Media & Speeches

On the Need for a Solution Mindset by Catherine Livingstone

I would like to thank the Graduate Management Association for inviting me to speak tonight.

I also want to take this opportunity to congratulate the GMA for reaching its ruby anniversary.

Much has changed in our nation and our world since 1976.

For instance, another organisation was formed that year – ironically on April Fool’s Day.

It started out in a garage.

Its founders – one a technician, the other a college dropout – were high school friends.

And its name was stolen from the Beatles.

That garage start-up was, of course, Apple Computing.

Back then, …

Could anyone have forecast the phenomenon that Apple would become?

Could anyone have predicted the first and second coming of Steve Jobs?

Could anyone have foreseen the Macintosh … or the iPod … or the iPhone … or the iPad?

No one did.

But to paraphrase statistician Nate Silver, there was a signal in the noise.

The potential of computers had been apparent since the 1940s, and for those taking the time to listen carefully to Steve Jobs, he was very explicit about his vision for Apple.

In the moment, these transformational changes can appear sudden, but that’s just our perception. Most often, change is the outcome of a long, gradual process but it’s only when its scale reaches a tipping point that we become aware of it.

With that in mind, I would like to take this opportunity to reflect on:

  • The nature of change,
  • The need to innovate, and
  • The role of leadership, including the role of the BCA.

Let me start with the nature of change.

The Nature of Change

I attended Davos last year.

At the time, the red hot topic was artificial intelligence. It is certainly a white hot topic now.

Business and political leaders were reacting as if this was a sudden phenomenon, but in fact the elements- high powered computing, cloud infrastructure, machine learning and pervasive mobile connectivity -  had been emerging over several decades, in plain daylight so to speak, building capability along the way and now combining to deliver artificial intelligence.

It was actually quite shocking that there was so much surprise, and, as a consequence, how ill prepared the national leaders were: they were literally looking at each other in panel sessions asking what are we going to do?

A bit late to be asking that question, given predictions of imminent displacement of 40-60% of current jobs. 

The reason for our surprise is that we don’t pay enough attention to what is happening around us in the present?

Instead, we focus on trying to predict the future – on the answer, if you like, and while we may even look to the past for inspiration, the missing ingredient in recognising and interpreting change is actually to understand the present: to ask the questions, before landing on conclusions. The truth of the matter is, that it is easier to come up with answers, than it is to ask the right questions.

How many of us have been in strategy off sites, where there is a relatively brief introductory session on ‘present context’, followed by two days of talking about the future, risking a result of uninformed speculation rather than strategy?

As many of you may know I have been a passionate advocate for more investment in so called STEM education, and coding, and for children from a very young age. This is not to the exclusion of humanities subjects, but as a complement to them. The reason STEM and coding is so important, is that it lays the foundation for the underlying discipline of computational thinking - which involves being able to cope with large volumes of data, organise that data into coherent sub elements, identify patterns and then interrogate with those patterns to characterise underlying dynamics.

This might sound somewhat arcane and the domain of data analysts, but it describes the thinking process we should all be using to understand the present: whereas simple observations might have been adequate in the past, the volume of possible observations now demands a more systematic and analytical approach to understanding the present; to ask the right questions before jumping to conclusions. But as I have said, finding the right questions to ask can be a very painful process, which is why we naturally prefer to focus on answers.

This has huge implications for innovation capability.

The Need to Innovate

I have to say that I now approach the notion of innovation with a degree of caution: for such a straightforward concept, it suffers from an extraordinary degree of misunderstanding and, worse, is now seen as threatening by many in the community.

Part of the problem is that there is a misplaced belief that innovation is all about inspiration, when, in fact, it is more about perspiration. And that perspiration starts with understanding the present, and asking the right questions.

Back to Steve Jobs: one of the most significant innovations of the past decade has been the smart phone. It is incredible today to realise that Apple launched the first smart phone only in 2007 – less than a decade ago. Its impact has been revolutionary, but we, (including Telcos), missed its significance at the time of its launch.

Instead of pausing to reflect and understand it, we assumed it was just the next generation phone, simply an improvement on the previous feature phones. In fact, when Apple designed it, they weren’t answering the question of how can we design a better phone; they were responding to Steve Jobs’ question of how can we change the way people live their lives.

He really understood the context of the present at that time– mobile phones and the internet – and by asking the right question, combined the two, and in doing so created the platform for a whole new generation of business models. The way we live our lives has been revolutionised.

Interestingly Facebook and Google were among those who initially missed the significance of the mobile internet/smartphone, and both had to refocus and change course from a desktop and browser model, to catch up with a world dominated by apps on smartphones.

Cochlear Behind The Ear (BTE) speech processor experience in the mid 1990s:

  • Children receiving implants and program expanding rapidly because of very successful outcomes;
  • Product development and the innovation agenda was focussed on even smaller implants to enable implantation in very young children;
  • One member of the team asked a different question ie how can we ensure that they continue using the CI system once they are teenagers and become concerned about comestic appearance?
  • This led to the design and development of a BTE speech processor, (in spite of all indications that there would be no demand), which was released to the market three years later, by which time there was huge demand because of children entering their teenage years. 

