acs submission - inquiry into australia's innovation ... · pdf fileinquiry into...
TRANSCRIPT
Senate Standing Committee on
Economics References
Inquiry into Australia’s Innovation
System
31 July 2014
Submission by the
Australian Computer Society Inc
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CONTENTS
Section 1 Executive Summary and Recommendations Page 3
Section 2 Who is ACS? Page 7
Section 3 Towards an Innovation System Page 11
Section 4 Terms of Reference Page 18
Conclusion Page 25
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SECTION 1 – EXECUTIVE SUMMARY
The Australian Computer Society (ACS) welcomes this review into Australia’s innovation
system. Establishing a more robust and effective innovative system is critical for
Australia’s future national productivity and economic growth, particularly as the
resources boom seems to be normalising.
Australia’s innovation credentials are poorly ranked globally; since 2000 Australia has
generally fallen in most innovation measurements tracked by groups such as the OECD
and the World Economic Forum.
So what needs to be done?
Many factors drive innovation. Among them collaboration, culture and leadership,
appropriate infrastructure, access to capital, global linkages and supply chains, digital
literacy (particularly in the SME sector), government policy settings, and the supply of
an appropriately skilled workforce coming out of our education and training systems.
As the peak body for Australia’s ICT professionals, ACS is particularly focused on
addressing the skills issue and the closely related issue of SME digital literacy.
ACS believes that a key reform towards a modern, innovative economy in the digital era
is the injection of creative ICT skills at the early stages of our education system.
Adoption of the UK model whereby computing science is mandated in primary and
secondary schools is strongly recommended; computer literacy and proficiency needs to
be achieved at the latest by the end of Stage 1 in primary school. In the VET sector
there needs to be a greater focus on skills and competency outcomes rather than
training packages directed at a particular qualification or occupation. Tertiary sector
students should have greater exposure to work-integrated learning (WIL) so graduates
are more work-ready. This means having a mix of not only the deeper technical skills,
but also the critical ‘soft skills’ like project management, problem solving, stakeholder
management and strategic and creative thinking, which are all necessary in business
today.
We need an education system that recognises rudimentary computing and ICT skills as
foundation skills, focuses on work-integrated learning in our VET and higher education
sectors to produce a jobs-ready workforce and which values the re-skilling of workers
displaced from ‘old’ industry sectors so they are able to actively participate in and
contribute to the digital economy.
As part of this skills focus, ACS also advocates developing a long-term employment plan
for Australia that maps our human capital and the extent to which it matches our
economic and skills needs. The plan would include metrics and success indicators. And
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importantly in terms of professional services such as ICT the plan would include a focus
on the importance of ethical behaviour and trust. Such a plan would be a key input to,
and assist with, the development of a more integrated and focused approach at all
levels of the education and training supply chain. This is one of the initiatives being
recommended by the B20 Human Capital Taskforce being held prior to the G20 meeting
in Brisbane in November this year. Employment Plans could provide a ‘baseline’ for
countries to track and compare on-going development and initiatives with other nations.
Ideally, every corporate five-year plan should have a page devoted to the organisation’s
long-term skills matrix, and this information should be nationally collated for tertiary
course planning.
In relation to SMEs - which account for 96% of Australia’s businesses, 70% of
employment, and 57% of value add – there is general lack of e-readiness. SMEs are
more likely to be competitive in national and global markets if ICT products and services
are regarded as critical, “must have” elements of the business. ICT drives innovation
and builds competitive advantage. The old paradigm of exporting goods and services
has been substantially replaced by the ecommerce paradigm of importing customers,
especially in the services sector, and Governments need to accommodate this in
planning.
ACS already helps SMEs with their ICT workforce planning based on globally established
ICT frameworks, and by delivering and/or providing access to relevant training.
Governments also have a key role to play here by focusing on programs that deliver
practical, on-the-ground advice and solutions based on strong evidence based approach.
In other words, programs based on analysis that clearly identifies the specific digital
weaknesses, which need to be addressed. The important point here is that there is no
“one size fits all” solution for SMEs. They are not generic. Their needs differ by industry
sector and by region. This would represent new thinking and a much needed new
approach by Governments.
ACS believes an important first step for Government is that it must, at a high level,
clearly demonstrate a stronger commitment to innovation. This requires articulating a
clear vision and backing that up with strong leadership. And as a very public indicator
of this vision and leadership, ACS recommends Government create a new role of Chief
Innovator, a role similar to the current Chief Scientist. The person would report directly
to the Prime Minister, would be from a private sector background, would have a clear
track record of innovation, would be highly regarded and respected, and would have the
Prime Minister’s support to work across all portfolios of Government to achieve the
policy and program outcomes required. Government can also show leadership by being
much more innovative in the way it engages with the community and delivers its own
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products and services. This will also require some fresh thinking within portfolios and
perhaps a re-assessment of accountabilities.
Government needs to also ensure programs are calibrated in such a way that better
supports innovators, entrepreneurs and risk-taking ventures. As an example, the
employee share option regulations are failing start-ups and causing innovative
businesses to look offshore for talent or a better business environment. In this regard
the UK sets a good example of a facilitative environment.
The tax treatment of angel investments needs attention – the risk aversion of Australian
high net worth individuals and self-managed super funds needs to be coaxed lower by
tax incentives. Funds from Government programs that try to pick winners are inefficient
and can be redeployed to fund tax incentives for angel investment with private investors
bearing all the risk.
