Jan 30, 2023 | Governance, Small business, Strategy
The Federal Government committed to a $15 Billion National Reconstruction Fund’ in the October 2022 budget. While the 7 priority areas have been articulated, and there is a better than average website full of glossy photos and optimistic copy, we are waiting on the details.
Of the $15 billion, 8 billion has been earmarked as follows:
- Up to $3 billion for renewables and low emission technology. (I wonder how much the fossil fuel industry has earmarked in their political diaries for carbon capture projects that double as subsidies)
- $1.5 billion for medical manufacturing. Moderna has already committed to completing an mRNA manufacturing facility by the end of 2024 in partnership with the Feds, which must chew up a chunk of that money. They have also just tripled their price/dose in the US for a technology that greatly benefited from public funding during the pandemic. I wonder how the PBS will address that one?
- $1 billion for value adding resources. Presumably, this is to start to cover some previously fumbled bets on Lithium, and rare earth mining and processing. We have roughly 50% of the global production of Lithium, 25% of known global reserves, but capture virtually none of the value of the stuff as it goes into battery production.
- $1 billion for advanced manufacturing. The facility set up by Flinders University in Tonsley Park in SA in collaboration with several defence suppliers, and the Manufacturing Institute of Scotland, one of the UK’s successful Catapult programs has a run up start. It is envisaged that defence accredited SME’s will be able to access funding and mentoring from the arrangements. This seems to be a very sensible bet, hopefully just the start of many experiments, but I am not holding my breath.
- $500 million for agricultural value adding covering food, fibre, fisheries and forestry. For an industry sector where Australia has consistently demonstrated a capability to innovate as a response to the poor average quality of our soils, this seems parsimonious.
The balance remains unallocated, waiting on the detailed guidelines.
Where the demarcation between this fund, the funds allocated to the CRC program, which recently announced $148 million to 6 CRC’s (from a final submission list of 26) is a bit unclear to me. However, what is clear by the thrust of all the programs and press releases, is that the emphasis is on high tech, however you choose to define it. The normal, run of the mill SME manufacturer, those not engaged in technology, struggling to pay the bills, employ and train people in the absence of TAFE, keep up with bigger domestic competitors funded from overseas, are left out in the cold.
It is easy to draw the conclusion we do not need them, and individually we do not. However, collectively they are a huge part of the economy, employ hundreds of thousands, and generally pay their taxes when lucky enough to make a profit, without engaging the services of accountants in Bermuda.
Most innovation comes from SME’s. Not just the technical innovation that drives the defence, electronics, and space industries, but the more mundane process and customer innovation that drives an SME to see a market opportunity that others do not, or choose not to see. Such innovations are sometimes potentially disruptive to an established group of big players who would rather stomp on the SME than change the business or product model that had made them successful. Often, these incumbents are protected by so called ‘industry standards’ written by those same incumbents, further expanding their hold on the status quo.
For that latter group of SME’s, they have a problem evolving from the deindustrialisation of the Australian economy over the last 30 years. This is graphically illustrated by Australia’s drop to 91 from 60 just 20 years ago on the latest Harvard Economic Complexity model. This puts us just behind powerhouses like Kenya (90) Laos (89) Uganda (87), and a host of others we would dismiss as ‘third world’ economies.
This lowly position is compounded by the currently disrupted industrial supply chains: they cannot get their hands on the equipment necessary to move quickly to fill the market gap. This assumes they can access the equity and/or loan funds necessary for the commercialisation, and the skills to run the gear.
There are also various programs run by the states, for all sorts of reasons, chief amongst them seemingly the opportunity for a press release and flurry of PR activity before an election. Printers (those that remain in business) are expecting a mini-boom in NSW over the next few months.
Being one who has seen this problem from both sides, I do not underestimate the challenges. Nevertheless, effectively ignoring a very substantial group that provides many day to day goods and services, employing and training thousands, and generally making an irreplaceable contribution does not seem sensible.
