at the level of the manufacturing firm and its workforce.

The key mission of such manufacturing support is to make it feasible for Australian manufacturers to compete on value, not price, both globally and at home.

This requires fostering the following abilities in manufacturing firms: 

  • methods of experimenting with innovative business models;
  • access to and absorption of new knowledge, both from customers and researchers;
  • organizational learning and capability-building;
  • closeness to customers;
  • matching new opportunities with capabilities and skills;
  • the right people empowered and well-managed;
  • a sound radar for new trends, technologies and opportunities;
  • processes for managing risks;
  • simultaneously managing current business activities, selectively abandoning past activities and exploring ideas for new activities;
  • a mindset of willingness to collaborate with other businesses, higher education bodies, government, and other stakeholders.

An opinion piece by Professor Roy Green for the Australian Manufacturing Forum summarises the case for a new deal for Australian manufacturing policy and identifies five important building blocks, including better co-ordination of a national industrial strategy, industry clustering and procurement initiatives. 

Endorsing and drilling down into Roy Green’s commentary, it is useful to define the following priorities for a new deal manufacturing policy.

A fresh approach to Australian manufacturing policy should be driven by the twin imperatives of creating demand and opportunities in lucrative markets, and building the necessary capabilities and skills in a critical mass of Australian manufacturers (not just high tech, high growth firms) to respond imaginatively to this demand.

This banner of ‘demand’ and ‘capability’ can be translated into practical programs such as:

  • Voucher schemes which provide an incentive and make it easier for manufacturing businesses to seek external help with acquiring knowledge and solving business problems or undertaking change transformation projects. 
  • Procurement programs which are designed to provide manufacturers, often small and medium sized enterprises, with a lead customer to challenge them to find solutions and pull through new knowledge and skills that they can then take to the wider marketplace. 
  • Industry or Technology Roadmap projects, which are effectively industry clustering initiatives either for a sector or geographic region, where manufacturing firms and other related interests are brought together to explore the potential of ‘smart specialisation’ initiatives. 
  • Shared Learning Programs, often peer learning involving practical and case-based presentations by other manufacturing firms and their leaders, e.g. advanced manufacturing technologies for business performance; business model innovation; design thinking.
  • Manufacturing Leadership and Mentoring programs that are industry-led and involve the leadership teams of manufacturing enterprises participating in structured networking and mentoring sessions with credible and experienced manufacturing business leaders.
  • Innovation or Maker Spaces provide opportunities for manufacturers to experiment with business innovations in a ‘safe’ space without risking all the resources of the enterprise. Such spaces can be used to retrain workers, trial business ideas, test out business applications of new technologies, and create manufactured products and prototypes.

The current crisis of a global pandemic shows that economic and social goals cannot be separated, action to safeguard both lives and livelihoods are presenting a complex and community-wide challenge. Australia’s manufacturing industry can be part of the solution. A new deal for manufacturing policy in Australia is a significant first step.

REFERENCES:

This is an extract of an article posted by Narelle Kennedy, Managing Director, The Kennedy Company on the Australian Manufacturing Forum LinkedIn group, 20th April 2020, see www.aumanufacturing.com.au

Roy Green, A New Deal for Manufacturing—Five Building Blocks for a New Plan, 14th April 2020, go to https://www.aumanufacturing.com.au/a-new-deal-for-manufacturing-five-building-blocks-for-a-new-plan-by-roy-green

COVID-19 AND THE SOCIAL CONTRACT

The COVID-19 crisis highlights that social and economic policy are, in fact, two sides of the same coin. 

Lives and livelihoods are intertwined – action on one impacts on the other. Efforts to stem the health and transmission effects of the coronavirus cause a massive and sudden reduction in economic activity. This, in turn, means income and job losses and business shut-downs, many likely to be permanent.

These problems are complex and communal. 

They are not solved by separating social from economic issues. They are not solved by more intense competition, nor by government fiat or even, generous rescue packages. We need policy and regulatory innovation and uncommon collaboration across governments and between business, government, the health system, and community interest groups. 

This global crisis has demanded collective sacrifice, which in recovery, requires a social contract that similarly benefits everyone. All must mobilise to address this common purpose, and ensure that all sections of the community get a ‘fair go’.