The role of professionalism in risk mitigation is underestimated. Australia’s genetic
disposition to innovation and improvisation is being seriously impeded by poor quality
technology and unprofessional project management and system implementations. While
a licence is needed to change a power point or to be a bouncer in a nightclub, no
credential is required to take charge of IT security in any Australian enterprise, nor to
program robots or other safety-critical technology ranging from avionics to amusement
park rides. Sooner or later the value of professionalism, which by definition puts the
public interest above self-interest, will be seen as desirable if not mandatory. Until then
the so-called 80-20 rule will see cost cutting take precedence over prudence.
Government also needs to look at imaginative ways it can ensure the long-term viability
of publicly funded research such as is conducted by NICTA and CSIRO, both critically
important organisations in Australia’s innovation ecosystem. NICTA is the nation’s
largest organisation dedicated to ICT research and the commercial application of this
research to create national wealth. It is also coordinating a national program (known as
Digital Careers or Group X) to address the worrying shortage of high school students
choosing to study ICT-related courses in science, technology, engineering and
mathematics (STEM). This decline in STEM studies has led to a shortage of skilled ICT
workers capable of doing the jobs required to build and sustain an advanced digital
economy. ACS is a partner in the Group X activity.
If we are to build a more innovative culture in Australia and create innovative new
products and services, we need NICTA to continue with its excellent work and build on
the considerable successes it has had to date. NICTA also provides an opportunity for
our best and brightest ICT minds to deploy their talents in Australia and not pursue
careers in other countries. NICTA therefore helps reduce the “brain drain” which has
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been lamented in this country for decades. NICTA is a key part of the innovation
solution for our country.
About Digital Careers:
Digital Careers is a program to reduce the critical shortage of Australian ICT professionals. Funded by Commonwealth Department of Communications ($6.5 million over four years, from 1 July 2013), the program is hosted by NICTA. Digital Careers is collaboration between government, industry, research, and tertiary institutions (universities and TAFEs). The Australian Computer Society (ACS) is closely involved in co-coordinating the program. The program’s objectives are to:
• Increase interest amongst school students in digital technologies and particularly engage students who do not have a natural interest in ICT
• Increase the portion of students enrolment in ICT courses at universities and TAFE
• Increase awareness of career diversity, opportunities and benefits of an ICT based study program/education
• Raise the profile and reputation of the ICT industry and ICT careers • Provide education and training material and professional development for ICT
educators and • Improve the capability and confidence of school ICT teachers and catalyse the
professionalisation of ICT teaching
To achieve these outcomes Digital Careers Program focuses on:
1. Activities and events for school students from years 5 to 10 (ages 10-15);
2. Teacher Professional Development; and
3. Promotion of the diversity of careers in the ICT industry.
RECOMMENDATIONS
• Consider introduction of the UK education policy of mandated IT programming
from K-12
• Alternatively, introduce computer and technology skills at the earliest levels of
primary school with a view to achieving computer proficiency by Stage 1 science
as a mandated subject in primary and secondary schools
• Mandate computer science at secondary level to ensure that the Australian
population achieves a base level of technical conversancy to even have a chance
of competing with global competitors who place far more emphasis on this topic
• Reform the VET sector to focus more on skills and competencies rather than
qualifications and occupation outcomes
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• Introduce more work-integrated learning and a greater focus on teaching the
“soft” skills in our VET and higher education sectors to improve the work
readiness of graduates
• Develop a long-term employment plan for Australia, which maps our human
capital and the extent to which it matches our economic and skills needs.
In terms of Government support for innovation:
• More targeted, evidenced based assistance to SMEs to lift their digital
readiness
• Appoint a Chief Innovator from a private sector background, who is not
shackled by bureaucratic processes and can make recommendations directly
to the Prime Minister
• Demonstrate real innovation in its own delivery of products and services and
the way it interacts and engages with the community.
• Amend the employee share option regulations to encourage start-ups, as
the UK does.
• Redeploy inefficient innovation funding models with tax incentives for angel
investment in Australian start-ups and Australian intellectual property
creation (with benefits contingent on IP remaining in Australia)
SECTION 2 – Introduction
2.1 Who is ACS?
The Australian Computer Society was formed in 1966 and is Australia’s peak body for
ICT professionals with over 22,000 members and a national footprint. Like all
professional bodies, a core function of the ACS is the assessment and accreditation of its
members as Certified Technologists or Certified Professionals. Assessments are
conducted against an internationally accepted framework called Skills Framework for the
Information Age (SFIA). To retain professional status ACS requires certified members to
undertake ongoing professional development activities. For more information about the
ACS, please see www.acs.org.au
ACS also conducts research-based advocacy on behalf of members on ICT and skills
related issues, and is increasingly starting to work more with Australian workplaces
(public and private) to help them with their ICT workforce planning and training needs.
ACS is responsible for the professional accreditation of ICT degrees in Australia. It has
accredited 950 education programs at a range of Australia universities and a number of
registered training organisations (RTOs) that provide higher education degrees in ICT.
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ACS works closely with the Tertiary Education Quality Standards Agency (TEQSA) to
align courses with national standards. It also works with the Australian Council of ICT
Deans in the accreditation process.
2.2 Why ICT skills and innovation are important
ICT and computing skills - which are part of the Science, Technology, Engineering and
Mathematics (STEM) set of skills - are core to driving innovation in an era where digital
technologies dominate. Yet it is estimated that in Europe, while STEM occupations are
expected to grow by 14% by 2020 (compared to 3% for other occupations), the supply
of workers with education qualifications in STEM subjects is projected to actually fall. In
the United States, employment in these STEM occupations is projected to grow almost
as fast between 2008 and 2018 as employment in all other occupations combined.
Further, the European Commission estimates that by 2020, there will 900,000 jobs in
the European ICT sector unfilled due to a lack of appropriately skilled workers.