It seems to me that the answer of the question in the headline is ‘you can’t’
Is there anything I have not seen that assists these enterprises?
Feel free to disagree, or indeed, provide advice I can pass on to those struggling enterprises.
Jan 26, 2023 | Change, Governance, Leadership
January 26 again, how quickly it comes around. It seems only yesterday I was scratching my brain to put together the 2022 missive without being too rude, utterly distracted by the stink coming from the then government and its tin ear. My distrust of the body politic has not gone away, but the new crowd in Canberra seem to be going about the job in a sensible and disciplined way. That allows me to be a bit broader in this commentary, and there will be no snarky comments on the looming election in NSW where the choice is, well, between a couple of groups, neither of which should be allowed anywhere near a decision-making apparatus more complex than a bathroom tap.
Industry policy
I wonder if we have any focus sufficiently long term to rate as an industry policy. We do have a plethora of disconnected grant programs that suit the political stance of whoever is in government today, but we do not have a national investment focus that is above petty politics. Maybe it is time, so where should we be heading? Following are a few pointers from your scribbler:
Quantum.
Australia is a leader in quantum research, conducted by a consortium of universities, led by the University of NSW. In some form, Quantum technology will change just about everything over the next 100 years, and we need to keep our lead, so the capex comes our way in time. Just for example, researchers at the University of Adelaide recently demonstrated the charging advantages of a Quantum battery leveraging the characteristics of Quantum entanglement. (I do not understand it either) The result is that theoretically a car battery can be recharged almost instantaneously, possibly while not even stopping, just driving through a recharge station. While I will certainly not see this in my lifetime, who would not like the lead in that technology?
Sovereign supply chains.
Covid brutally brought home the message that resilience in supply chains was a necessity, and Australia’s were inadequate in some critical areas. Some sensible steps have been taken to plug the obvious holes, but a wider awareness of the need to be self-sufficient in critical items needs to be high on the national agenda.
We must break our dependence on imported fuels. Having a ‘strategic reserve’ several weeks away by ship in the US would be laughable, if it were not so stupid.
There is significant investment going into the area around Whyalla SA, with its over-supply of sun and wind. A deepwater port at nearby Port Bonython is easily adapted for export of ammonia, there is a world-wide tender for construction of a Green Hydrogen facility to leverage that wind and sun, and the existing steelworks undergoing a massive upgrade to facilitate so called ‘green steel’. This will use the renewables powered ‘green hydrogen’ production and nearby quality Magnetite iron ore held in the Middleback ranges just to the North. The area is also connected to the east west rail line, ready-made logistics.
The result of this investment will be competitive sustainable steel manufacture for domestic use and export, power to the national grid via the multibillion dollar electricity interconnector to connect NSW and Victoria to deliver power to the east states.
The current argument about supply of gas in the eastern states defies logic. There is plenty of supply, it is just that the companies who have drilling rights, who pay no income tax, can sell the gas for more overseas than they can get for it domestically. The management of the facts in this immoral argument makes my blood boil. I have no objection to companies maximising their profits, but doing so at the expense of the communities that deliver those profits to them is immoral in the extreme, and they should be penalised, not slapped on the hand with a feather, as is happening. If nothing else, it is a clear demonstration of the power of money to get your own way via lobbying, and threats of massive politically damaging advertising, and to hell with transparency and truth
Critical minerals.
Australia is blessed with an abundance of the many minerals most of us have never heard of until recently, that have come to the fore in new technology, particularly renewables. We are at risk of, again, being the worlds quarry, while doing little of the second and third level processing ourselves , the stages where the value is really created and captured. If you just take Lithium for example, Australia currently supplies more than 50% of the worlds lithium, but 90% of that goes to China for processing. Australia does have deposits of the 17 rare earth minerals, but not a lot of them, and no processing. China has a stranglehold on both mining and production based on significant deposits, and a forward looking plan to leverage those assets. Like it or not, the world needs China more than China needs the world as technology advances.
Semiconductors.
