5 reasons why Australia risks being left behind in the digital economy

Australian business risks lagging behind in digital economyWe like to think of ourselves as a progressive, modern, innovative nation here in Australia. We proudly point out examples of Australian ingenuity but in reality these are few and far between. The truth is that, despite our economic prosperity and extremely high standard of living, Australia risks being left behind in the booming digital economy.

Its not that we aren’t an innovative race; there are some extremely talented people dreaming up many amazing ideas, and there is something of a talent rush on Aussie tech entrepreneurs in Silicon Valley at the moment. The problem is that very few of those businesses or digital entrepreneurs will remain in this country unless things change considerably. The talent, the intellectual property and the businesses will move offshore.

The other risk is that, in an increasingly global and digitally connected economy, Australia will find itself being less than competitive due to a sluggishness in adopting new technology. Once again, this rubs against the popular stereotype that we are a nation of early technology adopters. That may be true as consumers, but the corporate world appears to be less enthusiastic about embracing change and technology.

A recent global study by IBM revealed that Australian marketers are lagging significantly in tech and social media. The study showed that Australian marketers still rely heavily on traditional forms of promotion and research and are yet to embrace the more modern techniques of their global counterparts.

At the same time research by GE indicates that Australia is seen as one of the least innovative nations on earth. The GE Innovation Barometer had Australia lagging behind countries like Brazil and Finland by corporate chiefs who were asked which countries were leading the way in technology and business practices.

The question is, why are we lagging behind? Here are 5 reasons I can see:

1. Traditional geographic isolation. Geographically Australia is a long way from the rest of the world, especially the traditional economic powers of Europe and the USA. We’ve managed to go through history doings thing our own way and there was rarely any pressure to adopt new ideas and technology in a hurry. But that was before the rise of the global, connected economy of the last 20 years. These days information and innovation travel fast and the borders of commerce have become blurred. No longer can we afford to be slow on the uptake.

2. Lack of competition. This is probably a symptom of our isolation too, but the reality is that competition isn’t exactly rampant in Australia at the corporate level. We have traditionally been a nation of monopolies and duopolies; Coles & Woolworths, Fairfax and News Ltd,. David Jones & Meyer, Holden and Ford, Qantas and Ansett ..and then Virgin, Telstra and eventually Optus are just some examples. Our retail sector has recently been screaming blue murder with the advent of internet shopping and competitive forces creeping in online. They’ve gouged Australian shoppers for decades and were too slow, lazy or cumbersome to see and react to the threat of the digital economy.

Lack of competition breeds laziness and a lack of innovation. A fast-moving innovator like Ruslan Koglan becomes the automatic enemy of traditional retailers like Gerry Harvey, and in true Australian style the old behemoths will do their best to wipe out upstart competitors and seek government protection against any threats to their previously uncompetitive existence.

3. Government policy. We hear constant debates about protectionism of old industries but very little about fostering innovation in this country. Both sides of politics are to blame. While we have a handful of small innovation funds and grants they mostly seem to exist to tick a box for government. Where is the serious discussion about tax breaks for new industries, or incentives for new breakthroughs? Sadly, while governments pay some lip service to innovation they do very little to foster it culturally, relying more on our ability to live comfortably off resources.

4. We’re too resource rich. Australia’s historic wealth has been based on agriculture and mineral resources. Its provided us with one of the world’s highest standards of living, but it also has led to a complacency that may have dire repercussions in decades to come. What happens when our resources aren’t as valuable or in demand? Why aren’t we reinvesting some of this good fortune in innovation?

Finland, one of the countries we’re said to be lagging behind, is not a resource rich country. Their traditional industry is forestry and related products like matches and paper. But this highly educated nation turned towards technology in the late 1980′s and companies like Nokia became world leaders. They now have a booming tech sector (for a nation of 5 million) and a more diversified economy. My fear is that our wealth and complacency will prevent this from happening in Australia.

5. Inherent conservatism. While we see ourselves as a nation of rough and ready risk takers, the truth is that we are highly risk averse. Part of this stems from the aforementioned lack of competition and government policy, but it seems to be prevalent throughout Australian society. Banks are very unlikely to seed new business ideas here due to the risk. Corporate managers are unwilling to try new ideas and technology until it has been proven convincingly elsewhere. Failure is such a black mark in this country that entrepreneurs are less likely to go out on a limb.

