Ripe for Change

Innovation is a complex process with multiple contributing fac­tors, however knowledge cre­ation and diffusion are at its core.

Knowledge creation is there­fore essential for economic activity.

Recent data shows that investment in research and education is a key driver of scientific output interna­tionally — an area where historical­ly, Australia is found wanting.

Currently in Australia a paltry 4 per cent of GDP is invested into higher education, research and development. Compare this with over 6 per cent in Finland and close to 7 per cent in Denmark.

Over the last 10 years, funding for research across all OECD coun­tries has forged ahead at 48 per cent. In Australia public funding for higher education was scaled back by 9 per cent.

If we take pri­vate funding through HECS into account, we slipped back one per cent compared with the OECD, which was increasing both public and private.

Macquarie Graduate School of Management dean Roy Green believes it’s pertinent to compare Australia’s corporate and governing mindset with that of Ireland, which has turned its ‘agrarian backwater’ predicament around.

“Ireland cur­rently has the largest global per­centage of high technology industry exports,” Green says.

“At close to 60 per cent, this is higher than the US and the OECD. Australia, by con­trast has less than 20 per cent high technology exports.”

What is causing the gap?

Roy Green quotes the Irish National Development Plan of 2000 for a hint:

“There is a strong link between investment in the research and innovation base of the econo­my and sustained economic growth… The accumulation of ‘knowledge capital’ will facilitate the evolution of the knowledge-based economy.”

Despite this, Green argues that knowledge creation isn’t entirely about research and development.

“In two thirds of cases according to the Australian Bureau of Statistics, and possibly more so international­ly, innovation is driven by new business models, by organisational change and by systems integra­tion,” he says.

“Australia doesn’t need firms to be either technology makers or technology takers. We could be systems integrators, which is something Australian firms are already good at.”

In the supply chain context, research demonstrates that the relationships between people are as important as the development of technologies.

“Obviously technolo­gies improve the efficiency of sup­ply chains but if the systems are not in place, if the people manage­ment isn’t in place then it doesn’t matter what kind of technology is available,” Green says. “It just won’t work.”

In Ireland’s case, Green points to an investment in human capital over 20 years, along with a very effective targeted foreign direct investment attraction strategy and an ingenious approach to partner­ship known as ‘boundary less clus­tering’.

“Clustering is the formation of genuine relationships based on firms whose offerings complement each other, either in a single pro­duction sector or across related sectors,” Green explains.

“For exam­ple information and communica­tions technology providers tend to gather together, but in boundary less clustering, geographic location isn’t as important as the sharing of knowledge and information and the ability to derive competitive advan­tage from operating as a communi­ty rather than individual organisa­tions.”

In the west of Ireland, where Green worked for 6 years, local companies and universities funded by public money clustered around particular projects based on specif­ic competitive strengths.

“Under the Science Foundation Ireland, a cen­tre of excellence was set up through a partnership between the National University of Ireland and local companies such as HP and Nortel, Green says.

“This centre now attracts leading research in digital enterprise.”

Could we achieve something sim­ilar in Australia?

“It will depend on the institu­tional arrangements in place, the cultural factors and the role of local entrepreneurs and researchers,” Green says.

“There is no one-size-fits-all to competitive clustering or supply chain manage­ment.”

“The art of being successful is to understand the environment in which one is operating and to develop competitive strengths as they become apparent.”

In Australia, the Rudd Government has delivered signifi­cant changes to the country’s national approach to innovation policy.

The recent Budget has allo­cated $1.075 billion over the next five years, to strategy which includes extra funding for post graduate awards and research.

In addition, the government is under­taking a Review of the National Innovation System, which to date has received over 600 submissions from researchers, scientists, learned academies and industry bodies.

But there’s a lot of catching up to be done.

Major competing nations have already realised the value of knowl­edge-based economies, so their innovations and competitive gains will have to be matched and exceeded through the efforts of supply chain practitioners in Australia.

Dr Simon Dunstall stream leader, Adaptive Supply Networks, CSIRO Mathematical and Information Sciences points out that services comprise about 80 per cent of the Australian economy, yet we are almost a net importer of services.

“For the services economy, which incorporates the transport and logistics industry, the overarching challenge is to continue to find ways to grow and globalise,” he says.

