towards a smarter - ibm · 2009-08-12 · towards a smarter economy: a roadmap to making it happen...

Towards a smarTer economy: A roAdmAp to mAking it hAppen

contents

Introduction ______________________________________________________ 1

Executive Summary _______________________________________________ 2

Australia’s Systemic Inefficiencies __________________________________ 4

Vision for the Future _______________________________________________ 9

Smarter Energy _______________________________________ 11Smarter Water ________________________________________ 15Smarter Traffic ________________________________________ 17Smarter Healthcare ____________________________________ 21Smarter Broadband Communications ______________________ 25

Roadmap for a smarter economy __________________________________ 29

What capabilities do we need? ____________________________ 29Where are we now? ____________________________________ 31How do we get there? __________________________________ 37 1. Think big, but start small __________________________ 38 2. Decide what not to do ___________________________ 40 3. Collaborate early and often ________________________ 42 4. Exploit the technology opportunities _________________ 44 5. Expect and encourage behaviour change _____________ 46 6. Enable capabilities ______________________________ 48 7. Track progress and celebrate success _______________ 50

A ten year journey ________________________________________________ 53

Are you ready for the smarter economy? ___________________________ 57

Conclusion ______________________________________________________ 60

Australia’s Leadership Forum Delegate Companies ____ Inside back cover

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Introduction

Across the world, IBM is striving to bring a new level of intelligence to how our planet works – how every person, business, organisation, government, natural system and man-made system interacts. We believe each interaction represents a chance to do something better, more efficiently, more productively. More importantly, if we make every system smarter, we have a chance to open up new possibilities for progress.

To understand what that means for Australia, on 30 April 2009, 40 of the nation’s senior public and private sector leaders met at the Australia’s Leadership Forum to consider the systemic issues hampering Australia’s productivity – telecommunications, transport, energy, water and health – and the potential to address these issues by building intelligence into our infrastructure.

The Forum concluded that digitally aware infrastructure will fundamentally improve the quality of life for all Australians. For example:

• An intelligent road system will help us to reduce traffic congestion by warning people of traffic jams and suggesting alternate routes;

• An intelligent energy system will have smart meters that help people to better manage their electricity bills;• An intelligent water system will help to reduce water restrictions by minimising waste across the system;• An intelligent health system will improve the speed and quality of treatment and help to take the pressure

off hospitals; and • Intelligent broadband communications will deliver new services, create new industries and allow more

Australians to work from home or avoid work-related travel.

The information these smarter systems would generate – and the services they would enable – could help us to tackle many of the issues arising from climate change, drought and our aging population.

Given these potential benefits, despite the diversity of their agendas, the scientists, engineers, business leaders, environmentalists and policy makers at the Forum reached a clear consensus: Australia needs to merge its physical infrastructure, of roads, rail, airports and buildings, with the digital infrastructure of broadband, the internet and data centres.

This will create digitally aware roads, water networks, energy grids, health systems, cities and buildings – giving Australia an intelligent infrastructure that can collectively support pressing national objectives, such as improving our global competitiveness or reducing our carbon emissions targets.

The Forum also concluded that our telecommunications, transport, health, energy and water systems do not exist in isolation: they are as interdependent as the inhabitants of an ecosystem. As we start infusing these essential systems with intelligence, we must ensure their integration – not just technically, but in terms of their purpose.

To help clarify that purpose, this document summarises the discussions at the Forum, presents the information shared with its delegates and proposes a roadmap for developing Australia’s intelligent infrastructure over the next ten years.

We hope it inspires support for the rapid adoption of smart infrastructure, which we believe offers a very promising path for Australia to lift its long-term economic growth potential.

Managing Director, IBM Australia and New Zealand on behalf of the Australia’s Leadership Forum

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TowARDS A SmARTER EConomy: A roADMAp To MAkING IT HAppEN

new opportunities, new ConversationsMany of the everyday systems on which our way of life depends are inefficient and unsustainable. But now, smart technologies give us the opportunity to make our transport, water and energy networks, cities and buildings digitally aware. If infrastructure is digitally aware it can sense and communicate problems, give us information to make better decisions, reduce inefficiencies – even predict and prevent failure.

For example:

• An intelligent road system will help us to reduce traffic congestion by warning people of traffic jams and suggesting alternate routes;

• An intelligent energy system will have smart meters that help people to better manage their electricity bills;

• An intelligent water system will help to reduce water restrictions by minimising waste across the system;

• An intelligent health system will improve the speed and quality of treatment and help to take the pressure off hospitals; and

• Intelligent broadband communications will deliver new services, create new industries and allow more Australians to work from home or avoid work-related travel.

The information these smarter systems would generate – and the services they would enable – could help us to tackle many of the issues arising from climate change, drought and our aging population.

According to new researchi by Access Economics, smart systems also offer the most promising path for Australia to lift its long-term economic growth potential. Conservative estimates from a ten year plan to adopt smart technologies in electricity, irrigation, health, transport and broadband communications point to benefits including:

• Increasing GDp by 1.5% over ten years;• Increasing the net present value (NpV) of gross domestic product (GDp) of

$35-80 billion over the first ten years; • Creating more than 70,000 jobs in 2014 alone.

But, to achieve these benefits, we will need to sharpen our focus on two capabilities:

• Technology capability The availability and deployment of the required technology, including its effective integration and funding.

• Change capability The behavioural change required for the technology to be adopted, bearing in mind the complex stakeholder relationships involved. This will require proactive collaboration, societal shifts, microeconomic reform and regulation.

executive summary

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The starting point is to develop a comprehensive and integrated plan that provides a single view of the whole program of effort required and the matching benefit streams. This plan will not only provide the roadmap for achievement, but also a clear sense of purpose and an appreciation of how the moving parts will need to work together to achieve success.

Then, we need to make a solid start very quickly – to get the process moving and to harness the resources and capabilities required.

In doing so, we must bear in mind seven key principles:

1. Think big, but start smallDefine manageable chunks of activity that will propel us down the path towards our overall vision for a smarter economy.

2. Decide what not to doAgree on priorities, so we can focus on what needs to be delivered and when. Assess projects in terms of both value and potential for a quick win.

3. Collaborate early and often‘Connect the dots’ between governments, researchers, businesses and citizens.

4. Exploit the technology opportunities Use international standards and fuse physical and digital infrastructure.

5. Expect and encourage behaviour change recognise the importance of community acceptance and the level of resources required to drive and support societal shifts.

6. Enable capabilitiesSupport change with regulation and microeconomic reform to increase productivity.

7. Track progress and celebrate success

To move to a better and smarter economy, we need to do things differently. redressing the challenges outlined earlier will not happen automatically. Indeed, we will need a strong focus to make the required modifications to the way we use technology both in specific industries and as a nation as a whole.

To build a sustainable economic future, Australia must make a swift, concerted and collaborative effort to form and work towards a vision for smarter digital infrastructure.

We have the capabilities and opportunity to build a smarter economy. Now we need our government, industry and academic leaders to agree on the vision and gather the resources to make it happen.

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australia’s systemic Inefficiencies

Many of the systems on which our way of life depends are inefficient and unsustainable. Unnoticed and, largely unremarked on, society pours away billions of dollars worth of many precious resources – every day.

EnergyAustralia’s electrical grid was built for another age, when energy was cheap and climate change wasn’t an issue. Using now outdated technologies, it was designed to be supplied by a few large, central power plants and to distribute power in one direction.

Today, Australia’s government has committed to reduce our greenhouse gas emissions by as much as 15% by 2020. To achieve this, our grid will need to integrate renewable energy – which will come from both large as well as many small, local generators. We also need to allow consumers to sell energy back to the grid and empower them to improve energy efficiency.

our current grid has limited intelligence and is simply not capable of meeting future challenges.

• Australia’s energy demand is projected to grow by 36.8% by 2030;• power generation creates 50% of our greenhouse gas emissions; ii • Up to 10% of energy is lost in transmission through grid inefficiencies;• 11% of energy is wasted because consumers lack information; • over 90% of consumers want tools to help manage their energy use. iii

“This decade productivity has declined. It’s basically been cut by a third compared with what happened in the ‘90s. So there’s a real need to lift our game.”

ric Simes Access Economics

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WaterWater resources in Australia are at a critical point. Unprecedented droughts, particularly over the last 10 years, have motivated governments, industry and the community to address this issue. Everyone recognises that, to make our economy sustainable, we need effective and efficient water systems.

We are not alone with this problem. Globally countries are struggling with issues relating to water quality, water quantity, water use, water management and waste management.

