Senate Standing Committee on

Economics References

Inquiry into Australia’s Innovation

System

31 July 2014

Submission by the

Australian Computer Society Inc

 

 

 

 

 

 

 

2  

CONTENTS

Section 1 Executive Summary and Recommendations Page 3

Section 2 Who is ACS? Page 7

Section 3 Towards an Innovation System Page 11

Section 4 Terms of Reference Page 18

Conclusion Page 25

 

 

3  

SECTION 1 – EXECUTIVE SUMMARY

The Australian Computer Society (ACS) welcomes this review into Australia’s innovation

system. Establishing a more robust and effective innovative system is critical for

Australia’s future national productivity and economic growth, particularly as the

resources boom seems to be normalising.

Australia’s innovation credentials are poorly ranked globally; since 2000 Australia has

generally fallen in most innovation measurements tracked by groups such as the OECD

and the World Economic Forum.

So what needs to be done?

Many factors drive innovation. Among them collaboration, culture and leadership,

appropriate infrastructure, access to capital, global linkages and supply chains, digital

literacy (particularly in the SME sector), government policy settings, and the supply of

an appropriately skilled workforce coming out of our education and training systems.

As the peak body for Australia’s ICT professionals, ACS is particularly focused on

addressing the skills issue and the closely related issue of SME digital literacy.

ACS believes that a key reform towards a modern, innovative economy in the digital era

is the injection of creative ICT skills at the early stages of our education system.

Adoption of the UK model whereby computing science is mandated in primary and

secondary schools is strongly recommended; computer literacy and proficiency needs to

be achieved at the latest by the end of Stage 1 in primary school. In the VET sector

there needs to be a greater focus on skills and competency outcomes rather than

training packages directed at a particular qualification or occupation. Tertiary sector

students should have greater exposure to work-integrated learning (WIL) so graduates

are more work-ready. This means having a mix of not only the deeper technical skills,

but also the critical ‘soft skills’ like project management, problem solving, stakeholder

management and strategic and creative thinking, which are all necessary in business

today.

We need an education system that recognises rudimentary computing and ICT skills as

foundation skills, focuses on work-integrated learning in our VET and higher education

sectors to produce a jobs-ready workforce and which values the re-skilling of workers

displaced from ‘old’ industry sectors so they are able to actively participate in and

contribute to the digital economy.

As part of this skills focus, ACS also advocates developing a long-term employment plan

for Australia that maps our human capital and the extent to which it matches our

economic and skills needs. The plan would include metrics and success indicators. And

 

 

4  

importantly in terms of professional services such as ICT the plan would include a focus

on the importance of ethical behaviour and trust. Such a plan would be a key input to,

and assist with, the development of a more integrated and focused approach at all

levels of the education and training supply chain. This is one of the initiatives being

recommended by the B20 Human Capital Taskforce being held prior to the G20 meeting

in Brisbane in November this year. Employment Plans could provide a ‘baseline’ for

countries to track and compare on-going development and initiatives with other nations.

Ideally, every corporate five-year plan should have a page devoted to the organisation’s

long-term skills matrix, and this information should be nationally collated for tertiary

course planning.

In relation to SMEs - which account for 96% of Australia’s businesses, 70% of

employment, and 57% of value add – there is general lack of e-readiness. SMEs are

more likely to be competitive in national and global markets if ICT products and services

are regarded as critical, “must have” elements of the business. ICT drives innovation

and builds competitive advantage. The old paradigm of exporting goods and services

has been substantially replaced by the ecommerce paradigm of importing customers,

especially in the services sector, and Governments need to accommodate this in

planning.

ACS already helps SMEs with their ICT workforce planning based on globally established

ICT frameworks, and by delivering and/or providing access to relevant training.

Governments also have a key role to play here by focusing on programs that deliver

practical, on-the-ground advice and solutions based on strong evidence based approach.

In other words, programs based on analysis that clearly identifies the specific digital

weaknesses, which need to be addressed. The important point here is that there is no

“one size fits all” solution for SMEs. They are not generic. Their needs differ by industry

sector and by region. This would represent new thinking and a much needed new

approach by Governments.