A 2103 report by the Australian Workforce and Productivity Agency (AWPA) estimated
Australia faces similar challenges in relation to its supply of skilled ICT workers. Their
analysis indicates employment for ICT workers is expected to grow over the next five
years. Total ICT workforce growth is expected of 33,200 workers, or 7.1 percent growth
between 2102 and 2017. Employment of ICT professionals is expected to grow by 9.5
per cent, by 21,400 workers during the same period.1 Supply to this market will be
patchy. High drop-out rates at the VET sector level combined with inappropriate skills
‘mix’ so far as employers are concerned means skilled and temporary migration
schemes have emerged as a key source of ICT worker supply. So if we are to lift levels
of innovation in Australia we must address the issues of STEM and ICT skills, including
the right mix of hard and soft skills.
The ACS considers that the current review into innovation is timely and in fact urgent.
It presents a much-needed opportunity for policy makers to introduce a comprehensive
and cohesive Innovation System - not just a policy - which recognises the inter-
relationship between improved educations and skills, more appropriate regulation and
legislation, and investment levers.
Given the ACS’s focus on a highly skilled ICT Australian workforce and better programs
to achieve this, this submission will concentrate primarily on the need to address the
Australian market failure of the supply-side not meeting demand-side requirements for
work-ready, creative and innovative workers who have a mix of hard and soft skills.
Innovation is more than traditional or foundation ‘hard skills’ such as science &
technology; increasingly policy makers need to look towards education systems that
1 AWPA, ICT Workforce Study July 2013, page 47
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produce a mix of ‘soft skills’ such as project management, stakeholder management,
leadership, and negotiation skills to support and complement hard technical skills.
A highly skilled ICT workforce is an essential foundation for Australia’s Innovation
System, because it is critical not only for the creation and application of new knowledge,
but also to be able to garner and apply knowledge produced elsewhere; we must “learn
from the world”2 because no nation can produce all the good ideas it needs to survive
and thrive in an increasingly competitive, global economy.
This has implications for all aspects of the compulsory and post-compulsory education
system as well as incentives faced by those choosing to participate in the labour force.
“These systems need to produce skilled and capable people with the ability to manage
their careers in a rapidly changing world and labour market. This entails a shift away
from training for a particular job, to a system that equips people with the capabilities
and skills required to compete in a technology-enriched, globally traded labour market,
regardless of their qualification.”3
Recent meetings of the B20 Human Capital Taskforce have highlighted the essential
path to success in the education sector, with focused suggestions for change supported
by ACS. These include increasing the alignment and responsiveness between the
learning ecosystem and workforce needs by:
• Aligning curricula with workforce and industry needs, utilising multiple learning
pathways and models
• Building basic skills for the digital age
• Enabling a flexible system of lifelong learning
• Undertaking efforts to reskill workers displaced as a result of “fallen” industries
This report also provides interesting case studies of success in other G20 nations, which
could be instructive for Australia. Delivery of skills upgrade programs by the private
sector in India has been especially successful.4
2 Yves L. Doz, Jose Santos and Peter Williamson, From Global to Metanational: How Companies Win the Knowledge Economy (Boston: Harvard Business School Press, 2001) 3 Building Australia’ Comparative Advantage, Business Council of Australia, July 28 2014, page 18. 4 The National Skills Development Corporation (NSDC) was established in 2009 to address India’s significant mismatch between skills demand and supply by upgrading the skills of the workforce through funding skills training and development programmes coordinated by the private sector. The PPP model is helping India overcome two of its greatest challenges in delivering VET courses – its lack of adequate infrastructure and shortage of job offers. The NSDC has established 29 Sector Skill Councils and works with 114 training partners operating in excess of 2,500 physical and mobile training centres across 352 districts in India. As of January 2014, 13.5 million people have been trained, and 750,000 people are known to have been placed.
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2.3 What is Innovation?
Conventional views have it that innovation takes place idiosyncratically in R&D labs and
‘Silicon Beach” clusters. But innovation is better understood as being embedded in a
national innovation system; it is more than science and technology or R&D. It can
embrace a better process, new market, new product or improved service5, and is
generally driven by consumer demand, although not always; no-one knew they needed
or wanted iPods, smart phones and tablets until someone imagined them and brought
the idea to market, whereupon demand grew astronomically. Innovation is a critical
engine for business growth and job creation in large and small firms alike.
This is not only about research and development (R&D), but about the whole range of
investments that firms and governments make in knowledge, including software, data
skills and organisational “know-how.” These complementary investments help to ensure
that R&D leads to innovations that generate growth and jobs. The increasing relevance
of services industries to GDP underlines the importance of harnessing the power of
technology and knowledge based capital to create new business models, services and
products to replace those made redundant by automation and digitisation.
The case for supporting innovation is clear – studies for the European Union and the United States
show that business investment in knowledge-based capital contributes 20 per cent to 27 per cent of
average labour productivity growth. The 2012 Australian Innovation System report showed that
Australian businesses that innovate are three times more likely to export and 18 times more likely
to increase the number of export markets targeted than those that do not innovate. Most sectors
have a multiplier effect on job creation, but the innovation sector has the largest multiplier of all.
While business takes the lead in such investments, government has a role to play by creating the
right environment for innovation to flourish. Governments can strengthen efforts to support
innovation by defining and promoting a national innovation agenda and pipeline that highlights the
5 The OECD defines innovation more broadly as “the implementation of a new or significantly improved product (that is, a physical good or service), process, a new marketing method, or a new organisational method in business practice, workplace organisation or external affairs.” Ministerial Report on the OECD Innovation Strategy, March 2010. www.oecd.org/sti/45326349.pdf
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priority areas for development, whether technology-driven or more broad-based. Targeting public
and private investment to specific areas is not about “picking winners”.6
An innovation system must include all economic, political and social/cultural institutions
affecting innovation, such as education and skills training environments, pre-university
education, the national financial/investment system, regulatory policies and the labour
market. Unless all these elements are operating synergistically, Government and
industry will be unable to create and apply an effective Innovation System; policy
makers must stop looking for solutions in isolation from the broad eco-system.