In Australia:

• Water scarcity places significant stress on our supplies. We are hard pressed to meet our water use needs for domestic, agriculture, community and environmental purposes;

• our water infrastructure is largely outdated and, in some cases, the technologies we rely upon to manage our water are up to 100 years old;

• We are struggling to respond quickly enough to the additional pressures of climate change, which will further reduce our natural water supply.

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Transportour current transport infrastructure and management approaches can’t handle Australia’s traffic. As the most urbanised nation on the planet, Australia’s cities are already battling traffic congestion, with growing populations and the proliferation of cars making the situation worse. Congestion is a source of costly delays and frustration, pollution and wasted fuel – not to mention collisions.

Beyond our cities, poor transport infrastructure is holding back our economy, with ships waiting to unload in our ports and half-empty containers travelling across the country.

To date, our governments and our political system have resulted in decisions focused largely on short-term fixes to eliminate these problems: building a new motorway, widening a road, putting up signs and establishing commuter lanes. While providing temporary relief, these short-term solutions only add to the long-term problems by increasing the number of vehicles on the road and exacerbating the related environmental, cost and safety concerns.

The solution lies not just in more concrete and signs, but in smarter transport systems and better informed commuters so they can travel faster and safer – and with greater energy efficiency than ever before.

• The cost of time spent sitting in traffic is over $11.1 billion annually – not including the cost of wasted fuel or the cost to the environment; iv

• The length of congested road is forecast to treble in the next 20 years; v

• 700,000 empty containers clutter our ports each year; vi

• A ship waiting to be unloaded costs $50,000 a day. vii

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HealthcareThe rising cost of services, the growth of Australia’s ageing and overweight populations, the shortage of clinical skills and the limited access to health information and treatments are pushing Australia’s health system to the limit. This is not only putting individual Australians at risk. As a country, we need to reduce the incidence of illness, injury and chronic disease to boost our workforce productivity and participation.

• over the next four decades, the number of people over 85 is forecast to quadruple to 1.6 million; viii

• The average pharmaceutical Benefits Scheme costs for a person aged 65–74 are more than 20 times greater than for an 15–24 year old; ix

• The percentage of GDp spent on health is projected to double in a generation; x

• 20-30% of treatment is not based on the latest research evidence; xi

• poor diabetes management led to 200,000 preventable hospital admissions in 2004-05;

• The Victorian Auditor-General reported 135,000 Victorians may have experienced a potentially or actually harmful “clinical incident” in 2007;

• The Australian Health Workforce Institute claims: “nurses are an endangered species.”

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Broadband CommunicationsJust as, in past centuries, our nation invested in rail, highway, and telephone infrastructure, so we now need to build up Australia’s digital infrastructure. In the last century, creating a new high-speed transportation system enabled businesses to expand much more quickly, helping drive economic growth for decades.

Today, we live in an increasingly digital world, with online assets traded domestically and internationally every day. Smart, high-speed telecoms will deliver lasting improvements to business productivity and enduring consumer benefits that raise the quality of life by enabling telecommuting, telemedicine, entertainment, access to e-government facilities, and a wealth of other online services.

• Australia ranks 16th in broadband penetration among oECD countries; xii

• Australia has an average download speed of 1.7Mbps, against the oECD average of 9.2; xiii

• The World Economic Forum ranks Australia 25th for accessibility of digital content, 35th for the quality of competition in the Internet Service provider sector and 29th for the lowest cost of broadband; xiv

• reports estimate Australia’s e-commerce as half that in the US. xv

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Today, we are seeing the infusion of intelligence into the way the world literally works.

Three things have brought this about:

• The world is becoming instrumented. By 2010, there will be a billion transistors per human, each one costing one ten-millionth of a cent;

• The world is becoming interconnected. With a trillion networked objects—cars, roadways, water channels and pipelines, appliances, pharmaceuticals and even livestock—the amount of data created by this network of sensors grows exponentially;

• Algorithms and powerful computer systems can analyse and turn those mountains of data into actual decisions and actions that make Australia work better. Smarter. More intelligent.

This means we can make our transport, water and energy networks, cities and buildings digitally aware.

If infrastructure is digitally aware it can sense and communicate problems, give us information to make better decisions, reduce inefficiencies – even predict and prevent failure.

By connecting our economic, natural and societal systems through smart technology, we will not only reduce systemic inefficiencies but create the potential for tremendous economic, environmental and societal rewards.

According to new research by Access Economics, smart systems offer the most promising path for Australia to lift its long-term economic growth potential.

Access Economics conservatively estimates that adopting smart technologies in electricity, irrigation, health, transport and broadband communications will:

• Grow GDP by 1.5% in ten years;• Increase the net present value (NpV) of Gross Domestic product (GDp)

of $35-80 billion over the first ten years;• Create more than 70,000 jobs in 2014 alone.

In each of these five areas, the benefits far outweigh the initial capital costs involved.

The key benefits for each specific area are outlined overleaf. However, these are just the start. Even more exciting potential arises as we examine the overarching, societal advantages of digital infrastructure.

For example, as fibre extends to the home, it will enable telenetworking, thus reducing the need for motor transport as communities and workplaces re-align themselves. Thus, digital infrastructure could actually reverse the separation of work and home that started in the industrial revolution, delivering environmental, health and efficiency benefits.

Vision for the Future

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We have an opportunity to transform Australia’s energy grids to: protect our electricity supply; empower consumers; and reduce our greenhouse gas emissions.

Smart grid technologies provide the potential to significantly improve efficiency in the electricity sector through better monitoring and control of the energy network as a supply chain through to end users.

We can use new technologies, such as smart sensors, new analytical tools and distributed generation, to create a ‘smart grid’ – a digital, automated, participatory network that shares responsibility between energy users and energy providers and allows consumers to proactively manage their energy usage.

With smart grids, energy companies can locate and rapidly diagnose a power outage, re-route power, and tell consumers when power will be restored. Smart grids also allow energy and utility companies to better understand power demand in real time, so they can improve delivery and dynamically incorporate energy from different sources. These capabilities support efficiency, greater use of sustainable energy sources, such as wind and solar, and will help meet rapidly growing energy demand around the world such as enabling widespread charging of new devices like “plug-in” electric vehicles.

According to Access Economics, investing $3.2 billion in smart grid technology over five years that lowers electricity use by 4% will:

• Increase the NpV of GDp by $7-16 billion over ten years;• Create 17,600 jobs.

Smarter energy grids

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Protect our electricity supply...with an efficient, smart network that monitors its own health, remotely senses damage and predicts demand.

With an analogue grid, energy providers often don’t know there’s an outage until a customer calls them, and most are reliant on manual restoration processes.

Whereas, a smart grid can be remotely controlled with in-built intelligence that detects problems and re-routes the flow of power. The result is fewer and shorter power outages, reduced maintenance costs, extended asset life and lower transmission and distribution costs.

SMART IS knowing exactly where a power outage occurs and instantly dispatching a crew to fix the problem.

SMART IS Extending asset life by preventative maintenance: sensing and managing the stress placed on aging equipment.

SMART IS Detecting and minimising outages by sensing potential equipment failures.

SMART IS Increasing efficiency by using real-time data to match energy generation with energy needs.

Smart Project Case StudyAs part of its intelligent network program, EnergyAustralia is rolling-out 12,000 sensing devices throughout the electricity distribution network to create a smart grid. This world-class intelligent network will carry the necessary data for EnergyAustralia to deliver energy more efficiently, reduce outages through faster fault location and preventative maintenance and, to work towards managing distributed energy sources such as solar and storage devices.

“A smart grid will do for utilities, what the internet did for information.”

Craig MurrayCountry Energy

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Empower consumers…with real time information on their energy use, variable pricing and the opportunity to generate and sell their own energy back to the grid.

right now, consumers can’t see how much their energy use is costing them until they get their bill. If they knew when energy cost less and which appliances were using the most electricity, they would make smarter choices about energy use. A smart grid with smart metering gives customers the information they need to put off high-consumption activities until non-peak times of the day. It allows people to manage their energy use to reduce cost or environmental impact – or both. And it gives homes and schools running small renewable generators greater flexibility in buying, storing and selling energy.

SMART IS Meters that show consumers their energy use in real time.

SMART IS Variable pricing that allows consumers to choose off-peak energy.

SMART IS Analysing customer energy usage and providing customised energy services to meet their needs.

SMART IS Helping customers establish a “smart home” that turns appliances on and off to reduce energy costs.