For business, this means heightened societal expectations. There will be more scrutiny of the social relevance and contributions of business enterprises for the common good. What businesses do and say in responding to the impacts of the virus will be remembered by consumers and the general public.

Businesses must give greater weight to the non-market aspects of their strategy, making these at least as prominent as action to secure profits post-crisis.

This is the new reality of social purpose in business and of the quest for shared social and economic value.

REFERENCES:

Lesser and M. Reeves, Boston Consulting Group, Leading Out of Adversity, BCG Perspectives, 9th April 2020.

Institute of Public Administration Australia, NSW, IGNITE newsletter, COVID-19 and the frailty of the social contract, reprinted from Financial Times, accessed on 16th April 2020.

REDEFINING CAPITALISM – MORE THAN MONEY

We may be witnessing a turning point in history. The shift in business towards fulfilling a social purpose profitably – not just making money, but simultaneously producing social and environmental benefits.

If this is a lasting change where the corporate purposes of businesses are expected to be aligned with their social purposes, then we are entering a new era of capitalism.

The key features of this change are:

    • The rise of business enterprises that operate to secure the public good and societal benefits, as well as advancing their private commercial interests. This social purpose is not altruistic, but a source of competitive advantage and productivity improvement.
    • Increasing awareness that it makes good business sense for corporations to serve the needs of a wider group of stakeholders, rather than maximizing profits for shareholders alone. This is being recognised in corporate regulatory regimes in some jurisdictions.
    • The power to drive performance and productivity does not reside exclusively within the boundaries of the firm, its owners and managers. Rather, business success can be determined by the strength and breadth of the firm’s collaborations and relationships with external interests, e.g., researchers, competitors, supply chains, regulators.
    • Similarly, there are increasing calls to widen the measures of business success to recognize the significant contribution of intangible assets. Currently, while financial and material capital is measured, the role of human, social, intellectual and natural capital is under-valued. There is a push to redress this.

Greater prominence is being given to an authentic, positive business contribution to society and to the importance of partnerships and reciprocity between business and the community. This is being driven by the cumulative effects of a number of factors, as follows.

    • Greater stress on business’ social licence to operate, given community mistrust and incidences of corporate misconduct.
    • The mainstream take-up of internationally-recognised UN Sustainable Development Goals embedding practical action by firms on environmental, social and governance standards.
    • Competition for the attraction and retention of talent and being ‘an employer of choice’, especially in the eyes of younger generations who are tomorrow’s leaders.
    • The focus on higher purpose and community collaboration motivates greater discretionary effort and fosters new styles of business leadership required to manage open source innovative business models for transformation and growth of businesses.
    • Disillusionment with the distribution of the benefits of globalization, questioning the orthodoxy that attraction of investment in knowledge-intensive industries and skilled workers mainly in metropolitan areas and innovation hubs will ‘trickle down’ to declining regions, industries and communities and their low-paid, insecure workforces. There is a stark contrast between the advantaged and those left behind which jeopardises social cohesion.

Research and writings by two eminent Oxford University academics, Professor Colin Mayer and Professor Paul Collier, provide a substantial analysis of the forces of change impacting on today’s corporations and on the future of capitalism. Professor Mayer, in particular, rethinks the concept of the corporation and social purpose, and the implications for business strategy and for public policy.

The Australian Institute of Company Directors (AICD) quotes a presentation by Colin Mayer where he succinctly summarises this new understanding of the corporation and its purpose:

Business performance “is not only about producing profits, but about generating profitable solutions for the problems of society and the planet.” 

AICD and other analysis from the Boston Consulting Group distinguishes between a corporation’s mission as “the what”, vision as “the where to” and purpose as “the why”.  Purpose sets out a corporation’s fundamental reason for being. It is founded on the answers to two basic questions— who are we (what are our distinctive and authentic strengths) and what need do we fulfill in society.

A clear statement of purpose guides the evolution and execution of strategy and provides guardrails for decision-making. That is, a clear purpose helps businesses to navigate what to do and not do and where to best allocate resources.

Debate about the changing role of business in society, and hence the redefining of capitalism, is gaining ground. The discussions now seem to be about how, not whether, businesses can operate to maximize shared social and economic value.