The Australian Manufacturing forum in Linkedin did a terrific series during 2022 on the history and current shape of the semiconductor industry in Australia. We had one, in some areas leading the world, but the opportunity was fumbled badly, and we are now just another customer of overseas manufacturing. Given the importance of semi-conductors in just about every manufacturing application, not having a domestic manufacturing capability is a huge black mark. We have little hope of being a supplier at the leading edge of chip technology, but that does not rule us out of innovative use of more commonly available technology, the sort of innovation we used to do well.
Tax reform.
There is little argument that over the last 20 years, the rich have become richer, at the expense of the rest. This is not just an Australian challenge, it is global, and many are much further down the track than us.
Tax reform has two sides, domestic and international. Clearly the domestic tax regime is in a mess, the only debate about that statement is from those who have the most to lose by change. We are demanding more of our governments; at the same time, we are motivated at the ballot box by tax cuts. This is unsustainable, all we are doing is building a compounding hurdle for our grandchildren.
The second side is international. It is easy to get emotional about multinational corporations taking advantage of differing rules in jurisdictions, and paying no, or little tax as a result. The problem is what to do about an international problem that occurs in national boundaries. To date, all that has happened is that jurisdictions compete for business residency for tax purposes on low rates. The UK and several states in the US are amongst the worst offenders, along with the island nations typically known as tax havens.
In October 2019 136 countries signed up to an OECD plan to implement a global minimum tax rate of 15% starting in 2023, this year. Predictably, the implementation timeline is being pushed back by a combination of lobbying, and national jurisdictions simply not getting their shit together, but it is happening. Do not expect big results quickly, but any improvement is both worthwhile and will compound.
The recent decision to allow Santos to rape the Pilliga Forest around Narrabri for gas is just another example of how deeply the fossil fuel companies are embedded for their benefit in the Australian political system. I have no argument about the profit motive driving investment decisions. However, when the Cost of Goods Sold after the capital invested is effectively zero, at the long term expense of the community, and no tax is paid on profits I do have a problem. Businesses have a responsibility to make a contribution to the social and economic infrastructure of the community that owns the resources they use. In this case, Santos is avoiding that responsibility, as well as risking irreputable damage to fragile eco and hydro environments, so I do have a real problem on behalf of my grandchildren.
Science and research.
We underspend in aggregate, and what we do spend is uncoordinated across universities, states, research organisations and private investment. We have not yet figured out how to align the expenditure in such a way that there is a cumulative benefit from the whole investment. Australia is slipping downthe various lists of innovative countries is the outcome at least partly of this decline in the importance placed on science, and general research. As a marker, CSIRO in the 40 years I have been actively observing the breadth and depth of its activities, has shrunk to a shadow of its former self.
Education.
As with the point above, it seems we are falling behind what is required to at least maintain our relative position in the world, while standards are falling behind our major competitors. This is particularly evident in the work I do in advanced trade skills necessary to manufacture complex products. It is not a matter of pay, the trained personnel you need are simply not there, and with the difficulties of international movement, and the idiotic complexity and cost of the visa systems, we are missing opportunities. Perhaps it is for the better, as it removes from consideration the moral question of our right to plunder the educational outcomes from economies usually less able to educate their own people, and more in need of them than us.
Evolving over a long period has been a shift of education, from pre-school, to post tertiary, to advanced trade skills and back, from being a publicly funded foundation of a prosperous society, to a for profit industry. This is to my mind a hugely damaging erosion of a core principle of a successful economy.
Climate policy
The new government has, in my view, started well on climate change policy. After 20 years of unforgiveable hubris, we now have a direction. Not as specific or aggressive as many would like, but nevertheless a huge improvement from the previous lot, whose antidote to a thrashing at the ballot box is to move further to the right. How insensitive to public opinion, scientific reality, and just plain stupid must they be?