Reduce greenhouse gas emissions…by stopping energy wastage, connecting renewable generators to the grid and allowing consumers to choose clean power sources.

our current grids need to be more efficient, with up to 10% of energy lost in transmission and delivery. Nor are they geared up to deal with a high level of variable supply from renewable energy sources, which require energy providers to adapt their capacity planning to the fluctuating and unpredictable nature of wind and solar energy collection.

Smart grids aren’t just more efficient; they can connect with and manage a large number of small generators, enabling renewable energy.

SMART IS reducing transmission and delivery losses with an efficient grid.

SMART IS Smoothing power demand to take advantage of off-peak supply.

SMART IS Maintaining a sufficient, cost-effective power supply while managing stringent greenhouse gas emissions targets.

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We have an opportunity to transform the way Australia manages water to: create an integrated, intelligent system that helps us to use water wisely.

Irrigation accounts for 70% of Australia’s freshwater usage, but water efficiency in irrigation is below 50%, with losses evenly split between the distribution system and inefficiencies on farms. According to Access Economics, adopting smart systems through the irrigation areas of the Murray-Darling Basin that reduces water use by 15% will:

• Increase the NpV of GDp by $420-670 million over ten years;• Create 800 jobs (due to the low-labour intensity of agriculture).

If implemented across all Victorian irrigation districts, smarter water could save 400 million cubic metres of water (160,000 olympic size swimming pools) per year.

Create an integrated, intelligent water system…with a smart network that monitors its own health, remotely senses damage, assesses water availability and predicts demand.

We need a smart water system that helps manage end-to-end distribution, from reservoirs to pumping stations to smart pipes to holding tanks to intelligent metering at the user site – so we can manage water consumption efficiently.

Intelligent water solutions will help our communities to use and re-use water

supplies. They will also help us to accurately monitor, assess and forecast the availability, condition and use of water, and enable flexible pricing strategies.

Smarter water systems will also support the National Water Initiative priority of greater national cooperation and coordination in managing this vital resource, by ensuring Australia’s local water systems can all integrate and communicate with each other.

Use water wisely…by only irrigating where and when it’s needed.

We can significantly improve the efficiency of our current irrigation practices, which account for 70% of our fresh water use. Today, much of our water is lost through evaporation, leakage and manual irrigation practices.

SMART IS Ground sensors monitoring soil moisture.

SMART IS Computer analysis to determine how much water each plant needs.

SMART IS Automatically directing drip irrigation when, where and only in the quantities needed.

SMART IS Using technology to accurately report what water is available, where and at what price.

Smarter Water

“The smart irrigation system at Coleambally runs at 90% efficiency.”

professor Iven Mareels University of Melbourne

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We have an opportunity to transform Australia’s transport systems to: cut traffic congestion; empower commuters; and make our roads safer.

We can infuse intelligence into our entire transportation system – streets, bridges, intersections, ports, rail, signs, signals and tolls – which can all be interconnected and made smarter.

Intelligent Transport System (ITS) technologies have the potential to address a range of transport issues, in particular helping to: improve safety, efficiency and competitiveness; and reduce environmental impacts.

According to Access Economics, adopting ITS technologies will:


Cut traffic congestion…with intelligent transport solutions that monitor, manage and predict traffic, working the whole system to prevent gridlock.

Short-term solutions to eliminating congestion often merely shift the problem: from freeways to city streets; from city centres to suburbs.

our current road system is not efficient, and simply building new roads is not the answer. We need to build intelligence into our current transport network.

SMART IS Using cameras, fibre optics and analytics to gather, analyse and share information across our transportation systems.

SMART IS Making real time adjustments to traffic lights to ease congestion.

SMART IS Electronic tolls with flexible tolling options.

SMART IS predicting what will happen to traffic congestion during new construction and better planning roads and public transport in that area.

SMART IS Integrating ports with our smart road infrastructure and phasing out manual processes for shipping documentation.

Smarter traffic

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Empower consumers…by giving them real time information on traffic problems, suggesting alternative routes and offering better public transport options.

private vehicles form 90% of Australia’s traffic. But traffic congestion and poor public transport leaves Australia’s commuters stressed and angry. They come to work less productive because of their challenging journey to work.

research shows most commuters would be happy to switch from cars to public transport – if the system actually worked.

SMART IS Using new sensor technologies, GpS and satellites to tell motorists about the best routes and parking during rush hours.

SMART IS Helping commuters make more informed choices about public transport, telecommuting or driving in non-peak periods.

SMART IS An integrated public transport system that tracks and adjusts services to meet changing commuter needs.

SMART IS Fleets of smaller buses that change route on the fly and go where they’re needed most.

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Make our roads safer…by reducing rush hour traffic and using intelligent vehicles that improve safety and reduce greenhouse gas emissions.

Smarter traffic systems will address climate change and air quality concerns by reducing the wasted fuel and emissions from congestion.

Businesses can play their part by reducing rush hour traffic by allowing employees greater workday flexibility and work-at-home options. They can also help with and benefit from intelligent fleet management, including: better route planning; off-peak freight movement; and alternative fuel and hybrid vehicles.

In addition, smart cars will help keep traffic moving, cut greenhouse gas emissions and reduce accidents. Intelligent cars will be able to sense other vehicles and road conditions ahead, allowing them to take preventive actions to avoid dangerous conditions. They will also tell you where traffic is jammed up and find you an alternative route.

SMART IS Active safety capabilities that sense and respond to driver behaviour and road conditions.

SMART IS Sending information captured from braking patterns – for example, from vehicles approaching a recent accident – to other vehicles.

SMART IS Introducing common standards so all vehicles can communicate with each other and integrate with road sensors.

SMART IS Hybrids and battery technology leading to sustainable vehicles.

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Smarter healthcare

We have an opportunity to transform Australia’s healthcare systems to: optimise operational performance; deliver patient-centric care; and make better use of health information.

A smarter healthcare system starts with better connections, better data, and faster and more detailed analysis. It means integrating our data and centring it on the patient, so each person owns their information and has access to a networked team of collaborative care. It means moving away from paper records, to reduce medical errors and improve efficiencies. And it means applying advanced analytics to vast amounts of health data, to improve outcomes.

According to Access Economics, investing $6.3 billion in an integrated national electronic health records system will:


The healthcare sector is currently almost 10% of the national economy, a figure set to grow steadily as the population ages and healthcare costs rise. Thus, any improvements in delivering healthcare services will yield substantial gains to the national economy.

Optimise operational performance…by streamlining clinical processes and using technology to deliver both cost efficiencies and better clinical outcomes.

Cumbersome work practices, archaic IT systems and limited connectivity are wasting hundreds of millions of dollars each year and putting lives at risk. As a matter of urgency, Australia needs to connect its primary healthcare providers, hospitals and patients and have digital records available whenever and wherever a patient presents.

At the same time, we need to improve operational excellence within individual institutions. For example, our nurses need computerised rostering to ensure they are allocated at the greatest point of need – and to stop them burning out.

SMART IS Accessing an individual’s full medical and family history with one view.

SMART IS Standardising clinical practices across the Australian health system by integrating information between healthcare institutions.

SMART IS optimising processes using operational performance data and clinical and business results.

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Deliver patient-centric care…By encouraging personal responsibility for healthier choices, while shifting our focus toward patient-centred activities.

our healthcare systems should connect Australians to information, to experts and to each other – to help them to act proactively to support their own health and those they care for.

For example, smarter healthcare monitoring systems can give a busy mother daily electronic updates on the health status of an aging parent who lives alone, is suffering from high blood pressure, and is on multiple medications.

or, a travelling businessperson, who is diabetic, can have a real-time discussion about his blood sugar levels with his Gp hundreds of miles away

SMART IS Enabling individuals to access their medical records from anywhere in the world.

SMART IS Giving people real-time line of sight and responses to individual health information.

SMART IS Connecting communities with remote healthcare professionals.

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Make better use of health information…With a focus on more personalised prevention, prediction, early detection and treatment.

More complete health information will help us to better predict, prevent, detect and treat disease. At the micro level, this will mean using real-time and holistic data to speed insights and increase confidence that medical decisions will yield the best outcomes for an individual patient. At the macro level, we can analyse entire populations to gain deeper understanding into the nature and treatment of different diseases.

SMART IS Analysing, reporting and predicting the progression and impact of chronic diseases like diabetes, heart disease or stroke.

SMART IS Analysing events generated in monitoring data to prevent a future acute episode.

SMART IS Tracking and reporting infectious diseases to intervene early and keep people well.

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Smarter Broadband Communications

We have an opportunity to transform Australia’s broadband communications systems to: improve the way Australia works; stimulate business growth; and provide a better customer experience.

