Address to AFR Innovation Summit: Leadership matters, the future of work depends on it

19 September 2017

Good morning and special thanks to the Australian Financial Review for the invitation to speak, particularly editor- in-chief Michael Stutchbury and technology editor Paul Smith.
Ive said for some time that the AFR with its determined focus on Australian tech is playing an absolutely crucial role in supporting local tech, particularly emerging enterprises.
So I very much value being involved in the Summit and the ideas being discussed are exceptionally vital to the nations longer term prosperity.
Ive tried to frame my contribution by relying upon some themes that come from a lateral perspective.
In doing so, know Ive been a long-time advocate of the tech sectors role not only in our economy, but also helping build stronger communities and social participation.
While naysayers will always find fault, I believe technology has made lives measurably better.
Its helped us do things we never could have imagined. Its connected people and given them voice.
Having said all that Ive never valued tech as an end in itself.
Perspective is important: tech is simply a tool to improve lives.
A crucial distinction because we can get wrapped up in the buzz around the latest gadgets instead of the opportunities presented by these developments.
Tech advancement brings a particular challenge to my side of politics.
The obvious observation is that through its disruptive character and with all the focus on the impact of the gig economy on a nations workforce tech is viewed disparagingly through a darker shaded prism.
But its not as simple as that. By opening up markets, disrupting established interests to create new wealth and work, theres an untapped progressive power in tech.
While governments of the 80s and 90s are credited with the sweep of modernisation they cast over the Australian economy and national life, today its tech doing this from the home to the workplace to the floor of parliaments.
Which is exactly why Im interested in digital technology and our local sectors efforts to strengthen its influence here and on the world stage.
Automation, robotics, artificial intelligence and machine learning have already started their race through many sectors of our economy.
Its been estimated that at least 13 of 19 industry sectors in this country will be impacted by technological change and automation.
Changing the way we work, changing the jobs we do, changing the relationship between business and workers, and asking more of leaders in our community.
The massive changes on the horizon present varying possibilities.
There is huge opportunity for Australian, building stronger businesses generating qualitatively better jobs. But this is not a given.
In fact theres never been a tougher time to argue what Im arguing right now.
In a climate where:
full time work seems less secure and available;
along with the overwhelming sense of dissatisfaction at the skewed distribution of benefit within advanced economies; and,
there is concern about what this might mean for future prospects;
Its hard to get people excited about what technology and automation might yield. Its almost insane to argue the case.
But if theres ever been an exciting time to make the case for unified leadership on this, its now. And I used the word unified deliberately.
Because the kind of leadership required cant be concentrated in the hands of a few this will require joined up effort from the public domain, private sector and broader community.
Failure to do so will see an increasingly agitated public and voter base demanding governments act. Not a climate for considered, long term thinking.
So here are the themes I want to run through during the course of my contribution today: the rage against the machines, the commerce conflict and the threat of Australia becoming a tech vassal.
Recent analysis from economics outfit Alpha Beta done for Google Australia estimates our economy could see a $1 trillion benefit by 2030 through the embrace of automation.
If our nations workforce was effectively prepared for the future of work a further $1.2 trillion boost would be realised. $2.2 trillion, all up. Nothing to sneeze at.
This wont come easy: 3.5 million Australian jobs might be affected.
Thats not to say they all disappear. They may fundamentally change. In some cases for the good, especially where it stops people from breaking their backs and damaging their livelihoods doing dangerous tasks.
But to put that overall 3.5m jobs figure in perspective, remember: Australias labour force is made up of just over 12 million people.
Automated vehicles alone present a challenge to the roughly 250,000 Australians that earn their living through driving.
Youll get variations depending on who you talk to:
Oxford University thinks nearly 50 per cent of jobs could be automated;
The OECD says up to 15 per cent; and,
Here in Australia, CEDA says it might be 40 per cent.
You can debate scope but you cant ignore impact and you cant stall preparing.
The combination of AI, robotics and machine learning will slowly assume responsibility for tasks considered mundane, repetitive and dangerous.
As 3.5 million Australians begin to wonder whats happening to their jobs they will actively question their bosses or their governments about how they as employees will be looked after through the change.
And there seems to be little being done to prepare, by business or government.
Which is why I think the war against the robots wont be the stuff of science fiction. It will be played out in our workplaces.
What will hurt us is playing sudden, panicked catch-up.
That Alpha Beta report found a lack of investment in automation by publicly listed Australian companies.
