Dec 18, 2024 | Change, Innovation, Strategy
In a world where technological generations now live and die within months, can another government review truly capture the lightning-fast pace of innovation? Two years after ChatGPT’s launch transformed our understanding of artificial intelligence, we’re facing a critical question: Are our innovation assessment methods becoming obsolete before the ink on the report has dried?
Australia’s innovation landscape tells a stark story. We’ve plummeted from 55th to 102nd in the Harvard Economic Complexity Index, a precipitous decline that demands more than traditional bureaucratic soul-searching. The challenge isn’t just about understanding our innovation ecosystem—it’s about reimagining how we nurture and accelerate technological breakthroughs in an era of unprecedented change.
Consider the breathtaking velocity of recent technological transformations. The journey from the ENIAC computer in 1945 to today’s AI-driven technologies has compressed decades of innovation into mere years. When I first encountered computing via punch cards in the early ’70s, the idea of conversational AI or neural interfaces would have seemed like pure science fiction. Now, these technologies are not just possible—they’re rapidly becoming commonplace.
The transformer mechanism described by Google researchers in 2017 didn’t just advance machine learning—it rewrote the entire rulebook of technological innovation. ChatGPT and its successors have demonstrated how quickly breakthrough technologies can move from theoretical concept to global phenomenon. The time between laboratory conception and widespread adoption is now measured in months, not decades.
Our current innovation review approach risks becoming a retrospective exercise—an autopsy of technological opportunities already lost. By the time a high-powered government board completes its comprehensive examination of the R&D ecosystem, the technological landscape will have shifted. We need a more dynamic, real-time approach to understanding and supporting innovation.
What might this look like? Instead of traditional lengthy reviews, we need:
– Rapid, continuous assessment mechanisms that can track innovation in near-real-time
– Flexible funding models that can quickly pivot to emerging technological frontiers
– Direct channels between researchers, entrepreneurs, and government decision-makers
– International collaboration frameworks that transcend bureaucratic boundaries
Countries like Israel and Singapore offer compelling alternative models. They’ve created innovation ecosystems that are less about rigid planning and more about creating adaptive, responsive environments where breakthrough ideas can flourish.
The stakes are too high for business-as-usual. Our global competitiveness depends on our ability to not just track innovation, but to actively cultivate an environment where breakthrough ideas can emerge and scale at unprecedented speeds.
Another government review won’t solve our innovation challenges. What we need is a fundamental reimagining of how we support, measure, and accelerate technological progress.
The future of Australian innovation isn’t waiting for a committee to finish its report. It’s happening right now—and we need to be ready to catch it.
Dec 2, 2024 | Branding, Innovation, Strategy
A phenomenon in my local area, Sydney’s inner west.
Suddenly, there are electric cars everywhere from manufacturers I had not heard of a couple of years ago. That is in addition to the venerable brands, Volvo, MG, Lotus, and others now owned by Chinese investors, leveraging brand heritage.
China now is manufacturing very good EV cars at a fraction of the cost of traditional manufacturers. They have established technically sophisticated and innovative supply chains and are discovering and leveraging the benefits of technology. The US, Japan and Korea can only wish for the cost base the Chinese now have across their industry. Chinese manufactured EV’s now control 40% of the biggest market in the world, China.
Central planning pointed Chinese industry towards EV’s, and assisted development, while western manufacturers relied on lobbying and subsidies to maintain the dominance of petrol and diesel. The only real innovation over the last decade they have undertaken has been in racing, particularly F1. The logic expressed was that the innovation would ‘trickle down’ into our everyday cars.
It didn’t work so well with economics, but that lesson has been ignored.
Tesla may have started the ball rolling, but China has given it momentum, and now delivers 60% of global EV registrations, and accelerating.
The acceleration of global EV market penetration, perhaps hobbled only by the shortage of recharging infrastructure, and the time necessary to recharge has come at an astounding pace.
It is a classic case of don’t just change the rules, change the game.
Steve Jobs did the same thing with the iPod, then the iPhone.
The header is by DALL-E, and highlighted the further takeover of the auto industry by using Pirelli, now Chinese owned, on the track hoarding.
When you need to think differently about your strategy, revise your thinking, and figure out how to compete in the future, call someone who has seen it before.