The National Broadband Network (NBN) announced in early 2009, is designed to open up new ways of communicating and delivering services whether by business, individuals or government. It will also allow the data from smart systems to be used more effectively.

The fibre-to-the-home that the NBN will provide is a world first, so there is insufficient data to quantify the net economic benefits of this rollout. Instead, Access Economics has estimated the benefits of a less ambitious agenda: investing $12.6 billion in national fibre-to-the-node broadband. This would:

• Increase the NpV of GDp by $8-23 billion over ten years;• Create 33,000 jobs by 2011.

In addition, the NBN will:

• Enable smart technologies;• Improve business productivity;• Introduce an array of new services;• Allow individuals and businesses to communicate more effectively and

deliver services remotely, including export services to the Asia pacific region and beyond;

• Improve convenience and choice for consumers who will be able to use the network for shopping, banking, information and government services.

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Improve the way Australia works…by allowing smart devices to talk to each other, in the process spawning innovative new types of services that provide ease, convenience, safety, relevance and alertness to our homes, communities and daily lives.

Communication isn’t just about people talking to people. It’s about things talking to each other. In a smarter Australia, almost anything can become digitally aware, instrumented and interconnected.

We have the connections, processors, analytics and capabilities powerful enough for trillions of devices to talk to each other and improve the way the world works. Smart houses can be programmed remotely. Smart cars talk to the traffic system. Smart phones can practically replace your wallet. Smart highways can regulate traffic flows.

But this will only happen if we infuse smart networks with intelligence, so they can identify connected, instrumented things and collect relevant data from them.

SMART IS Connecting healthcare providers, suppliers and patients with electronic records to reduce costs and improve health outcomes.

SMART IS Getting cars, roads, sensors and cameras to communicate with each other, so we can reduce congestion and carbon emissions.

SMART IS Allowing educators and students to collaborate across a national education system that uses digital teaching resources and gives every Australian child access to world class education.

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Stimulate business growth…with next-generation digital platforms that allow us to make better use of communications technology.

Smarter broadband communications systems allow individuals, businesses and governments to interact and transact in new, more efficient and personalised ways. Companies will use fast connections to make existing processes more efficient and productive, develop innovative business models, and transform business activities through new communications-enabled work practices.

Broadband and its applications will create new business opportunities (e-commerce), spur new consumer behaviours (social networking) and create whole new industries (telemedicine).

SMART IS Using video conferencing and teleworking to reduce your corporate carbon footprint and expand your potential skills base.

SMART IS Mass-customisation through build-to-order manufacturing made possible by the internet.

SMART IS Web-enabled just-in-time manufacturing practices.

Provide a better customer experience…by using real-time analytics to gain deep customer insights, improving customer service and personalising offerings.

Smarter broadband communications systems convert the increasingly vast amount of data into information to meet and predict the changing needs and behaviours of customers – resulting in optimised revenue, lower costs, and greater personal value to each individual.

SMART IS Converging billing and customer care to create new types of competitive service bundles and improve customer service.

SMART IS Capitalising on business analytics such as social networking to understand and respond to customer behaviour.

SMART IS Using Web 2.0 capabilities to tap into both internal and external creativity to develop next generation services.

SMART IS Introducing open standards so there is interoperability between all telecom networks and devices.

SMART IS Using industry standards such as eToM (enhanced Telecom operations Map), NGoSS (New Generation operations Systems and Software) and others to improve operational processes to save money and speed time to market.

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roadmap for a smarter economy What capabilities do we need?

To move to a better and smarter economy, we need to do things differently. redressing the challenges outlined earlier will not happen automatically. Indeed, we will need a strong focus to make the required modifications to the way we use technology both in specific industries and as a nation as a whole.

Fundamentally, we will need to re-shape and enhance our capabilities. While we have enormous social and physical assets as a nation, we will need to sharpen our focus on two capabilities in particular, namely our:

• Technology capability The availability and deployment of the required technology; for example, metering systems, broadband and analytics tools.

• Change capability The ability to manage the adoption of the technology; for example changing behaviours in the way we use electricity as a result of smart metering.

The technology per se does not change behaviour, but it does enable that change to occur. Additional change drivers may be required.

Together, these two capabilities provide a powerful mix to drive us towards a smarter economy. We can represent them in a matrix form as defined below in the Smarter Economy Maturity Model – see Figure 1.

Figure 1 – Smarter Economy Maturity Model

Higher

Technology capability

Lower

Lower Change capability

Higher

Technology capability• Availability of the technology• Deployment and timing• Effective integration of technology• Funding

Change capability• people behaviour change and adoption• Complex stakeholder relationships and

collaboration• Societal shifts• Micro reform and regulation

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By highlighting relevant positioning against the two axes, the Smarter Economy Maturity Model gives us some perspective on where we might be positioned right now and the direction of the best pathway to the future.

For example, too much investment in technology, without the required change capability, would make it challenging to realise the benefits of that technology.

on the other hand, a high level of willingness and readiness to change, without the required technology, would be both frustrating and difficult to manage – see Figure 2.

Figure 2 – Positioning the smarter economy

Higher


Lower


Higher

Smarter economy

Unsupported readiness

Technology searching for a

problem

opportunity goes begging

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Where are we now and what is the pathway to a smarter economy?

To answer the above question, we need to take a closer look at how to move into the fourth quadrant – see Figure 3.

Figure 3 – Current positioning

Higher


Lower


Higher

How do we get there?

Australiatoday

Clearly, there are different levels of maturity for each industry or sector group – as discussed below. However, all of them face considerable challenges, especially regarding the change capability. That said, moving towards that right hand quadrant of the Smarter Economy Maturity Model is achievable, but it will need a concerted and planned effort to make it happen.

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Energy

The energy sector is developing a relatively high technology capability, thanks to significant investment from both government and the private sector in developing smart electricity networks. For example, the Victorian government is mandating the rollout of advanced metering infrastructure (AMI) to all households by 2013. In addition, the integration required to automatically monitor and control two-way energy flow is driving associated investments and collaboration across the industry in advanced communication channels, data aggregation, measurement/analysis and security.

In terms of a change capability, aging infrastructure and the need for investment in smart grids have resulted in a much closer collaboration between key stakeholders, including consumers, regulators, financiers, researchers, and technology and service vendors.

Smart grids could ultimately give consumers the option of managing energy usage right down to the individual networked appliance, especially those appliances that are high energy users. With pricing signal information about their consumption and automated energy management tools, consumers will be able to proactively manage their energy usage and choose sources of power. In a US study, consumers decreased their overall peak load on the grid by 15% when offered the opportunity to save an average of 10% on their electricity bills.

However, to date, while Australian consumers are highly responsive to changing their behaviour around water use, in response to shortages, they have not yet shown a great desire to reduce their use of electricity. In fact, the desire for bigger houses has resulted in larger heating, cooling and lighting requirements; large TVs and other lifestyle decisions have

been driving increased energy demand. Energy-monitoring appliances have been on the market for a while, but we have yet to see any large-scale take-up of such products.

It is worth noting that governments are likely to raise the price of energy to encourage / force consumers into reducing their energy usage. This demand-side management, along with public education, may be necessary to ensure we are able to make our greenhouse gas emissions targets.

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Water

From the first drop of rain falling on the land, to fresh drinking water being delivered through a household tap, the water supply chain crosses a complex matrix of landowners, water authorities, local, state and federal governments, and end consumers. The ‘ownership’ of water is an often highly-emotive topic as we try to balance the needs of our economy, society and environment.

From a technology capability perspective, industry and government have yet to mobilise behind the concept of smarter water. Technology is available to help us monitor, measure and analyse entire water ecosystems, from rivers and reservoirs to the pumps and pipes in our homes. However, the volumes of data, the need for mining across different and new data types, and the demand for real-time responses all require a new kind of water management intelligence.

To make a smarter water system work, we will need information standards and sophisticated models. our current data infrastructure has limited scalability and interoperability, preventing timely and effective decision making across departments and organisations. Next generation water management systems need to be more flexible, while providing more robust real-time analytics, modelling, and decision support capabilities.

The technology exists today to make our water systems more efficient. We now need the willingness and collaboration to use this technology for the benefit of our economy, the environment and society.

In terms of a change capability, while this is quite strong at a consumer level, industry’s change capability is currently limited. on a macro scale, the water industry has more players and for this reason tends to be less collaborative than the energy sector. Within Australia, the water industry has historically focused on state-based government initiatives, and local monopoly markets, with limited impetus to collaborate across borders.