REFERENCES

Paul Collier and Colin Mayer, The future of the corporation, economy and society, presentation at Cardiff University, YouTube, 14th May 2019.

Paul Collier, The Future of Capitalism, Penguin Press, July 2019.

Colin Mayer, The future of the corporation: Towards humane business, Journal of the British Academy, volume 6, supplementary issue 1, pp 17-47, posted 19th December 2018.

Domini Stuart, More Than Money, Company Director magazine, AICD, February 2020, www.aicd.com.au

Boston Consulting Group, How to Harness the Power of Purpose, BCG Perspectives, February 2020.

John Tomaney and Andy Pike, The economics of belonging: the hidden costs behind large cities, Prospect Magazine, 19th September 2019, www.prospectmagazine.co.uk

Stephen Bartholomeusz, Business leaders see the light of ‘moral capitalism’ at Davos, Sydney Morning Herald, 23rd January 2020.

24th March 2020

COMPANIES WITH PURPOSE; JOBS WITH MEANING

Companies with purpose, jobs with meaning – these twin catch cries are increasingly being advocated as an urgent necessary change for future business success and longevity.

Such calls for shared or blended social and economic value are seen as vital for the ability of enterprises to compete successfully by growing their skills, retaining talented people and adding value to their own commercial results, the economy and society simultaneously.

Jim Collins, author, researcher and adviser on high performance companies and leadership for over 25 years summarised this characteristic of great, visionary, long-standing firms as embracing “both extremes across a number of dimensions at the same time – purpose and profit, continuity and change,….discipline and creativity,….empirical analysis and decisive action….

Yes, they pursue profits. And, yes, they pursue broader, more meaningful ideals….They do both. ….Profit is like oxygen, food, water and blood for the body; they are not the point of life, but without them, there is no life.”

The importance of creating companies with purpose and jobs with meaning has been reinforced at a time when business models are being challenged by digital and artificial intelligence technologies, a greater focus on higher environmental, social and governance standards by business and increased shareholder and consumer activism, especially in light of corporate failures and misconduct.

How to inspire workers and create purpose-driven organisations is featuring more prominently in academic research and in social and mainstream media. 

Robert E. Quinn and Anjan V. Thakor, writing for the Harvard Business Review, noted that addressing the problem of disengaged and underperforming employees by tighter oversight and management control is likely to be ineffective. Connecting them with a sense of higher purpose in their jobs is key. Higher purpose is not just a platitude or mission statement, nor is it just about economic exchanges. 

Quinn and Thakor define higher purpose as “it explains how the people involved with an organisation are making a difference, gives them a sense of meaning, and draws their support.” Thus, leaders can inspire employees to bring more energy and creativity to their jobs, to be more engaged, and to take risks, learn and raise their game.

For example, a call centre for a veteran’s organisation was not driven by numbers of calls handled or waiting times, but by their promise to provide extraordinary service to people who had done the same for their country.

But, business pursuit of shared social and economic value is not without its critics. Some urge business leaders to literally “mind their own business” and keep out of commentary on wider social issues, which they argue concern only elite minorities, and are not of interest to the average person. 

Notwithstanding this, many of the world’s CEOs are exercising their minds about how their businesses can serve the needs of shareholders, at the same time as benefiting a wide variety of stakeholders and the community at large.

  • Ginni Rometty, President, Chair and CEO of IBM worldwide, is an advocate of leveraging the power of working at the intersection of seemingly contradictory objectives, namely purpose and profit, human and artificial intelligence, analogue and digital, incumbency and agility. She comments that growth and comfort never co-exist, that you can’t progress without risk. 

IBM has concluded that investment in education and continuous learning and hiring for diversity is where it can have most impact. Securing a deep pool of skills for an uncertain future benefits both IBM and the broader economy and community, especially IBM’s technology pathway programs for disadvantaged areas and ‘returnships’ for women, adoptive parents and others to remain in or return to the workforce.

  • Another case is BHP. With its origins in Australia over a century ago, BHP is the world’s largest mining company and the largest company on the ASX. BHP has been a prominent voice for bolder action on climate change and emissions reduction, including a price on carbon. 