After several years of fires then floods, during the chaos of the pandemic, we have come out of it OK, unless you are one of those directly affected, in which case, you have been whacked. A mate has a house near Lismore, well above previously seen flood levels. He will no longer be able to insure it, so the future of Lismore must be in question, along with a number of other areas in NSW. However, we do need to remember that many areas in the state are called ‘flood plains’ for a reason, and stop development in those areas, rather than allowing short-term focussed development to build, only to find an unwanted swimming pool in the kitchen at some point in the future. This is a political web of influence that goes to the heart of the ingrained ‘gravitational’ pull of politics in this country.
Technology commercialisation
Commercialisation of technology is accelerating at an unprecedented rate. With that comes both benefits and costs. It seems the benefits will be accrued by a few, while the costs spread widely, socialised if you like. This can only accelerate the rate at which the wealth of the community migrates to the top and bottom, at the expense of the middle. The equitable distribution of the benefits of technology is a question tangled up in our education, infrastructure, and social priorities, and presents a Gordian problem to legislators who would much rather kick the can down the street than try untangling it. This is a short-term strategy that will haunt us in the long term.
Cyber security
Cyber security has been an emerging issue since the birth of the net in 1993, when Tim Berners-Lee released the first version of HTML. The breeches of Optus and Medibank last year brought it into public focus in a way that it had not been before. On November 30 last year ChatGPT was released. Like many, I have played with this and been blown away by the capabilities, and when added to the graphic capabilities of Dall-E2 released by the same research group, it is I believe an inflection point in our relationships with automated creative and intellectual work. Suddenly digital tools can create value, rather than just regurgitating what they have been given. We have yet to see the uses that crims will find for the emerging technologies and capabilities. At the very least, ChatGPT will correct the scam give-away spelling and grammatical errors that are often present in mass scamming emails and messages.
Fit for purpose
In ‘Venture Capital land’ there is a core idea that there must be a product/market fit for success.
Product/market fit in a commercial context assumes there is a strong demand for the product being considered, and assumes the ‘Purpose’ has been defined.
It seems the purpose of politics has devolved to a fight every three years for the trappings of power and incumbency, and while I cannot get into the heads of those writing the constitution, I am pretty sure that was not their intention. Rather, they intended for there to be a system that governed behaviour and the allocation of resources for the best long term interest of the country.
Given the constitution was drafted over the 7 years between 1891 and 1898, and was fit for purpose at that time, it would be a brave person to suggest that the environment in which we live has not changed dramatically over the following 125 years, and perhaps the degree of ‘fit for purpose’ has been depreciated substantially.
The coming referendum ‘debate’ on a ‘voice to parliament’ will test that proposition. The political heat is being wound up currently. The PM has been roundly criticised for a combative performance on Sydney radio 2GB, where the host sought more and more detail on the manner of implementation of the voice to parliament, and held the view that in its absence, the vote should be ‘No’.
Common sense says that if the detail is included in the referendum, then passed, it becomes part of the constitution, changeable only with another referendum. To address the complex challenges we face with the equality of first nations people, the notion that we cannot experiment to progressively improve the social and economic position they hold is absurd. We need to acknowledge their right to a voice in the constitution, then leave it to parliament over time to evolve the best ways of delivering on that constitutional responsibility, and hold parliamentarians accountable.
SME funding.
While we acknowledge that SME’s are the backbone of the economy, employing and training thousands, and spawning innovation, sourcing funding if you are an SME has never been harder.
Borrowing is difficult, as institutions require security which many SME’s and almost all start-ups do not have. Finding equity funding is a full time job, one that cannot easily be done while building and scalinga successful SME. The grant programs that are around can be a lifesaver, but the time and effort necessary to secure one is significant, and the chances of missing out for reasons that are often opaque is high. Even when you are successful, there are often limitations that are onerous. Rarely can grant funds be used for Capex which is often the tipping point for success, variations to the plan funded can be difficult to have agreed as is required, and in most instances, the grant funds must be matched, and then the funds are counted as revenue for tax purposes. Somehow, we have to do better.
VAD laws
All states now have Voluntary Assisted Dying laws on their books, although the details do differ.