However, we expect this to increase as a result of the recent dedicated focus on a national collaborative water program. The Federal ‘Water for the Future’ program aims to develop a single, coherent, national water framework integrating rural and urban water issues. Significant funding ($13B) has been allocated across a number of infrastructure, supply, and efficiency programs designed to underpin significant national water market reform.

However, we need further collaboration between stakeholders, service providers, and communities to agree and implement the necessary policies, technologies, and processes to drive real change.

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Traffic

Starved of adequate investment and technology upgrades for decades, much of the transport industry is in the middle of a period of sustained change and technology uptake.

Technology capability in this space is still relatively low because, while the sensors to collect and record data are now in place, the information loop is not complete. In other words, the industry is not yet analysing or using the data to create information or enable smarter decisions.

For example, we can already predict traffic congestion but, until traffic management systems can act on that information, nothing changes. Thus, we need to speed up our deployment of technology.

one key inhibitor has been the silo operational nature of the modes of transport. Given the different ownership models (state or federal government entity, private, or a mix), data exchange and collaboration on technology has not been a high priority. This silo-based operational model sits atop a complex stakeholder base, often with conflicting purposes.

The policy makers, the road operators, the communities of road-using interest groups all share a common goal of needing to complete a journey. However, they all have a differing view of the environment. This is compounded by traditional funding mechanisms, which only look at one mode of transport to reimburse costs, when often the greater benefit is across the wider stakeholder base.

Further, many of the methods used to drive behaviour change to address congestion problems are politically unpopular. For some, any toll is a toll too many. However, several major cities considered leaders in this area use a congestion tax to control demand and provide relief to road users. Thus, while regulatory reform will eventually drive change in transport, this alone may not deliver results quickly enough for today’s road user.

However, change may also be driven by transport authorities’ desire to better understand their customers – their communities of interest broken down to individuals. The commercial sector is aware that a known customer with known patterns can be marketed to. In future, just like customers in the retail sector, a better informed generation of transport customers will knowingly use the best route, at the best price point, while at the same time emitting the least emissions.

As city populations continue to expand, putting increasing pressure on demand, and adding new roads grows less and less palatable, Smart Traffic initiatives will become ever more important.

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Healthcare

Smart systems will be a vital part of solving many of the issues in Australia’s health sector, which is under escalating pressure due to an ever-increasing number of patients with chronic diseases; an ageing population; the rising cost of healthcare service delivery; and clinical work force shortages. Against this backdrop, cost containment is paramount and the incentive to change is high.

However, implementing smarter systems will require pan-industry collaboration. Health is a very complex industry with a diverse range of care models across clinical settings that include general practice, specialist care, acute care, community care, mental health, residential or aged care and terminal care. Each care model touches multiple stakeholders, complicating any change process.

In terms of technology capability, in recent years, the sector has seen significant improvements in the use of technology, predominately in the area of diagnostic imaging and telemedicine. The next step is using technology to transform the way we deliver healthcare services; for example, in electronic medical records, personalised medicine and interactive patient care technology. To date, these advancements have been limited due to the lack of coordinated funding, the complexity of clinical care models and the inability to access and share information. These programs have extended implementation periods, and the short-term funding is being diverted to fix short-term problems.

There is clearly considerable potential to harness technology further to improve efficiencies and take the pressure off an already overwhelmed and inefficient industry.

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Broadband Communications

High up on the technology capability axis, telecommunications has always been an early adopter of smart technology. In the last decade, as technological innovation has underpinned the convergence of information technology, communications and media, carriers have invested heavily in technology, particularly in areas such as wireless and broadband networks.

Now, the National Broadband Network (NBN) announced in early 2009 actually puts broadband communications at the heart of the Smart Economy quadrant. More reliable, comprehensive and cost effective broadband services are expected to enable a whole new class of applications that can take advantage of the significant increase in speed and quality, but most importantly the ubiquity of the network connecting to Australian households and businesses.

In addition to rolling out a national broadband network, it will be important to ensure that the broader business community and the community at large are able to reap all of its potential benefits. These include ensuring that businesses are able to fully utilise online communications and transactions to trade domestically and internationally, supporting the development and growth of new services industries, and ensuring that the general public are able to utilise the range of medical, educational, and government services that will be able to be delivered to patients, students and citizens in their homes and communities across the country without the need for travel or expensive equipment.

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how do we get there?

So how do we position ourselves in the top right hand quadrant of the Smarter Economy Maturity Model, and what are some of key steps to be taken?

The issues highlighted in this paper are complex and challenging, but bold moves are needed to solve big problems. Indeed, our view is that we need to stand back and take a broader and more holistic view to tackling some of these challenges.

We believe there are seven key principles on this journey:

1. Think big, but start small;2. Decide what not to do;3. Collaborate early and often;4. Exploit the technology opportunities;5. Expect and encourage behaviour change;6. Enable capabilities;7. Track progress and celebrate success.

Creating a smarter economy will require all seven to be in place. For instance, the collaboration in principle 3 will be wasted if the technology opportunities in principle 4 are not properly exploited. Together, the above principles will help to quickly move us further along both axes of the Smarter Economy Maturity Model.

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1. Think big, but start small

We need a strong vision to define where we want to be in the coming years. The government’s commitment to a reliable and comprehensive National Broadband Network has provided one such theme and has sharpened the attention on what such a rollout can achieve. The big picture has been clearly articulated.

However, in other spheres of activity, the picture is still evolving, and we are yet to see coherent roadmaps for action, as distinct from statements of the problem.

For example, we have yet to clarify the aims of water reform in the states or the reform agenda for the Murray Darling Basin. Major initiatives will need a long time horizon – possibly up to ten years and beyond.

The “how to do it”However, it is just as important to define the manageable chunks of activity that will propel us down the path towards that vision. We need to determine the steps we can take now and measure their success in the context of our long-term objectives. The notion of the “brick by brick” implementation is important in the context of achieving realistic outcomes, but only if we can clearly see each project’s place in the bigger picture.

There is a place for big bold initiatives but, on balance, our major focus should be on shaping initiatives and delivering practical outcomes that will take us closer to our eventual goal.

Crafting the building blocksThus, we have an urgent need to define and shape the projects that will accelerate progress. Identified and scoped, these projects will form the building blocks of the smarter economy. To succeed, many will need support from different areas, including being appropriately funded. We should aim to identify and clearly scope them by the end of 2009.

“I believe very strongly that we need to start trialling some of these things. We need to be able to prove that we can do it before people will roll it out properly. We need to provide some money for proof of concept on it, because it’s very hard to get it implemented without that sort of money.”

Neville StevensNICTA

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We also need to identify and manage risk in how these projects are structured and managed. Many of them will represent major changes in terms of: new technology deployment, business models restructuring and behavioural change.

This level of change will be challenging. A recent survey of over 1,500 leaders of change projects1 worldwide demonstrated that some 60% of projects globally did not meet all of their objectives. This figure was slightly higher in Australia.

This data underscores the need to carefully manage the risks of implementation and to clearly define the required approach to tracking of progress.

Leverage the experience

To increase the chances of project success, as the initiatives unfold, we must learn from each experience, leveraging the success and avoiding the pitfalls. There needs to be a mechanism of monitoring and sharing, but also a process to recognise and celebrate success (see principle 7).

There needs to be a very open and transparent way of communicating those experiences and understanding what works well in some areas and not so well in others. For example, the rollout of change that will impact rural communities more than urban communities may well demand a different set of implementation skills and

provide quite different lessons for future projects. All of these experiences need to be leveraged across the scope and duration of the rollout of change.

Recommendations• keep the big picture in mind but implement by taking practical and

manageable steps;• Develop clear project plans and scope as the basic building blocks; • Leverage the experience.

Smart Project Case StudyIn Ireland, scientists have turned Galway Bay into a SmartBay, with data collected from a network of buoys and the seabed. Sensors will collect a steady stream of real-time data on water quality, aquaculture, chemical content, wave energy and tidal movement, which will be used to support a host of different industries. It will help local fisherman to locate catches; warn beach patrols about riptides or jellyfish schools; tell energy companies about wave energy; inform the harbour master of high tides and flow rates; and give shellfish farmers information about water quality.

“We need to build up some examples and get the ball rolling.”

ric SimesAccess Economics

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2. Decide what not to do

Defining priorities will be a real challenge and needs to be tackled quickly to ensure progress is speeded up where needed. At the same time, it is almost as important to decide what NoT to do.

Priorities and focusWe need to agree on a clear set of priorities, so we can focus on what needs to be delivered and when. projects must be assessed in terms of both their value and potential for a quick win.