Only nine per cent of local firms are actively investing in automation, thinking about applying technology to sharpen their operations.
That rate is 50 per cent lower than that of leading countries.
What happens when Australian business see overseas rivals benefit from lower costs and improved profitability because of automation?
Theyll play catch-up, racing to lessen the differences.
And thats where the problem begins, with sudden, broad job dislocation likely to trigger a broader economic and social reaction.
Were seeing that reaction now, prompted by someone who has made his fortune from technology: Bill Gates.
He recently advocated for governments to tax companies that use robots to reduce the pace of change and fund new types of employment.
His logic: A human worker does $50,000 worth of work in a factory and that income is taxed. If a robot comes in to do the same thing, youd think wed tax the robot at a similar level.
Many people in this room will be horrified at that sort of proposal, unless youre not thinking of using robots in your operations and are also thinking of the payroll tax youre already paying.
I hasten to stress Im not announcing new Opposition policy here I am making the point that poor preparation will lead to reflexed responses that disadvantages us.
And instead of running from automation we should be thinking about how to get the most out of it and share the benefit widely, not easy considering the broken link between productivity and higher wages.
The pressure felt in the workplace by technological and digital change will not be quarantined to there. Businesses big and small will feel this.
Again, leadership can make the world of difference.
One thing to keep an eye on is whether bigger corporates get through this change relatively better than SMEs.
Yet, those SMEs will pay a price for our stubbornly low levels of digital transformation and digital engagement. A two speed variation in digital engagement big v small business is what I characterise as the commerce conflict:
Big business has the resources to marshal some kind of response to either automation or increased competition via digital platforms, while SMEs struggle and call for some sort of help, regulatory or otherwise.
The backdrop for this is the impending arrival of Amazon.
By all accounts its set to cast a mighty shadow starting from the Sydney Harbour Bridge, stretching across the continent and sending the seagulls scurrying off the ports at Fremantle.
If you believe everything being said, Australian retail will be decimated. Gerry Harvey will supposedly be shaking the gates of the nearest ADF base demanding something thats nothing like a proportionate response.
The fevered response to Amazons arrival is exactly the type of situation I think about when I describe the commerce conflict.
Australian consumers are well accustomed to online purchases, while being denied strong local digital platforms and online marketplaces.
Additionally weve had poor digital engagement by SMEs.
The Department of Industry, Innovation and Science reported in 2016 that SME investment in digital transformation often stopped at just having a website and broadband connection:
Not quite 50 per cent use an e-purchase platform;
Under 40 per cent are on social media;
Just over 20 per cent use cloud computing; and,
Only 20 per cent have digital supply chain management.
The department said there was a growing gap between businesses that had a digital plan and those that didnt.
Then Amazon arrives and the shouting starts.
When thinking of Amazon, think about these numbers:
85 per cent of mobile users are tapping into Amazon;
2.7 per cent of ALL digital time is spent on the Amazon store or apps. An astounding figure;
Morgan Stanley analysts predict retail earnings will drop by 16 per cent when Amazon arrives in Australia;
MYOB research shows 27 per cent of Australian SMEs were worried about the arrival of the online shopping giant; and,
43 per cent believe itll lead to lost customers and 43 per cent think Amazon setting up virtual shop will reduce revenue.
Those are all incredible numbers. This is the one I want you to focus on:
57 per cent of SMEs believed the arrival of Amazon would force them to innovate.
This figure is the standout from within a line-up of powerful numbers.
Faced with serious competition Australian businesses figure its time to get their act together.
On one level you cheer. On another, you think: why did it take so long?
Why did we wait for Amazon a loss maker for years, who transformed its business before our eyes, and eventually signalled its intent to come here before we recognised the value of digital engagement?
This is why talking about being a smarter nation matters it gets a wide range of people thinking about whats coming and acting.
As opposed to what we face now: missed opportunity and a hastily patched response where the cost of this is shouldered by employees and smaller players. There has to be a better way.
While people laugh whenever you mimic the Prime Ministers well-worn line about there never being a more exciting time to be alive, the joke is actually on us, on the nation.
Because the retreat from talk about Ideas Boom and National Innovation and Science Agendas is costing us. Dearly.
When former Prime Minister Tony Abbott said it was good we are no longer talking about being agile and innovative, he was being a short sighted vandal spooking a Prime Minister that should know better.
Venture Capital in Australia is going through a boom. Its up from $160m in funds expected to grow to roughly over $500. Accident? No.