BHP’s incoming CEO, Mike Henry, is widely regarded as a safe pair of hands, particularly for his operational and commercial acumen. He has also been at the heart of BHP’s mobilisation program on climate change and advancing social, environmental and sustainability goals for itself and for its coal and iron ore customers. For BHP, after a period of consolidation and cleaning up its asset base, its push now for greater productivity and unlocking more value from the company is matched by persistent action on its environmental and social concerns. 

These social and environmental initiatives are integral to and integrated with BHP’s business strategy. BHP’s approach carries weight beyond the company. Because it is so big, BHP’s actions affect the Australian economy, together with its thousands of direct shareholders and the many more individuals with an interest in BHP through their superannuation funds.

  • Then there is Mike Cannon-Brookes, co-founder of the successful Australian tech start-up, Atlassian. He is using his wealth and prominence to lead and promote business efforts to capture new opportunities and solve “wicked problems” that affect both business and the community. An outspoken critic of government inaction, Cannon-Brookes, like many of his generation, sees no contradiction between doing good business and doing business ‘for good’.

In a latest initiative, Mike Cannon-Brookes has partnered with the Federal Government’s Clean Energy Finance Corporation to back a new $30 million venture capital fund for start-ups in the agri-food sector, seeking to boost farm and agricultural supply chain efficiency and reduce waste.

These examples illustrate how efforts at shared economic and social value are playing out in business today. There is no single recipe, but it is a starting point for business enterprises to define for themselves what is needed to be a company with purpose providing jobs with meaning.

REFERENCES:

Jim Collins, ‘Concepts’, see https://www.jimcollins.com/concepts:html

Robert E. Quinn and Anjan V. Thakor, ‘Creating a Purpose-Driven Organisation’, Harvard Business Review, July-August 2018.

Dan Cable, ‘Helping Your Team Feel the Purpose in Their Work’, see https://hbr.org/2019/10/ , October 22nd 2019.

Aimee Chanthadavong, ‘IBM Boss Ginni Rometty urges businesses to widen the hiring pool to fill skills gap’, ZD Net, 12th November 2019.

Nick Toscano, ‘BHP new chief’s countdown to challenges’, Sydney Morning Herald, November 16th-17th 2019.

John McDuling, ‘Billionaire and green bank commit $16m to venture’, Sydney Morning Herald, November 18th 2019

 

 

THE NEXT WAVE OF CHANGE – LOOK LOCAL

Is it possible that local communities and their local government councils can turn around the low expectations and lack of faith many Australians have in our parliamentary and political institutions?

The call for a shift to localism to drive Australia’s future prosperity was a key message delivered by Terry Moran AC, former Secretary of the  Department of Prime Minister and Cabinet and eminent public policy analyst and adviser, to an event hosted by the Eidos Institute and the Queensland University of Technology on ‘Reshaping Culture, Reclaiming Trust’.

It is noteworthy because it is rare. Prescriptions for boosting national income and productivity typically feature centralised, arms-length ‘one size fits all’ policies which are spatially-neutral. 

Terry Moran’s contrary view is based on an analysis that public dissatisfaction with politics springs from the fracturing of communities, the lack of a compelling resonant mission for Australia’s future that people can believe in, and perceptions that government’s focus is on serving the interests of business and the well-off, not those of families and wage earners.

Drawing on social research and recent Government program reviews, Terry Moran contends that while Australians are “grumpy”, they do not want to blow up our democracy, rather they want to save it. 

They see the purpose of democracy as ensuring people, including the most vulnerable, are treated fairly and equally, and that our political system should solve problems that matter to improve people’s lives and prospects.

In particular, Terry Moran argued that the decades-old consensus on the benefits of economic openness and reform based on lean government, more privatisation and balanced budgets has run its course. 

This is exacerbated by the loss over recent years of deep-seated subject matter knowledge and expertise in the Public Service and by the narrow backgrounds of most political advisers.

In short, community sentiment has shifted against small government, outsourcing and the primacy of business. Australians, in fact, want stronger government delivering essential services that are affordable and effective. They also see the need for better regulation for fair treatment and for redress when things go wrong.

Structural reforms to rebuild public sector capacity and to change culture take time, so Terry Moran recommends finding new ways of working at the local level.