2.4 Innovation in Australia
Globally, our innovation credentials are rated poorly compared with similar economies.
The World Economic Forum (WEF) rankings place Australia down the table in capacity
for innovation, business sophistication and company R&D spending, and further down on
technological infrastructure. We rank highly in terms of school and tertiary enrolments
and research institutions.7 WEF has also ranked Australia 21 out of 148 countries on the
Global Competitiveness Index, down from 15 a few years ago. It identified labour
regulation, government bureaucracy and tax rates as the most problematic factors for
doing business in Australia. Australia also scores poorly in terms of venture capital, an
element of the eco-system that most assists start-ups and entrepreneurs.
Reasons for Australia’s relatively poor innovation ratings are complex: innovation is
notoriously difficult to quantify, and organisations that analyse innovation across
economies may use varying assessment criteria. In addition, innovation itself is a
complex phenomenon, requiring proximity to advanced sources of information,
customer demand, and complementary knowledge that is difficult to codify, measure
and communicate.
Australia’s government has a role to play in fostering much needed innovation – it
should be enabling innovation across the whole economy by fostering entrepreneurship
and collaboration and dynamic growth, and facilitating skills and capabilities.8
Australia is relatively isolated from some of the global competitive and financial
pressures and external shocks experienced by other nations, who responded to financial
crises with highly innovative solutions. Commentators have suggested that our isolation
6 B20 Human Capital Taskforce Policy Summary, www.b20australia.info 7 Global Competitiveness Report 2012, World Economic Forum, Switzerland, 2102 8 Building Australia’s Comparative Advantage, Business Council of Australia, July 28, 2014, page 3.
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has given rise to complacency and a cultural attitude that does not acknowledge the
benefits of innovation.
Others believe Australia has relied for too long on a resources boom, which has both
shielded us from financial crisis and clouded any ability to recognise what will come after
that boom. But Australia will always be a resource exporter and an innovator; such a
‘mixed economy’ provides opportunities for us to improve our innovation credentials.
In the resource sector, miners oversee Pilbara iron ore mines in real time from remote
operating centres in downtown Perth. This is innovation.
Firms in every sector are doing old things in new ways, mixing and matching from a
suite of technologies, including mobile devices, cloud computing, crowd-sourcing, digital
fabrication, remote monitoring, distributed sensing, and big data. These new mixes will
yield new processes, tools, products, services and different jobs. This is innovation.
Firms are changing; you can now build and run an online store from your mobile phone.
Markets are changing; even small firms can now sell to the world via cloud. This is
innovation.
But old boundaries are blurring and skills will have to change; some skills that once
were prized are becoming automated, while others are still developing. In this aspect,
innovation can destroy as well as create jobs, and Government needs to be aware of
this; it is already occurring. ACS considers that a radically reformed education and
training sector producing work-ready graduates, together with revised business policies
and regulation, will drive increased innovation into the next iteration of Australia’s
growing services economy.
Government has a key role to play here; a ‘bias towards action’ supported by clear
leadership and commitment to change is essential. Driving this change will require a
Chief Innovator who can identify Australia’s ‘unfair advantage’, operate outside and
above normal Government constraints. Reforms to education and business regulation
have enormous potential but the payoff in improved GDP and productivity may take
decades to be realised.
What is clear is that future success is not guaranteed if Australia does not transition to a
new source of growth as commodity prices and investments in resources projects
normalise. And there is no doubt that our firms are now competing against an
increasingly globalised economy.9
9 McKinsey Australia, Compete to Prosper: Improving Australia’s Competitiveness, July 2014, page 1
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SECTION 3 – Towards an Innovation System
There are many factors that drive innovation. Collaboration, culture and leadership,
appropriate infrastructure, access to capital, global linkages and supply chains, digital
literacy (particularly in the SME sector), government policy settings, and the supply of
an appropriately skilled workforce coming out of our education and training systems.
As the peak body for Australia’s ICT professionals, ACS is particularly focussed on the
skills issue and the closely related issue of SME digital literacy. And part of an effective
response to these issues and challenges will require Governments to think differently
about what they must do and to take a different approach.
3.1 Skills – supply does not meet demand
Driving a more innovative economy will not happen with a business-as-usual approach.
At its most effective, innovation is an inherently human endeavour; “knowledge has two
legs”. Successful innovation happens when people with skills, experience, and
capabilities come together to understand or predict, and then address, other people’s
challenges. Talent, like capital and technology, is a key success factor for innovation.
Inspiring potential talent will drive innovation and growth.
Education is a fundamental element in innovation and access to both basic and
vocational education is key to talent development. ACS recommends that a robust
Australian Innovation System can only be developed on the back of targeted (not
necessarily more) investment in education, building the human infrastructure to drive
innovation and growth. This investment needs to focus not just on foundation skills but
also on so-called “soft skills”, job-readiness and workforce participation.
ACS’s current advocacy focus is the three-pronged platform of early stage, VET and
tertiary sectors, with the aim of raising awareness of the need to start the creation of
imaginative and innovative students as early as possible (K-12), ensuring VET skills are
based on competencies rather than redundant ‘industrial age’ skills, and the tertiary
sector produces job-ready graduates that business can on-ramp to successful careers
easily.