ACS believes an important first step for Government is that it must, at a high level,

clearly demonstrate a stronger commitment to innovation. This requires articulating a

clear vision and backing that up with strong leadership. And as a very public indicator

of this vision and leadership, ACS recommends Government create a new role of Chief

Innovator, a role similar to the current Chief Scientist. The person would report directly

to the Prime Minister, would be from a private sector background, would have a clear

track record of innovation, would be highly regarded and respected, and would have the

Prime Minister’s support to work across all portfolios of Government to achieve the

policy and program outcomes required. Government can also show leadership by being

much more innovative in the way it engages with the community and delivers its own

 

 

5  

products and services. This will also require some fresh thinking within portfolios and

perhaps a re-assessment of accountabilities.

Government needs to also ensure programs are calibrated in such a way that better

supports innovators, entrepreneurs and risk-taking ventures. As an example, the

employee share option regulations are failing start-ups and causing innovative

businesses to look offshore for talent or a better business environment. In this regard

the UK sets a good example of a facilitative environment.

The tax treatment of angel investments needs attention – the risk aversion of Australian

high net worth individuals and self-managed super funds needs to be coaxed lower by

tax incentives. Funds from Government programs that try to pick winners are inefficient

and can be redeployed to fund tax incentives for angel investment with private investors

bearing all the risk.

The role of professionalism in risk mitigation is underestimated. Australia’s genetic

disposition to innovation and improvisation is being seriously impeded by poor quality

technology and unprofessional project management and system implementations. While

a licence is needed to change a power point or to be a bouncer in a nightclub, no

credential is required to take charge of IT security in any Australian enterprise, nor to

program robots or other safety-critical technology ranging from avionics to amusement

park rides. Sooner or later the value of professionalism, which by definition puts the

public interest above self-interest, will be seen as desirable if not mandatory. Until then

the so-called 80-20 rule will see cost cutting take precedence over prudence.

Government also needs to look at imaginative ways it can ensure the long-term viability

of publicly funded research such as is conducted by NICTA and CSIRO, both critically

important organisations in Australia’s innovation ecosystem. NICTA is the nation’s

largest organisation dedicated to ICT research and the commercial application of this

research to create national wealth. It is also coordinating a national program (known as

Digital Careers or Group X) to address the worrying shortage of high school students

choosing to study ICT-related courses in science, technology, engineering and

mathematics (STEM). This decline in STEM studies has led to a shortage of skilled ICT

workers capable of doing the jobs required to build and sustain an advanced digital

economy. ACS is a partner in the Group X activity.

If we are to build a more innovative culture in Australia and create innovative new

products and services, we need NICTA to continue with its excellent work and build on

the considerable successes it has had to date. NICTA also provides an opportunity for

our best and brightest ICT minds to deploy their talents in Australia and not pursue

careers in other countries. NICTA therefore helps reduce the “brain drain” which has

 

 

6  

been lamented in this country for decades. NICTA is a key part of the innovation

solution for our country.

About Digital Careers:

Digital Careers is a program to reduce the critical shortage of Australian ICT professionals. Funded by Commonwealth Department of Communications ($6.5 million over four years, from 1 July 2013), the program is hosted by NICTA. Digital Careers is collaboration between government, industry, research, and tertiary institutions (universities and TAFEs). The Australian Computer Society (ACS) is closely involved in co-coordinating the program. The program’s objectives are to:

• Increase interest amongst school students in digital technologies and particularly engage students who do not have a natural interest in ICT

• Increase the portion of students enrolment in ICT courses at universities and TAFE

• Increase awareness of career diversity, opportunities and benefits of an ICT based study program/education

• Raise the profile and reputation of the ICT industry and ICT careers • Provide education and training material and professional development for ICT

educators and • Improve the capability and confidence of school ICT teachers and catalyse the

professionalisation of ICT teaching

To achieve these outcomes Digital Careers Program focuses on:

1. Activities and events for school students from years 5 to 10 (ages 10-15);

2. Teacher Professional Development; and

3. Promotion of the diversity of careers in the ICT industry.

RECOMMENDATIONS

• Consider introduction of the UK education policy of mandated IT programming

from K-12

• Alternatively, introduce computer and technology skills at the earliest levels of

primary school with a view to achieving computer proficiency by Stage 1 science

as a mandated subject in primary and secondary schools

• Mandate computer science at secondary level to ensure that the Australian

population achieves a base level of technical conversancy to even have a chance

of competing with global competitors who place far more emphasis on this topic

• Reform the VET sector to focus more on skills and competencies rather than

qualifications and occupation outcomes

 

 

7  

• Introduce more work-integrated learning and a greater focus on teaching the

“soft” skills in our VET and higher education sectors to improve the work

readiness of graduates

• Develop a long-term employment plan for Australia, which maps our human

capital and the extent to which it matches our economic and skills needs.

In terms of Government support for innovation:

• More targeted, evidenced based assistance to SMEs to lift their digital

readiness

• Appoint a Chief Innovator from a private sector background, who is not

shackled by bureaucratic processes and can make recommendations directly

to the Prime Minister

• Demonstrate real innovation in its own delivery of products and services and

the way it interacts and engages with the community.

• Amend the employee share option regulations to encourage start-ups, as

the UK does.

• Redeploy inefficient innovation funding models with tax incentives for angel

investment in Australian start-ups and Australian intellectual property

creation (with benefits contingent on IP remaining in Australia)

SECTION 2 – Introduction

2.1 Who is ACS?

The Australian Computer Society was formed in 1966 and is Australia’s peak body for

ICT professionals with over 22,000 members and a national footprint. Like all

professional bodies, a core function of the ACS is the assessment and accreditation of its

members as Certified Technologists or Certified Professionals. Assessments are

conducted against an internationally accepted framework called Skills Framework for the

Information Age (SFIA). To retain professional status ACS requires certified members to

undertake ongoing professional development activities. For more information about the

ACS, please see www.acs.org.au

ACS also conducts research-based advocacy on behalf of members on ICT and skills

related issues, and is increasingly starting to work more with Australian workplaces

(public and private) to help them with their ICT workforce planning and training needs.

ACS is responsible for the professional accreditation of ICT degrees in Australia. It has

accredited 950 education programs at a range of Australia universities and a number of

registered training organisations (RTOs) that provide higher education degrees in ICT.

 

 

8  

ACS works closely with the Tertiary Education Quality Standards Agency (TEQSA) to

align courses with national standards. It also works with the Australian Council of ICT

Deans in the accreditation process.

2.2 Why ICT skills and innovation are important

ICT and computing skills - which are part of the Science, Technology, Engineering and

Mathematics (STEM) set of skills - are core to driving innovation in an era where digital

technologies dominate. Yet it is estimated that in Europe, while STEM occupations are

expected to grow by 14% by 2020 (compared to 3% for other occupations), the supply

of workers with education qualifications in STEM subjects is projected to actually fall. In

the United States, employment in these STEM occupations is projected to grow almost

as fast between 2008 and 2018 as employment in all other occupations combined.

Further, the European Commission estimates that by 2020, there will 900,000 jobs in

the European ICT sector unfilled due to a lack of appropriately skilled workers.

A 2103 report by the Australian Workforce and Productivity Agency (AWPA) estimated

Australia faces similar challenges in relation to its supply of skilled ICT workers. Their

analysis indicates employment for ICT workers is expected to grow over the next five

years. Total ICT workforce growth is expected of 33,200 workers, or 7.1 percent growth

between 2102 and 2017. Employment of ICT professionals is expected to grow by 9.5

per cent, by 21,400 workers during the same period.1 Supply to this market will be

patchy. High drop-out rates at the VET sector level combined with inappropriate skills

‘mix’ so far as employers are concerned means skilled and temporary migration

schemes have emerged as a key source of ICT worker supply. So if we are to lift levels

of innovation in Australia we must address the issues of STEM and ICT skills, including

the right mix of hard and soft skills.