E&OE. This analysis of the comparative costs of EV manufacturing came out a week after publishing the post. It delivers numbers that highlight the problem faced by western legacy car-makers. https://www.linkedin.com/posts/juergenstackmann_544-minutes-worth-watching-ed-conway-ugcPost-7271897558170456065-ETSC?utm_source=share&utm_medium=member_desktop
Nov 18, 2024 | Governance, Innovation, Leadership, Strategy
The latest economic complexity rankings put out by Harvard were recently released. Australia dropped from 93 in the world to 102. One place ahead of Yemen, one behind that manufacturing innovator, Senegal.
I had missed the report until an article in the auManufacturing LinkedIn group brought it to my attention.
The best that can be said about Australia’s drop from 93 in the previous ranking to 102 in this current ranking is that we have made possible the performance of the 101 countries that are above us.
This includes such stunners as Bangladesh at 100, Honduras at 97, Uganda at 96, and the home of Voodoo, ranking as one of the world’s poorest countries, Benin at 99.
To be fair, the ranking methodology struggles to adequately quantify the benefits accrued by services in its calculations. This compromises the ranking of Australia which has an advanced but hard to count services sector, while exporting mostly commodities, which is easy to count.
Nevertheless, while politicians are ensuring the public debate (aka playground squabbles) is around irrelevancies like the chairman’s lounge, long term challenges in education, aged care, housing, equality of opportunity, and economy wide productivity go uncontested.
Take education for instance.
This is a very substantial sector generating billions in economic activity by educating the children of our Asian neighbours. Many see it as a road to residence, which will benefit our economy doubly, as they have paid for their own education. However, many return home, enabling the ‘connections’ highlighted in the report as critical to complexity to be made. Meanwhile, for our own kids, we have continued to make getting an education more expensive to the point where it is becoming unaffordable in the absence of parental support.
In our wisdom, we are in the process of ringbarking this pathway to complexity.
How stupid can we be?
I recall in 1980 then Singapore PM Lee Kuan Yew warning that Australia was destined to become the ‘White trash of Asia’. It seems his warning is coming to pass.
PS. November 22. This ‘Visual Capitalist’ graph of the 30 largest exporters came into my feed today, adding some flesh to the bones of the index. The make-up of exports of several of them should lead to some deep thought. For example, Holland, Switzerland, Belgium, even the battered UK, where there are no hydrocarbons or minerals in the mix, outrank our commodity driven export mix. This is a solid indicator of the ‘complexity’ to which we should be building.
Nov 13, 2024 | Branding, Innovation, Strategy
One of the five costs in your business, in most cases, under recognised, under managed, and misunderstood, is Opportunity cost.
Doing A, means we cannot do B.
It is not always such a binary choice.
Opportunity cost is impossible to calculate with any precision, as it is forecasting the outcome of something you did not do, an opportunity forgone. It is however a critical component of any consideration of the manner in which the available capital of a business is deployed.
It is also driven by the strategy, which is another calculation of the shape of the future, and how you can optimise the leverage your resources deliver.
Commonly used models like discounted cash flows and the more demanding internal rate of return calculations are commonly used by accountants to make the choices between differing capital allocation options. Unfortunately, they both rely on cash forecasts, which are at best fragile. When the strategy calls for ‘innovation’ cash forecasts are usually over-optimistic, and the timing is wrong, so that beyond a ‘pin the tale on the donkey’ analysis, often grossly misleading. Such techniques favour doing more of the same, with at best incremental improvements. Deploying capital towards riskier uses means these calculations are less and less valid, putting off the risk averse amongst management, which is most of them.
We have a fantastic example facing us right now.
Intel used to be the dominating producer of semiconductors. ‘Intel inside’ remains one of the best known and respected brands around, and yet, Intel has fallen radically from grace.
Since the glory days, when they dominated the market, and had customers lining up to place orders years in advance, they are now struggling for relevance. The value of the business as reflected in the share market has plummeted, along with their market share in a market that continues to explode in volume and value.
Arguably, Intel should still be in the position now held by Nvidia, current market cap 3.64 trillion, and rising like a kite in a hurricane. Intel, while still worth over a billion dollars, is small by comparison.
Any calculation of the opportunity cost of strategic choices made in the past by Intel would make shareholders kick their cats. Intel delivered astronomical profitability resulting from then CEO Andy Gove making the choice to move away from memory chips and pioneer the semiconductor market. The emergence of the PC in the 90’s made Intel one of the biggest and most profitable businesses ever seen. They then missed the move to chip sets designed to enhance gaming, which doubled as the enablers of the exploding AI market.
At least Intel shareholders can feel better, as the missed opportunity club is a very large one, with some distinguished members.