In Australia, we often see invention confused with innovation. We have been encouraged to have an ‘ideas boom’ to follow on from the ‘resources boom’. There are a couple of concerns with this suggestion:

  • First, as David Thodey explained in a recent speech: New ideas reflect creativity; innovation is about implementing those ideas to deliver value.’ So ideas are a necessary but not sufficient condition. Execution is the key.
  • Second, as everyone here in WA would know only too well, during the resources boom there were plenty of ideas, and a great deal of innovation through implementing those ideas to create value; and, importantly, there is ongoing innovation in the resources sector to manage through the downturn. The initiatives underway in WA in several companies, to leverage their resource related investments into a digital/data centric environment, and take advantage of the Internet of Things, are world leading.

This reflects the reality that Australia needs ongoing innovation to deliver the growth which will underpin national prosperity. In the near term, the greatest impact will be from innovation investment by larger business, because of their scale and established business models.

In this regard, the anti-business, and particularly anti big business sentiment, which has developed in intensity over the past year, is very concerning.

Business is the economy’s frontline; engaging with the global economy and creating value through innovation. This value contributes to national wealth and thereby the capacity to provide the services which enable social well-being.

The negative sentiment has a number of drivers, including the conflation of innovation with globalisation, and we have seen similar anxieties manifest themselves in the Brexit result and the political rise of Donald Trump. There have also been specific reputational issues which have exacerbated the sentiment, and then it became a theme during the Federal Election.

So this brings me to the role of leadership.

The Role of Leadership

Leadership is a collective dynamic, and good leadership is collaborative.

It involves debate, working through differences of perspective, to find solutions. A blame mentality is an anathema to good leadership; it undermines the capacity to collaborate. And denial is not the place from which to start the quest for solutions.

As the chairman of the Reserve Bank, Glenn Stevens, has said: we are ‘kidding ourselves’ that it is possible to return to surplus without making tough decisions.

Getting those decisions as right as we can will demand collaborative leadership such as we have never seen, given the complexity and scale of the issues; and, unlike previous challenging times, our degrees of freedom are constrained by the fact that we are truly in a globalised world.

Business, big business, must be part of this leadership collaboration.  To the extent that there are reputational issues, we must address them transparently; equally, the role and contribution which individual businesses make to the economy and the community does need to be recognised. 

Businesses must find ways of connecting better with their employees, shareholders and customers.

The BCA and other industry bodies also have a role in contributing to national leadership. The BCA specifically does this by promoting substantive public policy discussions about the tough decisions that need to be made and the options available.

We have evolved a broad and integrated policy agenda covering key areas that are critical to the growth and sustainability of the Australian economy.

In particular, we are the only voice which has been arguing for a 10 year plan of incremental steps to ensure we have a policy environment which is fit for purpose for the national needs by 2025. It was a 10 year plan –but is  now approaching an 8 year plan, because the original 2025 target cannot be missed.

In developing this plan, we have collaborated with other business groups, with the community through ACOSS, and during the National Reform Summit in August last year with the ACTU.

I would like to take the opportunity to clarify remarks I made last week and which have been reported out of context: the suggestion that we don’t believe we need argue our case strongly and publicly is quite wrong. It’s what the BCA has always done and will continue to do.

We have argued for a policy environment which is conducive to innovation led growth, and the ability of business, large and small, to adapt rapidly to opportunities in the global economy: appropriate regulation and flexible workplaces are key.

We have argued strongly for investment in education, in teacher quality, STEM in the curriculum and, crucially, investment in the VET sector, which is critical in terms of skills, training, retraining, upskilling, But is atrophying through lack of investment. 

We have argued for a change in mindset in our health system from a provider centric to a consumer centric model. This is the only way of moving to better outcomes and at an affordable cost. If we can’t address the issue of escalating health expenditure, we cannot expect to be able to address the deficit.

In terms of the deficit, we have been very strong on the need for expenditure growth to be constrained, to protect our AAA rating in the short term, and to ensure the long term sustainability of the social services the community expects.

Finally, we have fought to keep the question of tax reform on the agenda and highlighted the fragility of our tax base, relying as it does on income tax rather than indirect taxes, and also our increasingly uncompetitive company tax rates, along with counterproductive, bracket creep in  personal tax.

Our policy framework is mutually reinforcing, and draws on a huge body of work which seeks to understand the present in as a complete a way as possible.

We believe it provides a robust basis for debate.

To play its part in this debate, however, business and businesses must certainly regain the trust and confidence of the community and demonstrate creation of value more broadly.

Equally we cannot resile from being a champion for the role of business in contributing to a robust economy through both wealth and job creation, and community investment.

The consequences for Australia’s social wellbeing of an undermining of the role of business are unthinkable.

Paul Kelly’s piece in today’s Weekend Australian  -recognising the impact during the 1960s of a generation of extraordinary business leaders who created the Pilbara and who laid the foundations of the resources industry in Australia – is, as he says, a case study in Australian vision. Other Australian business leaders have had a similar impact. I was fortunate enough to have worked with Paul Trainor in his Nucleus Group: Paul working with John Button had a vision for a medical device industry in Australia. That was also the 1960s, when there was no such company, let alone an industry. Today from Nucleus we have Cochlear and the Nucleus diaspora is represented throughout the hundreds of companies, including ResMed, in the medical device sector.

Business leaders must step up to the leadership responsibility for articulating their vision for their respective sectors of the economy and work passionately to deliver it. Working with government, but not expecting government to lead. That’s our job and our responsibility.