The various initiatives will have differing economic impacts, as shown in the Access Economics research referenced earlier in this paper. However, we also need to consider Australia’s capacity to drive various initiatives and actually realise these benefits.

potential constraints will include: funding, resources, skills and the ability of organisations and the community to absorb change. These considerations will help us to both prioritise and decide what is possible and what not to do at various points in the process.

“We do not want new digital divides.”

Michael BarberFlinders University

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Managing value and complexityThe notion of deciding what not to do is all about focus and commitment. It is about delivering successes that can be understood, measured and managed.

The US manned space program is a strong example of national leadership to achieve an end game within a defined period of time. The program, which required a significant commitment of resources, provided a very clear focus of effort over more than 10 years, amidst enormous complexity. It focussed initially on launching solo astronauts into space. While, at the time, this was seen as a massive advance in technical achievement, it paled into insignificance as the later parts of the program moved to launching two and then three astronauts in a single vehicle, with progressively more complex orbiting and in-flight and recovery procedures, ultimately leading to successful lunar missions.

In the Australian context, we will need to have a transparent view of the benefit / cost trade-off. We can examine potential initiatives from two perspectives: the value or benefit they will provide; and the cost and/or complexity involved. Where possible, we should start with initiatives that are higher on the benefit scale and lower on the cost / complexity dimension.

For example, where will we gain the greatest value from developments in e-health and what is the cost / complexity trade-off? In prioritising specific opportunities, we need to not only articulate the case, but also to clearly communicate that value proposition to all stakeholders.

Recommendations• rapidly develop priorities, also being clear on what not to do, so effort is

used most effectively;• Manage the trade off between value and complexity in rolling out major initiatives.

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3. Collaborate early and often

The inherent complexity of the various initiatives covered in this paper means that linkages and co-ordination will be crucial. Major national initiatives require excellent collaboration across many dimensions and facets of business and government activity. The major initiatives framed in this paper will require new and improved ways of “connecting the dots” – between governments, researchers, business and citizens.

Each has a different role to play. Systemic change will require consumer buy-in and widespread industry support. It will also need the focus of the nation’s scientific and academic communities. As the benefits are as much about long-term sustainability as economic uplift, market forces will not be a sufficient driver, making government and policy intervention essential in developing national smarter systems.

New collaboration modelsAs the initiatives rollout, we will need a new mindset around collaboration. Studies have revealed a very close connection between collaboration and innovation. 2

Collaboration results in shared learning and cross-disciplinary problem solving, which is a key driver of innovation.

Given the innovative nature of all these projects, we will need better collaboration across a broad spectrum of stakeholders, weaving together the varying interests of levels of government, the private sector and individuals in the community. This will require better partnerships between business and universities. Currently, when innovating, far fewer Australian businesses collaborate with universities or other higher education institutions than in other nations. xvii

We also should consider providing more support and possibly incentives for effective collaboration in research and the rapid commercialisation of smart infrastructure technologies.

“Universities have a role to play here... a lot of research has to be done and we can work together with the industry.”

professor Iven Mareels,University of Melbourne

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Practical collaboration opportunitiesWe also need to be aware of the practical opportunities for collaboration as smart infrastructure is rolled out.

For instance, as the process of installing smart meters accelerates, where possible, we should consider installing smart water metering at the same time.

Similarly, while the huge NBN project of digging lead-ins to so many homes is underway, requiring digging and trenching to homes and businesses, we should consider the savings and efficiencies of simultaneously co-ordinating other services requiring trenches such as energy and gas.

Using technology to collaborateWeb 2.0 technologies and social networking tools will play a major role in facilitating greater collaboration. While much of the popular commentary focuses on Generation Y and their take-up of collaborative and communication tools such as Facebook and the recent explosion of Twitter, the broader community is also becoming more engaged around the use of technology for broader themes.

The significant online use of the eCensus in 2006 (available on-line for the first time), and the adoption rates of eTax show the potential for broad community take-up of this type of technology. In oECD countries, more than 30% of citizens were using the internet to communicate with public authorities in 2007, and this is growing rapidly.

All this points to the very real potential to improve collaboration across a wide spectrum of stakeholders by using Web 2.0 technologies.

Businesses also are increasing their use of collaboration tools, with collaboration software, video conferencing and communities of interest now in common use. The next step is to harness collaboration far more creatively. For example, proctor & Gamble has dramatically increased its product development in collaboration with outside organisations, significantly enhancing its growth opportunities and reducing time to market for new products.

Recommendations• Drive towards new levels of collaboration;• Take up the opportunity for technology to enable collaboration;• Connect the dots between different groups.

Smart Project Case StudyIn the face of local scepticism about a traffic charging system in the increasingly congested city of Stockholm, the Swedish authorities implemented a one-year road pricing trial and then allowed citizens to decide via a referendum whether to make it permanent. After traffic fell by 25% and inner city carbon dioxide emissions by 40%, the referendum was passed. Stockholm subsequently had to redesign its public transport system to allow for the increased speed made possible by the reduced congestion.

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4. Exploit the technology opportunities

Use international standardsStandards pervade almost all human activities. planes cross the world based on an international set of standards and conventions for navigation and air traffic control. The

global standardisation of containers and related handling equipment was one of the important innovations in 20th Century logistics.

The IT industry has been at the forefront of defining international standards to allow computer systems, devices, networks and applications to interoperate. We wouldn’t have the internet today if it were not for a well defined set of underlying standards that were

agreed and widely adopted. The development and adoption of open standards helps deliver good governance, societal freedoms, economic health and business growth, as well as promoting global competition and technological innovation.

In the context of building intelligent infrastructure, it is critical that open standards be universally adopted.

Consider the situation in relation to water. Until quite recently, the industry used a number of different data formats and standards to describe and publish information about water, and there was little consistency between water organisations. Many of these differences can be traced back to the way that water was measured and described by each colony prior to federation.

If we are to build systems that measure and accurately account for water use it is clearly critical that we have a standard language for describing water observations such as stream flow, water quality, ground water levels, climate and precipitation, including where and when those observations are made. We already have a standard called WaterML, which is based on XML (eXtended Markup Language). The widespread adoption of this standard would mean that we could connect instruments measuring water flow levels in rivers and irrigation channels with a system predicting flood levels, knowing that the data exchange between those entities would be meaningful.

“We’re spending a lot of money at the federal and state level and if we don’t integrate it both physically and in a smart way, then we’re going to waste this big spend.”

Gerard SuttonUniversity of Wollongong

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Fuse the physical infrastructure and digital infrastructure from the startWe need to ensure physical infrastructure development is supported from its inception by digital infrastructure.

Today, such considerations go beyond sensors to monitor and measure stresses and maintenance needs for the bridge. They should also take into account the technology needs of possible toll operators, the possible digital connections with sensors in cars

and trucks that use the bridge, or interfaces with the weather authorities regarding wind speeds and temperature.

The key point is that these apparently different systems can be connected to enable smarter decisions. For example, information on very strong winds on the bridge could be sent to approaching trucks to warn them of slow speed across the bridge or to highlight options for different routes.

This “digital awareness” is a key area where technology can enable smarter decision making for end users.

Recommendations• Adopt open global standards that allow for scalability and inter-operability;• Fuse infrastructure and information technology into a single smart driver of

change.

Smart Project Case StudyBrisbane City Council is investing in smart technology that enables both the Council and the City to reduce its carbon footprint by: facilitating telecommuting and video conferencing to help reduce the impact on Brisbane’s traffic network; and implementing intelligent traffic management systems that improves the City’s traffic flow.

“It’s not just the physical and digital infrastructure coming together. We need to widen our perspective to look at the human infrastructure, the knowledge infrastructure...”

Narelle kennedyAustralian Business Foundation

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5. Expect and encourage behaviour change

The initiatives discussed in the paper will require many types of behavioural changes. For example, think of the changes required to conserve water and energy. Every citizen, every business, every farm will be challenged to change the way they go about their daily activities and business.

Achieving this type of widespread change is perfectly possible. Who would have guessed how the SMS facility on mobile phones would have changed behaviour in simple communications. There is now almost a whole generation that uses the simple SMS text message to communicate as a matter of course. Similarly, GpS has revolutionised the way we used maps and our preparedness to drive into unknown areas.

Newer technologies like smart metering will also drive new behaviours. Variable air fares change the times travellers choose to fly. Likewise, variable energy pricing through smart metering will also change the way that people choose to use energy. Similarly, road access pricing could change traffic patterns.