The public administration term used is “subsidiarity”. Subsidiarity is the principle of devolving decisions to the lowest practical level or closest to where they will have their effect, and the central authority has a subsidiary function.

The hallmarks of this local approach include:

  • Local control of decision-making on the use of funds from diverse Commonwealth sources.
  • ‘Joined-up’ service delivery, not separate services aimed only at single issues such as employment, health, income security, education and the like.
  • Promotion of flexible connections at the local level with networks, service providers, local government and opportunities.
  • Localising accountability with an active role for government with specialist local knowledge on the ground, and strengthening the expertise and capacity of local government.

The intention is to facilitate locally-connected, place-based approaches to the delivery of critical services to achieve better results. This will also serve to improve the experiences people have in dealing with government, and hence their engagement and social connections in their communities.

Looking local for the next wave of Australia’s prosperity promises not only more effective use of public money and sound community service delivery, but also an opportunity to boost social cohesion and a sense of belonging that comes with localism.

 

REFERENCES:

See Eidos Institute website at http://eidosinstitute.org/trust-and-culture

Rebecca Huntley, ‘Australia Fair. Listening to the Nation’, Quarterly Essay 73, March 2019

BASHFUL OR BOLD – CHOICES FOR LONG-TERM PROSPERITY

“Don’t bite off more than you can chew” is advice often given. Similarly, businesses are counselled to “stick to their knitting”, that is, concentrate on what they are good at either through natural endowments or because of first mover advantage.

It is often said that the best thing governments can do for the economy is to get out of the way. The argument is that the legitimate role of government is a small one to set the background conditions which allow the private sector to invest and get on with the job of wealth creation.

Now, is there a shift in this conventional wisdom?

Even if controversial, action is being canvassed to change investment decisions in the energy market. There is greater willingness to stimulate economies in the face of global disruptions. We see direct intervention to increase the supply of affordable housing, and subsidies to declining industries and vulnerable regions against business closures and job losses.

Do we need to be more active and ambitious to secure a prosperous future? Being satisfied with minimum operations to make a living or to keep the national economy ticking over may not be enough to succeed in times of fast-paced global technological and social change.

Economist and author of ‘The Entrepreneurial State’, Professor Mariana Mazzucato of University College London, puts the case for activism.

Professor Mazzucato and her research colleagues argue that creating both economic and social value requires innovation-led, sustainable and inclusive growth. Such growth depends on both public and private sector actors investing strategically in solving large-scale problems and big challenges, setting missions that inspire and make a difference and in the process, that create new markets, industries and skills that underpin long-term prosperity.

Collaboration or co-creation of value is the key. Professor Mazzucato is scathing about “the fabricated image of a lazy State and a dynamic private sector”, similarly of “the one-sided myth of the lone entrepreneur”. She rejects the conventional view that governments should only intervene to set the rules for a level playing field and to fix market failure.

Rather, Professor Mazzucato sees governments as agents of transformation. A significant purpose is to create and shape markets; to be a lead investor in innovation and research and funders of experimentation for multiple plausible solutions to big societal challenges; to open up new opportunities and to create a network of willing agents keen to seize these opportunities in mutually-beneficial public-private partnerships. In this way, governments can impact not only on the rate of growth, but on its strategic direction.

Despite popular perceptions to the contrary, the success of activist governments is already in evidence. Mazzucato cites the crucial role of public funding, procurement policies and collaboration initiatives in all recent technological revolutions. Information technology breakthroughs including the internet, the iPhone, touchscreen technology, and even SIRI were kick-started by public funds to research or grants and loans to entrepreneurs. A similar story applies for energy and space technologies and health and medical innovations. This investment lead by government encourages private investment to follow and sets the pathway for success by entrepreneurs like Steve Jobs and Elon Musk.

Public sector leadership and funds can have the effect of ‘crowding in’, not crowding out, private sector investment which otherwise would have been unlikely, given uncertain markets and high levels of risk.

The same debate is playing out in Australia with commentary on superannuation funds using their clout as investors to seek to transform Australian businesses and promote the concept of long-term value. Whether this is radical action or just responsible investor behaviour, the call is on for companies to think about how to sustain value over decades, focusing not only on financial outcomes, but equally on environmental, social and governance performance.

Deciding whether to be bold or bashful in striving for long-term prosperity is a vital and immediate choice for businesses, policy-makers and the community at large.