The ACS considers that the current review into innovation is timely and in fact urgent.

It presents a much-needed opportunity for policy makers to introduce a comprehensive

and cohesive Innovation System - not just a policy - which recognises the inter-

relationship between improved educations and skills, more appropriate regulation and

legislation, and investment levers.

Given the ACS’s focus on a highly skilled ICT Australian workforce and better programs

to achieve this, this submission will concentrate primarily on the need to address the

Australian market failure of the supply-side not meeting demand-side requirements for

work-ready, creative and innovative workers who have a mix of hard and soft skills.

Innovation is more than traditional or foundation ‘hard skills’ such as science &

technology; increasingly policy makers need to look towards education systems that                                                                                                                          

1 AWPA, ICT Workforce Study July 2013, page 47

 

 

9  

produce a mix of ‘soft skills’ such as project management, stakeholder management,

leadership, and negotiation skills to support and complement hard technical skills.

A highly skilled ICT workforce is an essential foundation for Australia’s Innovation

System, because it is critical not only for the creation and application of new knowledge,

but also to be able to garner and apply knowledge produced elsewhere; we must “learn

from the world”2 because no nation can produce all the good ideas it needs to survive

and thrive in an increasingly competitive, global economy.

This has implications for all aspects of the compulsory and post-compulsory education

system as well as incentives faced by those choosing to participate in the labour force.

“These systems need to produce skilled and capable people with the ability to manage

their careers in a rapidly changing world and labour market. This entails a shift away

from training for a particular job, to a system that equips people with the capabilities

and skills required to compete in a technology-enriched, globally traded labour market,

regardless of their qualification.”3

Recent meetings of the B20 Human Capital Taskforce have highlighted the essential

path to success in the education sector, with focused suggestions for change supported

by ACS. These include increasing the alignment and responsiveness between the

learning ecosystem and workforce needs by:

• Aligning curricula with workforce and industry needs, utilising multiple learning

pathways and models

• Building basic skills for the digital age

• Enabling a flexible system of lifelong learning

• Undertaking efforts to reskill workers displaced as a result of “fallen” industries

This report also provides interesting case studies of success in other G20 nations, which

could be instructive for Australia. Delivery of skills upgrade programs by the private

sector in India has been especially successful.4

                                                                                                                         

2 Yves L. Doz, Jose Santos and Peter Williamson, From Global to Metanational: How Companies Win the Knowledge Economy (Boston: Harvard Business School Press, 2001) 3  Building Australia’ Comparative Advantage, Business Council of Australia, July 28 2014, page 18. 4  The National Skills Development Corporation (NSDC) was established in 2009 to address India’s significant mismatch between skills demand and supply by upgrading the skills of the workforce through funding skills training and development programmes coordinated by the private sector. The PPP model is helping India overcome two of its greatest challenges in delivering VET courses – its lack of adequate infrastructure and shortage of job offers. The NSDC has established 29 Sector Skill Councils and works with 114 training partners operating in excess of 2,500 physical and mobile training centres across 352 districts in India. As of January 2014, 13.5 million people have been trained, and 750,000 people are known to have been placed.

 

 

10  

2.3 What is Innovation?

Conventional views have it that innovation takes place idiosyncratically in R&D labs and

‘Silicon Beach” clusters. But innovation is better understood as being embedded in a

national innovation system; it is more than science and technology or R&D. It can

embrace a better process, new market, new product or improved service5, and is

generally driven by consumer demand, although not always; no-one knew they needed

or wanted iPods, smart phones and tablets until someone imagined them and brought

the idea to market, whereupon demand grew astronomically. Innovation is a critical

engine for business growth and job creation in large and small firms alike.

This is not only about research and development (R&D), but about the whole range of

investments that firms and governments make in knowledge, including software, data

skills and organisational “know-how.” These complementary investments help to ensure

that R&D leads to innovations that generate growth and jobs. The increasing relevance

of services industries to GDP underlines the importance of harnessing the power of

technology and knowledge based capital to create new business models, services and

products to replace those made redundant by automation and digitisation.