Recognise different stakeholders have differing needsDifferent stakeholder groups will react differently and will need differing levels of focus and attention in different areas. For instance, water and energy are almost polar opposites in regard to stakeholder use. The bulk of our electricity is used in urban areas for commercial and personal use. However, 70% of Australia’s water is consumed for rural use. While water conservation is an issue for each and every citizen, at a macro level, household behaviour change is less of an issue for water than it is for electricity. Ironically, Australia’s urban communities have proved to be far better at conserving water than electricity.

Different ages and ethnic groups will also need to be accommodated. With the expanding ageing population struggling to live off pensions depleted by the global financial crisis, there will be a keen interest in the economical use of resources at a personal level. However, the tools available to individuals will need to be simple and easy to adapt to their needs.

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Understand change in a holistic contextAs smart technologies start to enable behavioural change, we must watch to ensure that this change is positive at a whole-of-economy level. Many behavioural changes in one system will have a knock-on effect into others.

For example, when Stockholm introduced smart tolling, some people stopped commuting by car and swapped to public transport, requiring this system to gear up to accommodate the increased demand. At the same time, others elected to drive to work earlier, and changed their work hours accordingly, impacting many businesses.

Sometimes, the knock-on effect has adverse consequences. For example, when considering the benefits of desalination in providing drinking water, we need to take into account the fact that it is highly energy intensive.

Go beyond engagementAs with any infrastructure roll out, smart systems will require high levels of community engagement, both to reduce project risk and also to maximise the opportunity for innovation. Community engagement will be vital to encourage trust, shared information and co-operation, requiring ongoing communication.

However, engagement is just the first step. Many of the potential benefits of smart systems will also require widespread changes in community behaviour. For example, more efficient public transport will only reduce congestion if people change the way they travel to work. Smart meters will only smooth out energy demand if people use the information the meters provide to make smarter decisions about when to draw power from the grid.

Monitor change regularlyIn addition, it will be important to constantly monitor change to understand how stakeholders are responding and whether additional support actions are needed. For instance, if some groups are resisting the take-up of newer technology, we need to ask “Why?” Maybe it is due to the speed of the rollout or it could be the lack of perceived benefit in the eyes of the customer. It could also be an issue with the nature and level of communications around the rollout. regardless, we need to identify and address change resistance early.

Recommendations• respond to different stakeholder needs;• provide a strong level of community engagement;• Monitor change on a regular basis.

Behaviour Change Case Study Following the Victorian government’s highly publicised Save Water Target 155 campaign, Melbourne’s water use has dropped by 14% on the previous year. This was partly due to 300,000 Melburnians swapping to water efficient showerheads through the State Government’s Showerhead Exchange program.

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6. Enable capabilities

In the 1990s, Australia achieved a strong surge in productivity, with record highs for both labour and multifactor productivity. More recently, however, productivity growth dipped, as the benefits from previous initiatives waned. Now we have another,

significant opportunity to lift Australia’s long term growth rate and living standards using smart technologies.

However, the clear acceleration of Australia’s labour productivity in the 1990s came – not from the technology itself, but from enhancing the use of enabling

technologies, building management capabilities and capitalising on regulatory reforms, rather than as a result of greater capital investment replacing labour. xviii

It was the high technology using sectors rather than the high technology producing sectors that were the key component drivers of productivity growth.

Thus, boosting productivity through smarter systems will require more than developing and applying information technologies. It will also require investment in management capabilities and the support of microeconomic reform and regulation.

Microeconomic reformIn the 1990s, microeconomic reforms were important in boosting productivity in electricity and transport.

The electricity market underwent widespread reform xix such as the structural separation of generation, transmission and distribution activities, privatisation and corporatisation of government-owned utilities and the removal of regulatory barriers to new market participants.

Equally, the Australian land transport sector was also subject to substantial microeconomic reforms, especially in areas of public transport and the reform of railway systems. reforms in Australian railway services in 1991 were based on addressing: government intervention, pricing, service quality problems, investment deficiencies, and monopoly and competitive neutrality concerns. Such reforms also spurred the adoption of technologies, with NSW, for example, implementing a real-time train operating system for planning, programming, monitoring and stock control practices and investing in new radio and satellite tracking systems.

Attracting investment in digitally aware infrastructure may require similar reforms.

“The real danger is the current regulatory frameworks will stifle the innovation that’s needed to make smart grids a reality.”

George MaltabarowEnergyAustralia

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Regulatory changesTo be effectively implemented, many smart technologies need the support of the government to co-ordinate decision-making throughout the economy. This is because smart systems often need to be implemented throughout the relevant infrastructure for each area of the economy. Left to its own devices, the private sector will find it difficult to make optimal investment decisions in such infrastructure.

For example, many individual producers in irrigation areas have already adopted relevant sensor technologies; however, to obtain the largest benefits from smart technologies, we need to integrate water flows throughout the irrigation system – not just on farm flows or channel flows. Moreover, all societal uses of water – urban, rural, industrial as well as environmental – have to be considered together.

In the transport sector, intelligent systems need to be complemented by appropriate governance and regulatory changes to coordinate transport networks.

Similarly, government will need to co-ordinate the rollout of e-health systems or comprehensive national broadband technologies.

Future microeconomic reforms must ensure:

1. price signals that accurately reflect the cost of producers and consumers’ actions.2. Access to the relevant infrastructure for users on fair terms.

Recommendations• Drive regulatory reform as a key enabler.

Enabling smarter systemsThe Queensland Government has established the SEQ Water Grid as part of a new industry model to re-align the management of water and streamline South East Queensland’s previously complex water supply arrangements. This new institutional arrangement aligns ownership and control of water assets with public accountabilities so that the Queensland Government is accountable for water supply security and in control of the water and assets to deliver that security.

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7. Track progress and celebrate success

Given that the initiatives will be rolled out in a measured manner (see principle 1), it is imperative to track progress step-by-step. This will also provide opportunities to maintain the momentum by perpetuating a broad dialogue and celebrating each success.

Broad dialogue on progressWe need to maintain a broad dialogue across the public and private sector regarding the focus and progress of the rollout. This will help to constantly refresh the long-term vision and adapt it in-line with new technological developments or national priorities. It will also keep the main stakeholders focussed on the priority of moving to a smarter economy.

We therefore recommend conducting an annual smarter economy forum to provide a dialogue and transparent assessment of progress and also a focus on changes that may be needed. This will serve not only as an annual checkpoint but also a basis for determining whether more specific actions are needed to maintain progress towards the top right hand quadrant of the Smarter planet Maturity Model.

This could also be supported by some form of smarter economy index that can establish a baseline and then provide an ongoing measure of how we are tracking as a nation.

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The recognition factorWe can hasten the journey by celebrating successful projects or components of projects – large and small. These could be successes in regard to technology per se or in areas where significant change has been achieved.

Every success should be used as a demonstration of what smarter systems can achieve, forming a bank of case studies for reference across a broad spectrum of business and government.

As a mechanism to encourage project owners to record achievements, we recommend establishing the Smarter Economy Awards (SEAs) to recognise key achievements in this space. These might be a small number of prestigious awards for positive progress in the smarter economy arena.

Recommendations• Maintain the broad dialogue with an annual smarter economy forum;• Highlight and celebrate achievements and success along the way.

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a ten year journey

We see the journey to a smarter economy as spanning ten years. While there will be some significant achievements in a shorter time frame, we need to plan for a ten year period so that each project is designed to support future intended elements. Given this time frame, we believe there are two ingredients for success.

The first is to develop a comprehensive and integrated plan that provides a single view of the whole program of effort required and the matching benefit streams. Such an undertaking has not been done in this form across the whole range of opportunities. This comprehensive plan will not only provide the roadmap for achievement but also a clear sense of purpose and an appreciation of how the moving parts will need to work together to achieve success. Achieving an $80 billion uplift in GDp will require an appropriate planning process.

The second is to make a solid start very quickly – to get the process moving and to harness the resources and capabilities required. This also requires a clear view of how to approach the tasks ahead.

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In our view, we need a three phase plan, focused around:

• Refining the agenda – target December 2009 This phase is geared towards defining the particular initiatives required and developing a set of priorities for tackling them and clear criteria against which initiatives will be evaluated. This phase will also need to develop a sharp view on the required enablers and some of the constraints that may arise.

• Shaping the initiatives – target December 2010 This phase is directed towards breaking the initiatives into manageable pieces, defining the sequencing and timing and the overall governance arrangements. For many initiatives, this will be completed well in advance of the proposed deadline.