These VAD laws have had a difficult road to walk to confirmation, cutting across as they do a range of deeply ingrained practices. Our life expectancy has gone up substantially in the last 50 years, driven by a better understanding of what is healthy, and medical science. Sometimes, a life is driven beyond what can be deemed as worth living, the hugely emotional challenge being, who is doing the deeming.
Our collective retirement funds.
Over the year the stock market fell 5%, affecting the retirement incomes of most Australians. Our compulsory super system relies on the contributions we make through our working lives to fund retirement, and there are not enough of our children coming through to do it for us. The demographic changes are slow, long term, and utterly inconsistent with our short election cycles, and temptation to spend money as it arrives in our pockets. The compulsory nature of the super regime, for all its flaws, is saving us from ourselves.
Our global impact.
We remain somewhat insulated from world affairs. The war in Ukraine, fuelling economic stagnation in most countries as fuel prices rise, the lunacy of Brexit, and the revolving British political door that makes ours look stable and sensible, the pressure being generated by China’s political re-engagement with the world after spending 25 years pulling hundreds of millions out of poverty, an extraordinary feat. We feel the winds of these changes, but are not as directly driven by them as most OECD countries.
Despite the problems we have, the economy is strong, amongst the best around on the back of the exports of iron and coal to China. When, rather than if, the China bubble bursts, we will be deeply in the poo if we do nothing, which makes the thawing of relations with China that the new government has undertaken so crucial.
On a brighter note
I continue to be encouraged by the reports of innovative manufacturing across many sectors that seems to be popping up, despite the best efforts of the status quo to keep them from happening.
On January 1, we had another annual windfall as the copyright on many major works came to an end. Copyright in most developed countries is conferred on the creator at the point of creation, and lasts for the life of the creator plus 70 years. We can reasonably expect a host of adaptations and newly ‘freed’ works to appear this year.
In addition, to the joy of the few supporters left, the Wallabies performance shortfall over the past few years has been fixed. We brought back a coach we fired 17 years ago. For an old Rugby tragic like me, despite my cynical response to the phoenix like re-appearance of Eddie Jones, he will at the very least liven up the back page of the dailies.
Finally I ask you, where would you rather be?
Living with the political chaos and divisions of the US, in Europe, where the economies have been going sideways for years, despite being the centre of culture and the ‘good life’, England, a basket case hung by the balls in a basket of their own making, China, where any sort of criticism, whoever you are, (Jack Ma, are you listening) can land you in quicksand, and vulnerable to the tsunami of Covid about to hit them?
I would pick to be exactly where I am, despite the shortcomings.
Go and put another chop on the barbie, open a coldie, hug your loved ones and get ready to do it all again in 2023.
Have a great day.
Header photo credit: ABC.
Nov 21, 2022 | Communication, Governance, Strategy
The purpose of a brief is not to be brief.
A brief, for whatever purpose it is written should be a catalyst for creative thinking, examination of options, and father of a robust solution. This applies equally to an engineering brief as it does to an advertising brief, research brief, or brief given to a head-hunter searching for a new CEO.
Failure to write a good brief will lead to a sub-optimal outcome, or at best, considerable delay and false starts that consumes resources unnecessarily.
A comprehensive, well thought out brief is not a guarantee of success, but it certainly shortens the odds.
Following is a framework for the next time you have to write a brief, for whatever purpose.
Let strategy drive the brief.
Strategy should be the primary driver of every decision taken in an enterprise, down to the daily tactical decisions. It provides the framework for the choices that need to be made. Most briefs I have seen are disconnected from strategy. Sometimes this is just poor leadership, in others it reflects the lack of any strategy, which is evidence of poor management. In the absence of a clear strategy, the choices made as an outcome of a brief of any sort may as well have been taken in a vacuum.
Define the need.
A brief will be in response to some need to be addressed. It may be a competitive challenge, it may be seeking a solution for an internal problem, or it may be seeking information, or be focussed on an opportunity of some sort.