In particular, the changing nature of work and older sectors forced to move to the new
information age, means that vocational training has taken on a new urgency; it is often
the part of the education system that equips people to move from lower to higher value
jobs. The ICT industry moves so fast, that the historical notion that VET qualifications
map to a specific vocational outcome no longer holds true.
It is important to make the distinction here between those seeking to enter the industry
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(such as a traineeship pathway), and those gainfully employed whether in ICT or other
industries. Young people in continuous learning (i.e. doing VET direct from school) have
very different needs from students already employed.
The VET system is angled and designed for TAFE and traineeships but to maximise
productivity, GDP growth and address priority skills we need a system better able to
deal with those already employed or seeking work as adults.
Limitations of the current approach are that it is:
• Overly regulated and 'restrictive'
• Training against national systems adds too much cost for too little reward for
employers
• Focusing on the supply (training outcomes) rather than employer needs
(demand)
The fundamental question to ask is whether skills development funding is failing to
reach businesses to stimulate growth. ACS suggests that the answer to this is in the
affirmative; evidence to support this is the fact that ICT enrolments in VET declined by
40% over the last decade. Corporate un-accredited training continues to grow.
A pragmatic policy solution would be targeted priority purchasing of skills development
at the unit of competency level rather than qualifications, or pre-defined skill sets as
defined in national training packages through ‘consensus’.
Such an approach will:
• Expedite knowledge and skills transfer to the economy
• Fast-track and provide ease of entry into the ICT labour market by those employed
but not currently working in the sector, highlighting transferable skills, and
maximising skills utilisation across the economy
• Cultivate an immediate ROI where many alternative actions have long lead times.
VET has been relatively overlooked compared with schools and universities in the public
debate on education; ACS will contribute to the Government’s current review of the VET
system. The priorities for VET are to:
• Make VET a national priority
• Move the focus more to skills (especially ICT) and competencies which produce
a flexible, adaptive workforce
• Resolve roles and responsibilities between the states and Commonwealth
• Better integrate the VET system with other parts of the education system and
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with industry
• Improve regulation in support of a more dynamic, effective and innovative
system, including allowing public providers to operate on a more commercial
basis
• Conduct a thorough assessment of the real future investment requirements of
VET.
The nature of any country’s workforce is crucial to its competitiveness. Workforce
development is heavily influenced by the education and training system including all
levels of traditional education, vocational training and company-based training, as well
as the ability to provide opportunities for life-long learning. Enhancing workforce
capabilities is now even more critical given the competition Australia faces from Asian
region nations with more labour, lower costs and in some cases higher innovation levels.
It is well documented that Australia has an imbalance in skills supply and demand
across many sectors of the economy.10 Whether this is a net skills “shortage” or “skills
gap imbalance” is a moot point; employers struggle to access skills they need to do
business. Across all sectors of the economy, ICT is becoming increasingly important to
drive value, employment and productivity. ICT now accounts for almost ten per cent of
GDP, which is comparable to the mining sector. As the digital economy grows, and older
industry sectors decline, ICT jobs are growing in number and specialism and yet in
Australia there are insufficient numbers of domestic ICT graduates to meet this demand
and those who do graduate face ongoing barriers to entry level jobs in ICT.
The ACS knows that many employers consider graduates from a range of disciplines are
not work-ready – while they have deep technical knowledge they may lack the
professional skills necessary in business. A flexible educational system which focuses on
“T” shaped talent pools of all-rounders who are both technically deep in at least one
area and possess management skills which may have been learned in an older, non-ICT
industry sector. For those whose depth is STEM, the breadth will be “softer” human
skills or business skills - project management, leadership, creativity, finance, and
entrepreneurship. For some, the human or business skills will be the deep part of the
“T”, with technical breadth rather than depth. This approach is equally applicable to
transitioning ‘old’ sectors participants such as autoworkers into ‘new’ skills in the digital
economy.
The ACS also acknowledges that employers may be reluctant to invest in bringing
graduates “up to speed”. The ACS has developed a work-readiness program for
10 ICT Workforce Study, AWPA, 2013
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international ICT graduates who finish degrees at Australian higher education
institutions and seek permanent residency. The ACS Professional year program runs for
44 or 52 weeks and aims to equip student with the professional skills needed to succeed
in the Australian workforce. These include communication skills, business skills and
workplace culture awareness, an internship with a host organisation and online
professional development. ACS is now planning to extend this program to domestic
students.11
Similar employability arguments are pertinent in relation to displaced older
workers and those workers requiring up-skilling or cross-training, an issue that will
increasingly bedevil the Government as older industry sectors decline in Australia. The
ACS program Skills Framework for the Information Age (MySFIA, www.acs.org.au/sfia-
certification/mysfia) is based on the global program conducted out of the UK and can be
used to cross- and/or up-skill workers seeking to transition from older industry sectors
in to the newer economy. It provides a simple framework consisting of competencies on
one axis and levels of responsibility on the other. ICT practitioners can “self-assess” (or
be assessed by qualified practitioners) for their competency levels against a range of
skills and then identify areas for improvement to progress their career paths. For
organisations facing large redundant workforces, this tool is a robust start to up-skilling.
ACS has now commenced working with large private and public sector organisations to
assess their workforces according to the SFIA competency base and to use this as a key
tool in workforce development planning.
The real issues for an Australian Innovation System generally are a continual lack of
focus on attracting young people into ICT as a career, and employer buy-in to any form
of 'growing a graduate' scheme that would skill them for such a career. The ACS has
consistently advocated for a focus on attracting young people into ICT through well
thought-out programs in schools and more targeted levels of support for Higher
Education and the VET Sector. For example, in the current VET sector, the system is
focussed on disciplines packaged into occupational groups and job families, sorted into
the Australian Qualifications Framework. This is an inadequate response for the digital
economy and the up-skilling required to transition a workforce from old industry to
participation in the global digital economy; a renewed focus on competency standards
rather than Training Packages is required.