“In my observations, Australian organisations are a little slow and risk-averse when it comes to adopting new and sophisticated solutions, yet people in operational roles in particular, are often very good at forming and continually-improving business practices that deliver respectable levels of supply chain efficiency.”

“For continued innovation, we need to preserve these practical strengths and sup­port them with IS developments that can overcome limitations in scale, complexity and distance.”

Dr Dunstall argues having the tools to consistently turn data from the supply chain into useful infor­mation is part of the answer.

“It’s getting progressively easier to sense, transmit and store data about supply chain operations,” he maintains, “but making sense of the data is much harder.”

“It’s not enough to observe small fractions of data in relatively raw forms, such as tracking individual items in a vast network, or aggregating up to a level where the insightful detail is lost.”

“It is also important to remember that it’s often the variable, hard-to-control elements that lead to logis­tics inefficiencies,” he adds.

“Forecasting and managing the variability in supply and demand, for example, predicting the maturi­ty and yield of crops, the transit times in domestic and global trans­portation, or sales of products — seemingly remains almost univer­sally problematic.”

“Therefore soft­ware applications/services for sup­ply chain monitoring, forecasting and optimisation will be pivotal elements.”

In terms of innovative partner­ships, Dr Dunstall says researchers at the Georgia Institute of Technology in the US are leading a project involving CSIRO and others internationally, with the aim of observing the transit-time and tem­perature experienced by wine trav­elling from South Africa, Chile or Australia to inland US importers.

“Data so far shows that there are significant transportation delays and some wine shipments are sub­jected to temperatures ranging from near-freezing to well above 40 °C.

This is damaging to the product and is generally undetected and unmanaged by the supply chain participants.”

Like Roy Green, Strategic Futurist, Marcus Barber believes the real challenge for Australia is to break down the ‘this is how you do supply chains’ paradigm.

Observing the struggle businesses have with strategic planning, Barber founded the Australian Strategic Planning Institute which provides expert facilitators for organisations to consider gover­nance, systems and thinking issues.

“There are lots of smart people looking at ways to improve the effi­ciency of their supply chains,” Barber says, “but it’s time to devel­op an awareness of what else might be available outside the current model.”

“Those that do will be light years ahead of competitors. The ones that don’t will still be stuck in traffic.”

Keynote speaker for the 2008 Queensland supply Chain Conference, Barber will tell the industry about his application of ‘Symbiotic’ supply chains.

“Symbiosis looks for multiple ways for supply chain partners to ‘scratch each other’s backs’,” he explains.

“It’s also increases opera­tional abilities for those businesses who understand where their supply chains are most likely to break down.”

“It’s important that organisations begin to ‘map’ their overall busi­ness relationships, and how these impact on the size, speed and loca­tion of specific supply chains,” Barber argues.

“In essence, we move the supply chain concept from being a linear step model, like a production line, to one in which dysfunctional elements are by-passed or removed, and capacity is built in where it’s needed.”

As for the future, Barber says there are some strong signals that supply chain thinking, especially the nature of the ‘back office’ is in for a shake-up.

As one example, Barber points to ‘Crowd Sourcing’, a process where consumers using online networks promote product development and new business partnerships.

“Fifteen years from now, other impacts to the supply chain might include, ‘Take back legislation’, where man­ufacturers are required to take back a product once it has reached the end of its useability for a con­sumer,” he adds.

“Product design might move towards Biomimicry, or learning to minimise packaging and waste, and multiplying a prod­uct’s uses by observing nature.

Rapid Prototyping, where produc­tion itself occurs in the home might also manifest itself.”

According to Roy Green, new research suggests Australian busi­ness is ready for a revolution.

“For the first time, possibly in history, we’re seeing a great alignment between what business and univer­sities ought to, and want to be doing,” he says.

“Rather than call­ing for a greater interest in tech­nology transfer and commercialisa­tion, businesses want universities to promote critical thinking, the ability to communicate, lead, absorb, change and adapt.”

“Companies want an interaction that’s beneficial to both sides, allowing the discovery of new knowledge to be made available to employees who would otherwise be on a routine treadmill, and provid­ing the public space to think cre­atively about the future.”

“It’s now over to the national innovation systems, the institutions of society to encompass that poten­tial for alignment and to make the best use of it.”

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