A lot of that growth occurred when the political domain partly led the talk about the value of investing in enterprises to help build the economy and jobs of the future.
It justified risk. Why did we retreat?
Because reportedly Coalition backbenchers couldnt explain what innovation meant to someone living in suburban or regional Australia.
If we cant breathe life into that worthy mission, how could we argue that automation will be necessary for firms to survive into the future?
Or do we simply retreat and just let other nations take the lead, where we dont support the bright elements of our digital economy
And just wait to import someone elses idea via an app store?
In the process becoming the equivalent of technological vassal state, dependent on know-how developed off shore, whose creation was in part developed by an expat who figured we didnt have an environment to nurture that initiative on home turf?
That is what is at stake not thinking, not talking and not acting leaves us in a worse place, despite the illusion created by those who want to pretend its good were not talking about innovation.
Leadership matters. And not just leadership delivered by political players we all have a stake in this.
In recognising that technological change has been a constant, since the start of the Industrial Revolution.
That change has affected jobs but its created new jobs in the process.
Its built stronger firms. Helped generate new forms of wealth. Improved communities. Meant our economy could keep pace.
In recognising the way changes touches lives and getting our act together, recognised what was coming, preparing for it, convincing others that it would be worth it and that theyd be supported through it.
Not just to get by but to get better, be in a stronger place than before.
We should recognise and cheer on the emergence of a strong Australian digital economy, with firms and talent that recognised for their contribution at home and overseas.
But many who dont see themselves as part of our tech sector will be affected, wholl face demands to do things differently.
From the employee who has to change to a completely new role to the SME that has to think differently about chasing down and keeping their customer, or running their business more efficiently against competition.
What can government do? Wrong question.
What part are we all going to play in this? Thats what we must ask.
If jobs are going to change and people potentially changing roles not just jobs on a more frequent basis the starting point is: skill.
We will need to invest heavily in human capital. Not just in supporting its development but thinking about how skill development will be delivered.
For example, how many times have you heard people ask out loud: are we training up people for jobs that will no longer exist?
When you ask startups what can government do to support the emergence of a stronger tech ecosystem they say: just do what youre supposed to do, invest in education, let us have access to talent.
Yet at a time when we need to actively prepare people for a higher level of skills to meet the demands expected in the future.
We see a federal government that has absolutely no plan to deal with the future of work and is actively cutting investments in schools, TAFE and universities.
Its not like there hasnt been any consideration of possible future approaches.
A number of institutions have thought deeply about the skill sets and demands that will be required in the future. Led by the CSIRO, they produced the report Tomorrows Digitally Enabled Workforce.
It was launched last year by the Employment Minister covering issues Ive discussed today, who at the time said:
How Australias workforce fares in the long term will depend on our ability to help workers make transitions to new and better jobs. Our biggest challenge will be to ensure no one is left behind.
Despite spotlighting the challenge, where are we? That effort gathers dust within the Turnbull Government.
We cant afford that at a time we are being challenged to reconsider the orthodox view of education and skills attainment.
Weve heard about the concept of lifelong learning, now we have to live it.
Governments have a role to play in helping prepare for change.
As does corporate Australia. Ill often ask corporates: Within these four walls, who do you think is preparing their workforce best for transition? Very few can answer. Thats a problem.
Businesses are well placed to consider better approaches to workforce development, helping employees move to new roles with new skills.
And then let others know this is something worth doing lets face it, theres no point hiding that because you all know people move between firms, you deserve to know others are acting.
So, we should ask: what can business do to encourage mid-career education and retraining?
What sort of quickly attainable qualifications would business be willing to recognise and encourage people to attain?
Just a few questions that will be important to the 3.5 million people who need to acquire the skills that make them employable.
There are huge social, competitive and financial incentives to get this right but we cant just hope.
If the Turnbull Government continues on its current track, Australia will not make the most of this $2.2 trillion opportunity.
There is no indication theyve done the solid ground work to prepare. Theyve abandoned the innovation debate.
How do we prove to SMEs the value of digital engagement and digital transformation, when you cant fill out a Census form online or try to deal with an ATO website that regularly crashes?
We cant simply drift along and cobble together a response when needed, as more competitive economies set the pace, aided with stronger technology bases, more forward-thinking leadership and more collaborative public-private approaches to these challenges.
We can do better and should. Its something Labor is thinking deeply about. We are determined to reinvigorate this debate and get the nation working together on this.
Not driven from a negative starting point but knowing that we can build better firms, better workplaces and better communities as a result.
Thank you very much.