It is equally important for industries and business, not just Government, to get involved
in enhancing education systems. Advances in information and communication
technologies (ICT) in recent years played a crucial role in transforming traditional
11 Extension of the PYear program will likely commence in 2015.
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education and making it more accessible, affordable, and effective globally. Learning
from other nations facing acute market and financial stress (such as the UK) is
instructive; taking a long-term view towards better skilled graduates in 10-15 years’
time, the UK has mandated the teaching of ICT skills from K-12, commencing
September 2014. The program is supported and funded by Government, industry and
the ACS sister organisation, the British Computer Society who is taking a lead role in
training teachers to help them deliver the revised curriculum.
“The Chancellor of the Exchequer and Education Secretary have today (Tuesday 4
February 2014) announced a new £500,000 fund to train teachers in software coding, so
our schools can inspire the next generation of tech entrepreneurs.
The government will provide match funding from industry and business, allowing new
and existing teachers to be trained by the experts. This will equip schools to teach the
new computing curriculum introduced this September and designed with input from the
Royal Society of Engineering, and industry leaders such as Google and Microsoft.
Introducing children to skills like computing and coding from an early age is all part of
the government’s long term plan to ensure young people have the first class education
they need to succeed, and make sure Britain leads the global race in innovation.”
https://www.gov.uk/government/news/year-of-code-and-500000-fund-to-inspire-
future-tech-experts-launched
By building a world-class technology curriculum at the early stages of K-12, Australia
should hope to avoid the approach of ‘capstone’ subjects such as ICT being taught as
part of home economics or woodwork. Another example of early stage education in
creativity and innovation foundation is Estonia, a country of only 1.29 million people,
where publicly educated students are required to learn coding at ages 7-8 and continue
to the final year of school www.innovatsioonikeskus.ee/en
3.2 Digital literacy of SMEs
SMEs account for 96% of Australia’s businesses, 70% of employment, and 57% of
value-add. But most recent analyses by Governments indicate that SMEs have not
embraced ICT as a work-productivity enabler or a tool to expand their markets both
locally and globally. Their take-up of cloud technology for example, has been low, and
use of social media to enhance online presence is similarly low.
Reasons given for this low take-up include cost and time to implement; most small
businesses focus on their business survival, not ways to improve their growth. They
18
will need to embrace ICT products and services as a critical, “must have” element of the
business that drives innovation and builds competitive advantage.
Government has a role to play in lifting this awareness. More facilitative programs to
educate SMEs about ICT tools and online presence, and a vastly improved national
broadband infrastructure capable of supporting SME growth are essential.
3.3 Rethink government levers
Government can do a lot to support innovation and to develop a National Innovation
System. It has a huge influence on how things are done. A third of GDP (including
transfer payments) goes through internal revenue. Its services are among the largest
employers. It is the largest buyer of information technology. Its systems touch
everyone. It sets the rules of the game in health, education, finance and beyond.
Government remains risk averse, but blanket caution is the wrong rule. Government can
do more to offer data for the community to re-use, for example by choosing open data
protocols as standard, and to open government processes to input from innovators,
particularly through the procurement process. This includes providing opportunities for
small and medium sized enterprises to compete effectively and bring to the table,
without disadvantage, innovative new business solutions underpinned by new and
emerging digital technologies. Notwithstanding assertions to the contrary, this is not
happening in the public sector at the moment.
Government can also foster innovation by getting out of the way in many areas. Where
the regulatory burden is high, government should reduce barriers and compliance costs;
on the contrary, regulatory burden on small business has increased over the recent
years. Regulatory changes that permit small firms with new ideas to access capital,
manage cash flows, and share risk will be key. Tax treatment of current employee share
options must be reviewed to provide the encouragement to innovation available in the
pre-2009 regulation.
Finally, Government needs to show leadership by placing innovation on the policy
agenda as a priority. Creation of a Chief Innovator role is essential, together with a
clear statement of national vision for an innovative Australian future, which is not tied
inextricably to resources or agriculture.
SECTION 4 – Terms of Reference
The challenges to Australian industries and jobs posed by increasing global competition
in innovation, science, engineering, research and education, with particular reference to:
(a) The need to attract new investment in innovation to secure high skill, high
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wage jobs and industries in Australia, as well as the role of public policy in
nurturing a culture of innovation and a healthy innovation ecosystem;
The Australian Government has a longstanding traditional role in facilitating
competitiveness and coordinating actions to enable growth. This cuts across many policy
domains, including tax policy, trade and investment, skills and education, regulation and
industry policy, and governance, such as the federation and how government
enterprises are made to compete. “Over the last several years this role has been poorly
coordinated and executed. Risk taking, which is vital to innovation and competitiveness,
has been stifled by heavy-handed regulation, and market design has been poorly
directed.”12
The economic challenges Australia faces in the next twenty years are too vast to be met
by Government, business or industry acting alone. Active collaboration between the
three sectors, including funded R&D institutions, is essential. This will require educators
from primary to secondary levels to develop structured relationships with business and
government leaders so they better understand what type of skills are in demand in the
markets their students will go into. Educators must start to create ‘digital career’
opportunities for their students as well as keep themselves up to date on the changing
nature of careers and markets, and embrace bringing those markets into their
classrooms.
Business must ‘sell’ their needs and opportunities to schools and students early in the
cycle, to acquaint those students with options, requirements and work experience
through internships and apprenticeships. Providing these on-ramps for younger skills
will ease the to-work transition and encourage better job-readiness.