The result of this conservatism is a lack of innovation and slow adoption of new technology, as evidenced in the IMB study. The new generation of entrepreneurs who are willing to stick their neck out are more likely to take their ideas overseas, especially to the USA and Silicon Valley the new mecca of entrepreneurial innovation. That’s why US-based tech funds are starting to scout here in Australia. They know the talent is here, and the ideas are being developed, but the risk takers are more likely to feel at home and much more welcome in California.

The result of all of this will be lost opportunities for Australia and a major risk of being left behind in the digital economy.


Posted under Uncategorized

Written by Craig Wilson

6 Responses to “5 reasons why Australia risks being left behind in the digital economy”

Sad but true, I think you’ve got everything pretty much spot on there Craig.

Comment by Mat Packer on December 7th, 2011

[...] it’s all true, 5 reasons why Australia risks being left behind in the digital economy We like to think of ourselves as a progressive, modern, innovative nation here in Australia. We [...]

Comment by 5 reasons why Australia risks being left behind in the digital economy | This is an Internet Blog on December 7th, 2011

As you point out in a different way – we are probably not “hungry” enough and lack some real competitive ambition to do the best we can. That’s for the sporting field right?

Typically our industries seem to want to peek at what others in their industry are doing and find innovation that way.

It would be more useful for them to look to other industries not like their own and see what is happening that is quite unlike what they are accustomed to and explore ways to adapt non traditional approaches to their industry challenges.

That takes an enquiring mind, some capacity to explore new ideas and let go of attachment to the past. And a management team that will support them to do so.

Comment by Lindy Asimus on December 7th, 2011

Interesting post Craig!

I want to comment on one point as it relates to some reading I’ve been doing recently in the economics and sociological literature involving the rediscovery of the work of Gabriel Tarde.

“Lack of competition breeds laziness and a lack of innovation.”

Control of the market, by working against competitors, so as to quite literally reproduce markets in a stable fashion and therefore lead to accumulation, is a different problem to supporting innovation.

Innovation and accumulation are at two ends of a spectrum of economic value. (Production is in there too, but lets just set that aside for a moment.) True innovation does not need competitors, and any market actors that would see themselves competeting with innovation rather miss the boat because innovation changes the character of the market. Think of the classic examples of Kodak or more recently Apple, etc. Or your example of Kogan; he is not in the ‘same’ business as Harvey Norman. They service similar markets, and definitely want the same dollars, but the expectations that drives consumer demand for both Kogan and Norman are very different. Kogan’s entry (congruent with many other services that operate in a similar albeit more adhoc way) changed the character of the market, so Norman needs to adapt to this innovation or keep on squeezing the ever deminishing previous configurations of the market. Innovators don’t ‘compete’ in any normative sense, they transformed the market itself.

Comment by Glen Fuller on December 7th, 2011

There is also an inherent conservatism in vendors of innovative (in terms of “transforming the market” in the manner Glenn described earlier) products, perhaps due to local market size. I’m involved within the local and international developer community of a large ERP vendor, used by MANY Australian, New Zealand and Asian based companies. While the vendor is pushing the sales of a particular new piece of software, all education and marketing is directed at their US and European markets.
Yes, I can accesss sufficient information to stand up an example of the software in a local or overseas based cloud – physical hardware to support this type of product typically runs to $US500K+, so using a huggable server is out of the question for a pilot. However, getting acccess to vendor support within Australia is very difficult; the Australian branch is essentially a sales office and nothing more.
In short, I have use cases for a particular innovative product, that is available, but I can’t find anyone that no one wants to sell me their version of it !!

BTW, this particular vendor is only one of many aiming at this particular market, but ALL the ERP vendors I deal with are causing me the same grief. And it’s not just software; It’s similar when we discuss actual hardware; for example, it’s much easier to make a business case for a enterprise sized mobility rollout when you quote US rather than AUD prices for the devices.

Comment by Martin English on December 8th, 2011

A big one in my book — I have been to over 60 countries in the last three years and Australia simply has the worst internet speeds/access/bandwidth restrictions of almost any of them. Pathetic.

Comment by Michael Hodson on December 15th, 2011

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