Ensuring the need the brief is seeking to address is clearly articulated is vital to the construction of an actionable brief to experts that will enable them to bring appropriate expertise to bear to deliver the planned outcome.
Define the objectives.
As noted above, the generation of a brief presupposes there is an investment of some sort being contemplated. No investment should be made in the absence of explicitly stated outcomes the investment is expected to deliver. These are usually stated as objectives.
The best objectives are always those against which performance can be measured, SMART objectives. In some circumstances, such as an advertising brief, such clarity is challenging to achieve. It requires deep thought to indentify the drivers of the outcome, the lead indicators, that can be reliably measured. However, the effort will deliver returns, whatever the arena for the brief.
Assemble all relevant facts and informed analysis.
It should go without saying, but no brief is complete unless there is a comprehensive collection and analysis of all facts, and information relevant to the choices that will be made. Objectivity is a blessing. Sometimes it is hard to know where to draw the line, particularly when constructing a creative brief. Average will rarely deliver results, and continuation of the status quo while often ‘safe’ in a corporate environment, is bound to deliver ordinary results at best. There is a warning here for marketers, who will take this to be a licence to change advertising execution. Marketers are often way too close to their advertising and get tired of it before the average participant in the market has seen the message sufficiently to absorb and act on it.
Execute with experts.
A great brief in the hands of the summer intern will not usually deliver a useful result. No matter how great the brief, expertise in coming to grips with the nuances and options presented, requires wisdom that only comes from experience.
Simplicity.
While this post opened with the observation that the purpose of a brief was not to be brief, it is also the case that the simpler, more concise, more focused on the drivers of success the brief is, the better. Simplicity will increase the ability of those responding to make the choices they need to in order to deliver the outcomes being sought. Steve Jobs said it best when he said: ‘Simplicity is the ultimate sophistication’ about 50 years after Einstein said: ‘everything should be made as simple as possible, but not simpler’
Note to the unwary. When what should be a ‘Brief’ is called a ‘Tender’ it is a sure sign that price is the dominating consideration, and you are not the only one being invited to the party.
Header cartoon credit: Tom Gauld in ‘New Scientist’
Nov 9, 2022 | Change, Governance
November 2022 is the 33rd birthday of what may be the most important month in recent history, November 1989.
A momentous month.
It saw the fall of the Berlin wall, the beginning of the end of communism and the soviet empire. We met that occasion with such hope, optimism, and a sense of relief that the immediate problems facing a Germany that needed a second reconstruction were pasted over. Slowly the optimism for the future of the now ‘free’ countries that broke away from the USSR has eroded, as the kleptocrats took power, and the spoils of previously state owned enterprises fell into a few select hands. It is the determination to extend the power and hegemony of that group that has led to the war in Ukraine.
The second momentous event that month was the completion by Tim Berners-Lee of the genetics of the web. Hypertext Markup Language (HTML), the formatting language of the web, and its siblings, URL, the unique web address and HTTP, the process of retrieving linked material from across the web.
These two events generated the drivers of the geopolitical face of the world, the way it communicates, does business, and governs itself. In short, they shaped the world we currently live in.
The commonality between these two momentous events is the simple words ‘democratic capitalism’
The economic battle between states, capitalism winning out over communism, and democracy winning over despotism. Suddenly we had freely available all the information and resulting transparency we could possibly need to live in some semblance of harmony.
Both have been proven to be false gods. The harmony and balance we sought has been comprehensively thrown out.
The power of the web has been weaponised and turned on us in ways inconceivable 33 years ago, and we have yet to develop an antidote. While this has been happening, the kleptocrates have exercised a level of influence and control the Stasi could only dream about, and led us into another war in Europe. As Einstein noted: The significant problems we have cannot be solved at the same level of thinking with which we created them.
Sadly, this is what we continue to do.
Photo credit. The header photo is of a nuclear explosion, one of which France set off on Mururoa Atoll in November 1989. Another event in a long list of what made that month a pivotal point in modern history.