Government needs a more cohesive and joined-up innovation policy that addresses not
just the education issues but also onerous tax and regulation on innovative businesses
coupled with the lack of facilitative incentive schemes. The critical loss of talent due to
the failure of the employee share option scheme also augurs ill for a future innovative
society.
(b) The Australian Government’s approach to innovation, especially with respect to
the funding of education and research, the allocation of investment in
industries, and the maintenance of capabilities across the economy;
Australia has introduced a raft of policies and programs intended to boost innovation,
12 Building Australia’s Comparative Advantage, BCA, page 34
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support workforce development and improve the education and training system. The
Digital Education Revolution, Job Services Australia, Australian Government Skills
Connect, the Investing in Experience Program are just some of the programs introduced
since 2008. Outcomes from these and other related schemes are negligible. As with
many good programs, they have not been adequately resourced or promoted.
A 2011 Review in School Funding recommended significant changes to funding for
schools to combat declining performance of Australian students. Many of its
recommendations have not been acted upon. In 2006, COAG called for increased in the
proportion of adult workers with skills and qualifications to contribute to the workforce,
but these aspirations have not seen their way into any policy since then. More practical
schemes such as Enterprise Connect and Commercialisation Australia have been
terminated, replaced by the Entrepreneurs Infrastructure Program (EIP), which is not
geared towards risk-taking innovative activities, but more focused on rewarding those
who are already successful.
Combined with severe funding cuts to NICTA and CSIRO, institutions that have
developed and commercialised successful innovative products, this approach to building
a successful innovation culture and system in Australia is disappointing, especially when
compared with activities and policies in like-minded economies such as the UK and the
US.
(c) The importance of translating research output into social and economic benefits
for Australians, and mechanisms by which it can be promoted;
While there are some excellent examples of university-based research resulting in
commercially valuable innovation in Australia, in general the main priorities of university
personnel in the past have been academic publication and high quality teaching, rather
than seeking a commercialisation avenue for any successful idea. This is not necessarily
the fault of the university sector; AVCAL notes in its submission to this Committee that
current research funding priorities are skewed towards academic publications,
consultancy reports, major exhibitions, invited keynotes and other contributions to the
research field, citing ARC principles on Performance Evidence for successful grants.13
The challenge of how best to commercialise high quality research brings us to the issue
of a research institution such as NICTA. Companies tend to base their research activities
at optimal locations for skills, regulation environments, ease of doing business and
strength of ideas. Independent research institutions, tasked to commercialise as many
of their ideas as practicable in local and global markets, are also perhaps better venues
13 Australian Private Equity & Venture Capital Association Ltd, Submission to Senate Inquiry into Australia’s Innovation System, page 10.
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for commercially directed research.
Mechanisms such as a venture capital, effective R&D schemes, incentives for innovative
start-ups trying to commercialise and an effective share option scheme to assist
innovative start-ups through the ‘valley of death’ to commercialisation are lacking in
Australia. Examples of appropriate mechanisms from the UK are instructive, and should
be worthy of possible introduction in Australia.
• R&D Tax Credits; Qualifying R&D spend by SMEs is eligible for a corporate tax super deduction currently of up to 200% and, under certain circumstances a tax credit repayment.
• Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS); Offers income and capital gains tax reliefs for investors in certain small, higher-risk companies.
• Enterprise Management Incentive (EMI); Allows small and medium sized businesses to reward employees through provision of share options in a very tax effective manner
• Entrepreneur’s Relief; Reduces CGT on qualifying gains to an effective rate of 10% up to a lifetime limit of £10m of gains
• Optimising capital allowances; Alongside the standard capital allowances scheme there are enhanced allowances for investing in R&D, energy efficient equipment and investment in certain Enterprise Zones
• Small Business Rate Relief; Qualifying small businesses may be eligible for relief of up to 100% on business rates for 2012/13
(d) The relationship between advanced manufacturing and a dynamic
innovation culture
ACS has no particular comment on this term of reference except to say that no sector of
the economy, including manufacturing, can expect to compete effectively in today’s
globalised world unless it embraces an innovation culture.
(e) Current policies, funding and procedures of Australia’s publicly-funded
research agencies, universities, and other actors in the innovation system;
ACS considers that the termination of all government funding for NICTA after 2016 must
be reviewed, to allow for appropriate transition to a self-funded model over a longer
period of time, and to consider alternative funding models as has been done in the UK
with the Catapult Networks, which serve as an example;
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The UK has developed ‘Catapult networks’, which are designed to transform the UK’s
capability for innovation in seven specific areas and help drive future economic growth.
The seven areas are high-value manufacturing, cell therapy, offshore renewable energy,
satellite applications, connected digital economy, future cities and transport systems.
The Catapult networks are a series of physical centres where the very best of the UK’s
businesses, scientists and engineers work side by side on late-stage research and
development, transforming high-potential ideas into new products and services to
generate economic growth. The funding model will vary through the life of the
technology and innovation centre and can be expressed in simplified terms as following
the one-third, one-third, one-third model. Under this model, centres are required, when
fully established, to generate their funding broadly equally from three sources:
•Business-funded R&D contracts, won competitively
•Collaborative applied R&D projects, funded jointly by the public and private sectors,
also won competitively
•Core public funding for long-term investment in infrastructure, expertise and skills
development.
Each Catapult centre is its own separate legal entity, controlled by their own boards with
an executive management team responsible for the day-to-day management of the
centre.14
NICTA’s success in spin-off companies (fourteen so far), attracting funding from other
sources, conducting a successful PhD program and collaborating with both private sector
bodies and state governments indicates that it can move to a self-sustaining model but
will require more time for that transition.