• Delivering the changes This phase focuses on the implementation and monitoring of progress and success. Its timing will vary considerably depending on the individual initiatives and projects.

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This is illustrated in the form of a high level plan in Figure 4 below.

Figure 4 – The road ahead in three phases

proposed elapsed time

2009 2010 2011 2012 2013 2014

A. Refining the agenda• Define the set of initiatives• Define overall priorities• Set the objective for each initiative• Identify key enablers including funding

B. Sharing the initiatives• refine the initiatives into manageable pieces• Define the overall sequencing and timing• Define the overall governance process

C. Delivering the changes• rollout on a measured basis• Test the concepts and gain successes• Measure the progress

rapid focus of efforts and direction

Clearly shape the manageable pieces of activities

Clear focus on capabilities to deliver

“The thing that impresses me in part in all of this, is that there’s a holistic view out there. It’s not just a transport thing, it’s also a broadband thing – and we can bring it together.”

Neville StevensNICTA

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The following section provides some thoughts and a quick self-assessment for your organisation regarding the seven principles covered in the previous section. It offers you some high level pointers on your organisation’s readiness to embark on the smarter economy journey, and be a real player in this space.

Consider each issue from the perspective of your own organisation and rate your position on a scale of 1 to 5. For instance, a rating of 1 means you believe your organisation fails to address the particular issue at all. on the other hand, a rating of 5 suggests your organisation fully addresses the issue.

please note, this is not meant to be exhaustive. It simply aims to generate some thinking around how your organisation is positioned to play strongly in the smarter economy.

1. Think big, but start smallIssue: Your organisation has defined a strategy and approach for playing an active role in the smarter economy. Major projects and initiatives are carefully planned not just in terms of roI criteria, but also how they contribute to smarter technology and smarter decisions.

1 2 3 4 5

Fails to address the issue Fully addresses the issue

Issue: Your organisation has a strong focus on a step by step approach to engaging in the smarter economy. Its plans demonstrate a structured and logical approach to the smarter economy.

1 2 3 4 5


are you ready for the smarter economy?

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2. Decide what not to doIssue: Your organisation has a strong focus on what can and cannot be done to seize the opportunities around the smarter economy. Technology strategy and allocation of resources are clearly focused around smarter economy opportunities.

1 2 3 4 5


Issue: Your organisation understands the value propositions around the smarter economy and can clearly identify and manage the trade off between benefits flows vs cost / complexity.

1 2 3 4 5


3. Collaborate early and oftenIssue: Your organisation has defined collaboration as a key capability and has clear plans for its effective execution. It has a clear understanding and capabilities around collaboration tools and Web 2.0 opportunities.

1 2 3 4 5


Issue: Your organisation has a clear view on how it will collaborate in the context of the smarter economy opportunities and uses smart collaboration tools and activities with a range of stakeholders to capitalise on these opportunities.

1 2 3 4 5


4. Exploit the technology opportunitiesIssue: Your organisation has a well crafted and communicated plan to exploit smart technology and has embedded the concepts of the smarter economy as an integral part of its ICT strategy.

1 2 3 4 5


Issue: Your organisation has a clear focus of the fusion between physical infrastructure and digital infrastructure. For example, all physical developments in your organisation (new buildings, office space, etc) are fully supported by digital infrastructure right from inception.

1 2 3 4 5


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5. Expect and encourage behaviour changeIssue: Your organisation recognises the change challenges and opportunities around the smarter economy, and has a clear view of how to successfully manage behaviour changes that will be needed in the context of the smarter economy.

1 2 3 4 5


Issue: Your organisation recognises that change in the context of the smarter economy will need to be managed holistically and with agility.

1 2 3 4 5


6. Enable capabilitiesIssue: Your organisation understands what capabilities will be needed to enable the smarter economy, and can clearly articulate and work within the regulatory frameworks that may be needed.

1 2 3 4 5


7. Track progress and celebrate successIssue: Your organisation has defined a process to clearly track and report smarter economy opportunities and progress.

1 2 3 4 5


Issue: Your organisation has a clear view of how to celebrate the success around the smarter economy and applies a carefully defined recognition program geared to achievements around the smarter economy.

1 2 3 4 5


While this is indicative and there is no “right” or “wrong” answer, responses that are below 4 in more than three of the above principles indicate that some improvements are needed to be able take full advantage of smarter economy opportunities.

The above points are presented to provide some broad indicators of how your organisation is positioned regarding the smarter economy and where some of your priorities may need to be focused or emphasised.

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conclusion

Australia has an important opportunity to make a concerted and collaborative effort to form and work towards a vision for smarter digital infrastructure.

Not only will the process of developing this infrastructure create jobs – embedding smart technology in our businesses, transport systems, utilities, social services and cities, will create massive efficiencies.

It will also give us unprecedented information and control to tackle the systemic issues threatening our quality of life.

Australia starts this journey on the back foot – many other countries are already substantially further advanced. For every week we delay, we will fall further behind.

And yet, we also have considerable advantages in the shape of a supportive government, national infrastructure body, talented local ICT industry, a highly educated workforce and a community willingness to embrace technology.

Ultimately, we believe Australia has every capability and opportunity to build a smarter economy.

Now we need our government, business and academic leaders to agree on the vision and gather the resources to make it happen.

i. The Economic Benefits of Intelligent Technologies, Access Economics, 2009 ii. National Greenhouse Gas Inventory 2006, Department of Climate Change, Australian Government,

http://www.climatechange.gov.au/inventory/2006/index.html iii. Global Utility Customer Survey 2008, IBM iv. Estimating urban traffic and congestion cost trends for Australia, BITRE, 2007 v. Infrastructure Roadmap for Reform, Business Council of Australia 2007 vi. Australian Strategic Policy Institute, 2005 vii. Teekay Tankers Limited, 2008 viii. Productivity Commission ix. Treasury, 2007 x. Treasury, Productivity Commission xi. Business Council of Australia xii. OECD Information Technology Outlook 2008 xiii. 2008 ITIF Broadband Rankings xiv. World Economic Forum, The Global Information Technology Report 2008-2009, 2009 xv. Digital Economy Future Directions, AIIA, 2009 xvi. The Economic Benefits of Intelligent Technologies, Access Economics, 2009 xvii. Business Council of Australia, 2008 xviii. The Contribution of Services and Other Sectors to Australian Productivity Growth 1980-2004, Professor Alan Hughes,

Director, Centre for Business Research, University of Cambridge, UK, Mr Vadim Grinevich, Junior Research Fellow, Centre for Business Research, University of Cambridge, UK, November 2007

xix. Productivity Commission, 2006

1. Making Change Work, IBM 2009 2. Global CEO Study, IBM 2006

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IBM, the IBM logo, ibm.com, Smarter Planet and the planet icon are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at www.ibm.com/legal/copytrade.shtml”. © Copyright IBM Australia Limited 2009. ABN 79 000 024 733. © Copyright IBM Corporation 2009. All rights reserved. GL_10685

The views represented in this document are those expressed by various participants and concluded during the Australia’s Leadership Forum. They are not specifically or solely the views of IBM. The recommendations detailed in this document are those drafted by IBM based on discussions during the Australia’s Leadership Forum and supported by the Forum. IBM does not warrant the accuracy and correctness of any of the information contained in this paper.

Access EconomicsAustralian Business FoundationAustralian Industry GroupAustralian Information Industry AssociationAustralian Services roundtableAmerican Express Australia LtdBetter placeBoeing Australia Business Council of Australia (BCA)CEDA – The Committee for Economic Development of AustraliaCHEpCISCo Systems Australia pty LtdClimate Action Network Australia (CANA)Cochlear LtdCountry EnergyData#3Department of Broadband, Communications and the Digital EconomyDepartment of Innovation, Industry, Science & researchEnergex LimitedEnergyAustraliaFlinders UniversityIBM Australia and New ZealandMedibank private LimitedMacquarie University (professor Tim Flannery)National Water CommissionNetwork Insight InstituteNICTANSW Treasury CorporationQr Limitedrussell Investment GroupTelstra Corporation LimitedUniversity of MelbourneUniversity of WollongongVicroads

published by IBM Australia and New Zealand

Authors:Matt English, IBM Australia [email protected] Wightwick, IBM Australia [email protected] Letitia Zwart, IBM Australiakaren pryor, pryor Consultants

For more information go to: ibm.com/smarterplanet/au

australia’s Leadership Forum delegate companies

International Business Machines CorporationIBM Centre, 601 Pacific Highway, St Leonards NSW 2065

towards a smarter - ibm · 2009-08-12 · towards a smarter economy: a roadmap to making it happen...

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