Note: the graph in the header is the Intel stock price. $1 in 2000 is now worth $1.83 adjusted for inflation. In other words, the current year low price of $19/share is worth just over $10 in 2000 dollars after inflation. This is in a market Intel used to dominate, and that has exploded over the last 5 years, with Nvidia grabbing the chocolates. That is the opportunity cost intel has suffered.
Oct 29, 2024 | Innovation, Leadership
Evolution has given us this ability to act on ‘autopilot’, or habit, while subconsciously remaining attuned to our surroundings. Our brains have limited capacity, so it needs to save as much as it can to allow it the space to deal with the unexpected, crises.
Our ancestor woman while walking to the stream on autopilot is thinking about getting the water, wondering what the hunters might bring back for dinner, and how to keep the kids in the cave. A slight rustle in the grass, will immediately focus all her attention on where it came from, adrenaline rushing, just in case it is a predator.
This autopilot mode is highly beneficial for efficiency. It is the way we evolved. It frees up cognitive capacity for more immediately important things, consigning to habit the things that do not require the effort of thought.
It also obstructs innovation.
In our modern world, the predators in the grass have been largely eliminated, so we are not subconsciously looking for them anymore, and our situational awareness has degraded, creating ‘blind spots’. This prevents us from seeing opportunities for innovation. The problems we learn to work around become invisible, and the solutions we become accustomed to seem unchangeable.
Take luggage as an example. For decades, travellers endured dragging heavy suitcases through airports. In two iterations, 16 years apart, two people, thinking from first principles which is often an antidote to habitual thinking, added wheels. Vacuum cleaners all lost suction as their bags filled, until James Dyson challenged the accepted norm. The QWERTY keyboard, originally designed to prevent mechanical typewriters from jamming, is still used today despite its inefficiencies for modern typing.
Seeing hidden problems that become opportunities requires intentional, conscious practice.
- Regularly ask yourself, “Why do we do things this way?” Document even small points of friction. Observe how others interact with products or processes and take note of any struggles or workarounds.
- Approach familiar tasks as though you are experiencing them for the first time. Seek perspectives from individuals outside your field.
- Question assumptions, especially those that are widely accepted without scrutiny.
- Step away from problems periodically and return to them with fresh eyes. Study analogous challenges in other industries. Try explaining processes to a child—their innocent questions often expose hidden assumptions.
To innovate effectively, we need to develop our ‘peripheral awareness’: the ability to notice opportunities on the fringes of our focus. This requires maintaining a state of relaxed alertness, where you are engaged in the present task but also open to noticing details that others may overlook. I use my phone and notebook to note interesting things on the go. I regularly transfer these cryptic notes into an ‘ideas bank’ kept in One-note on my computer.
Every major innovation begins with someone questioning the status quo.
The next time you find yourself thinking, “That’s just the way it is,” take a moment to challenge that assumption. You could be on the verge of a significant discovery. While our brain’s efficiency is a valuable asset, it can also limit our potential. By honing our peripheral vision for innovation, we can transform these mental shortcuts from obstacles into pathways for creative thinking and, hopefully, distinctive, and innovative solutions.
Oct 8, 2024 | Analytics, Innovation, Strategy
Have you ever been in a situation where you just ‘know’ a course of action is right?
No data, no detailed scenario planning, you just know.
I have.
Where does that confidence come from, and is it justified?
Have you distinguished between genuine intuition, based on experience and knowledge, and the overconfidence that can arise from a lack of awareness of one’s limitations?”
In my experience which includes choices that have been both very good, and very poor, there are two qualitative drivers of those good choices.
Significant domain experience.
This experience does not come from being around for a while, it comes from taking action many times, and learning from the outcomes, resetting, and trying again.
For example: a seasoned chess grandmaster can often intuitively anticipate the best move without consciously calculating every possible outcome, drawing on years of experience and pattern recognition.”
Learning from analogy.
When you see a course of action succeed in other domains that have some similarity to your own, you can infer that the success may be repeatable in yours.
For example: The introduction of disc brakes in cars came from their development for use in stopping aeroplanes when landing.
In a world increasingly dominated by data, it’s crucial to remember that while numbers provide valuable insights, they should not be blindly trusted. True wisdom often lies in the delicate balance between data-driven analysis and the intuition honed through experience and learning from mistakes.
Chess is a game where a grand master has a store of intuition gathered and sorted by years of practice that is leveraged instinctively when playing.