REFERENCES

Mariana Mazzucato, ‘The Entrepreneurial State. Debunking Public vs Private Sector Myths’, Penguin Random House, 2013.

Danny Davis, ‘Super power: why the future of Australian capitalism is now in Greg Combet’s hands’, The Conversation, 20th March 2019.

ORIGINAL AND UNCONVENTIONAL – LESSONS FOR BUSINESS, SOCIETY AND POLITICS

There is one striking insight common to the business quest for innovation, to solving intractable community problems and for turning around public disquiet with the poor state of current political debate. It is this:

Truly original and powerful ideas successfully put into action require unconventional thinkers and perspectives, unorthodox combinations of activities and partners, and an uncommon ability to anticipate and defuse forces hostile to these endeavours.

It is well-known that innovation is more than simply creativity, or new technologies, or commercialising inventions or discoveries. Innovations that transform and endure provide unexpected value to people—customers, users, or stakeholders—and pay more attention to the business model that delivers the benefit and profit from novel ideas, than to the creation of these ideas alone.

We need to understand more about how this kind of innovation works.

An illuminating summary of latest research from the independent business school IMD Professors Cyril Bouquet, Jean-Louis Barsoux and Michael Wade appears in a Harvard Business Review article titled ‘Bring Your Breakthrough Ideas to Life’.  This article makes the case for divergent thinking, the role of outsiders, pausing for reflection, imagining the unexpected and a focus on manoeuvring around the often tacit obstacles to original and unconventional offerings.

These researchers have distilled five practices to bring innovation to life:

1. Attention: look closely and through a fresh lens

Be aware of unconscious bias from your profession or training. Consider niche populations, observe and find ways of detecting unmet needs or unserved customers.

2. Perspective: step back to expand understanding

Reflect and learn. Avoid the rush to problem-solving, try “strategic procrastination”. Pause and make sense of weak signals.

3. Imagination: look for unexpected combinations

Challenge orthodoxy and envision what is not. Make connections between existing strengths and new opportunities. Bring in outsiders with different subject matter knowledge, e.g. the McLaren Formula 1 racing team applying their capabilities to emergency health care systems and air traffic control services.

4. Experimentation: test smarter to learn faster

Test to improve, rather than to prove concepts and prototypes. Be open to sharp changes in direction, be prepared not just to pivot but to reboot.

5. Navigation: manoeuvre to avoid being shot down

Read potentially hostile environments both inside and outside the organisation. Mobilise supporters, especially unconventional allies.

This research, while focused on business innovation, could equally apply to solving persistent and complex social and economic challenges in the community, and to lifting the tone and quality of politics and public debate which is often criticised as being overly partisan and adversarial.

Australia has a case study that demonstrates innovative action on difficult problems by tapping into ideas from diverse and unconventional perspectives and by taking practical steps to implement emerging solutions.

The Eidos Institute (Eidos), a not for profit social enterprise, is a network of partners seeking to change the way Australia’s important social and economic issues are solved, beyond simplistic answers and quick fixes. With the support of philanthropists, Eidos aims to be a place for informed, intelligent and collaborative problem-solving in the public interest.

Eidos operates by conducting a tested process of Challenges with systematic steps to clearly define the problem, stimulate wide-ranging engagement and actively seek out and test solutions. Eidos’ approach draws on the knowledge and expertise of diverse people and organisations that are rarely connected together, and finds a way to open up new ideas and action for solutions in a timely manner and with an unusual depth of evidence and insights.

Eidos models a better pathway for public policymaking and debate by being an incubator of fresh ideas for action and change on problems that matter.

So, the current research from the IMD professors on business innovation and the Eidos case example on better problem-solving reach the same conclusion.

The development and survival of truly original breakthrough ideas – whether in business, the community or politics – relies on exposure to diversity and the unorthodox, plus the adaptability to learn and to successfully turn ideas into action.

REFERENCES

Cyril Bouquet, Jean-Louis Barsoux and Michael Wade, Bring Your Breakthrough Ideas to Life, Harvard Business Review, November-December, 2018.

Narelle Kennedy serves as the Chair of the Eidos Institute Ltd – see website at www.eidos.org.au