In addition, University curricula must be reformed to link more closely with business and
industry needs; in this regard the Australia Council of Deans of ICT, working
collaboratively with ACS for accreditation of ICT courses, is well positioned to affect this
reform under guidance. The current methodology of using the Common Body of
Knowledge (CBoK) approach is being updated to ensure it remains relevant to skills for
the information age.
(f) Potential governance and funding models for Australia’s research
infrastructure and agencies, and policy options to diversify science and research
14 See BCA op.cit, page 35
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financing;
It is widely agreed there is insufficient funding15 in Australia to support innovative
activity and entrepreneurship; many innovations leave Australia for more encouraging
environments where access to capital and clusters of research are fostered by other,
more pro-active governments.
Industry and business need to work cooperatively with government to develop joint
funding schemes based on commercialisation success for research coming out of
independent research institutions, and those universities with sustained histories of
successful research leading to spin-offs or other commercial outcomes. Not all
universities are suited to research; government should fund those that have displayed
successful commercialisation.16
(g) The effectiveness of mechanisms within Australian universities and industry
for developing research pathways, particularly in regards to early and mid-
career researchers;
Given the data presented in the previous response, ACS considers that funding grants to
universities must be changed so that research outputs are classified more appropriately
by the ARC.
(h) Policy actions to attract, train and retain a healthy research and innovation
workforce;
Development of better Government leadership and vision for an innovative Australia is
essential; innovation and the ‘smart economy’ are not particularly evident in the current
Government agenda. If we do not address the innovation issue with real urgency, Asian
competition will very soon attract our better skills out of Australia to more encouraging
environments.
To encourage and direct innovative ideas in our local environment, the Government
needs to appoint a Chief Innovator from the private sector (similar to the current Chief
Scientist but with an exclusive focus on innovation), not connected to any department or
agency, reporting to the Prime Minister and responsible for the comprehensive
development of an Innovation System based on joined-up and cohesive policies and
programs which are properly resourced and targeted. Qualities required for a Chief
15 Australia provides approx $8.6 billion in funding to research and development each year; $2.9 billion goes to the University sector. Source: BCA, page 52 16 AVCAL notes that there is a low priority given to translating these funds into commercial outcomes, with total Government support for commercialisation amounting to 2% of the federal budget allocation in 2012. Op.cit, page 10
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Innovator are:
• seek out potential new ideas
• see benefits and opportunities others don’t
• allow for reasonable failure rates
• have a longer term vision
• entrepreneurial and realise the benefits of adaptation
• lead by example, good mentor and well connected
(i) Policy actions to ensure strategic international engagement in science, research
and innovation; and
The government should look to emulate the UK’s successful innovation program to
develop areas where Australia has potential comparative (or “unfair”) advantages, such
as the professional services sector. It should also implement changes to the
arrangements surrounding employee share schemes that will improve the
competitiveness of Australian businesses and enhance the operation of the Australian
innovation system. This should be done by bringing Australia into line with the rest of
the world by making the point of taxation for employee share schemes at the time at
which the shares, or rights are exercised. The government should further develop the
Entrepreneurs’ Infrastructure Program. To ensure its effective operation, the program
should be focused on driving collaboration, genuine risk-centred innovations and
providing access to networks.
If Government can attract international venture capital to Australia to assist with filling
the funding gap, innovators and entrepreneurs will have more confidence in this market
and the Government’s commitment to address market failure. This will require changes
to the current capital market, the possible introduction of corporate venturing programs
(where large companies invest in smaller start-up, with no tax disadvantage) and the
reduction of capital gains tax for technology start-ups.
(j) Policy options to create a seamless innovation pipeline, including support
for emerging industries, with a view to identifying key areas of future
competitive advantage.
The government has a role to articulate a direction and growth strategy. “It should
explain where Australia stands today, how the government plans to build prosperity, the
benefits of reform that will accrue to Australians, and the role of major government
policy elements – tax, fiscal policy, population policy, employment policy, better
regulation, industry policy – in helping to achieve this direction. By clearly articulating a
direction, it enables and encourages the public service, the community and businesses
to organise their activities, strategies and approach in order to contribute to achieving
25
this direction. Businesses act on signals; it is essential that these signals are clear and
consistent.”17
Government needs to better understand how innovation works. Innovation generally
starts with bright ideas, and these ideas grow within a vibrant and creative education
system; the ‘pipeline’ thereafter is usually towards venture capital, a start-up company
and market success or failure. For each stage in that pipeline, government provides
support or sets legal frameworks.
But there are leaks in the pipeline. Education systems at all levels are not producing
work-ready creative thinkers. Much research is never cited and much cited research is
not applied. Some intellectual property may not be worth protecting. Employee share
taxation is failing start-ups, which rarely use a tool that should be a great fit for them.
R&D tax concessions are too difficult to use. All these breaks in the innovation channel
require attention by the Government, combined with a robust high-speed broadband
infrastructure (which we still do not have) to support collaboration between all
stakeholders.
Conclusion
Innovation has always been important to Australia’s economic development; from
wealth sources such as land, natural resources, unskilled labour, manufactured assets
and finally to the creation of intangible assets such as knowledge. Today’s advanced
economies are characterised (and dominated) by people who work with their heads, not
their hands.
This is reflected by the dominance of the service sector in those advanced economies.
No nation today can become truly prosperous unless it develops a knowledge-innovation
economy, and this has implications for every aspect of a country’s education system,
tax and regulation system, and political leadership generally. ACS strongly urges the
Government to seize what may be the last chance to develop policies and environments
that support Australia moving towards an innovative future.
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17 Building Australia’s Comparative Advantage, op.cit, page 34