The case for supporting innovation is clear – studies for the European Union and the United States

show that business investment in knowledge-based capital contributes 20 per cent to 27 per cent of

average labour productivity growth. The 2012 Australian Innovation System report showed that

Australian businesses that innovate are three times more likely to export and 18 times more likely

to increase the number of export markets targeted than those that do not innovate. Most sectors

have a multiplier effect on job creation, but the innovation sector has the largest multiplier of all.

While business takes the lead in such investments, government has a role to play by creating the

right environment for innovation to flourish. Governments can strengthen efforts to support

innovation by defining and promoting a national innovation agenda and pipeline that highlights the

                                                                                                                         

5  The OECD defines innovation more broadly as “the implementation of a new or significantly improved product (that is, a physical good or service), process, a new marketing method, or a new organisational method in business practice, workplace organisation or external affairs.” Ministerial Report on the OECD Innovation Strategy, March 2010. www.oecd.org/sti/45326349.pdf

 

 

11  

priority areas for development, whether technology-driven or more broad-based. Targeting public

and private investment to specific areas is not about “picking winners”.6

An innovation system must include all economic, political and social/cultural institutions

affecting innovation, such as education and skills training environments, pre-university

education, the national financial/investment system, regulatory policies and the labour

market. Unless all these elements are operating synergistically, Government and

industry will be unable to create and apply an effective Innovation System; policy

makers must stop looking for solutions in isolation from the broad eco-system.

2.4 Innovation in Australia

Globally, our innovation credentials are rated poorly compared with similar economies.

The World Economic Forum (WEF) rankings place Australia down the table in capacity

for innovation, business sophistication and company R&D spending, and further down on

technological infrastructure. We rank highly in terms of school and tertiary enrolments

and research institutions.7 WEF has also ranked Australia 21 out of 148 countries on the

Global Competitiveness Index, down from 15 a few years ago. It identified labour

regulation, government bureaucracy and tax rates as the most problematic factors for

doing business in Australia. Australia also scores poorly in terms of venture capital, an

element of the eco-system that most assists start-ups and entrepreneurs.

Reasons for Australia’s relatively poor innovation ratings are complex: innovation is

notoriously difficult to quantify, and organisations that analyse innovation across

economies may use varying assessment criteria. In addition, innovation itself is a

complex phenomenon, requiring proximity to advanced sources of information,

customer demand, and complementary knowledge that is difficult to codify, measure

and communicate.

Australia’s government has a role to play in fostering much needed innovation – it

should be enabling innovation across the whole economy by fostering entrepreneurship

and collaboration and dynamic growth, and facilitating skills and capabilities.8

Australia is relatively isolated from some of the global competitive and financial

pressures and external shocks experienced by other nations, who responded to financial

crises with highly innovative solutions. Commentators have suggested that our isolation

                                                                                                                         

6  B20 Human Capital Taskforce Policy Summary, www.b20australia.info 7  Global Competitiveness Report 2012, World Economic Forum, Switzerland, 2102 8  Building Australia’s Comparative Advantage, Business Council of Australia, July 28, 2014, page 3.

 

 

12  

has given rise to complacency and a cultural attitude that does not acknowledge the

benefits of innovation.

Others believe Australia has relied for too long on a resources boom, which has both

shielded us from financial crisis and clouded any ability to recognise what will come after

that boom. But Australia will always be a resource exporter and an innovator; such a

‘mixed economy’ provides opportunities for us to improve our innovation credentials.

In the resource sector, miners oversee Pilbara iron ore mines in real time from remote

operating centres in downtown Perth. This is innovation.

Firms in every sector are doing old things in new ways, mixing and matching from a

suite of technologies, including mobile devices, cloud computing, crowd-sourcing, digital

fabrication, remote monitoring, distributed sensing, and big data. These new mixes will

yield new processes, tools, products, services and different jobs. This is innovation.

Firms are changing; you can now build and run an online store from your mobile phone.

Markets are changing; even small firms can now sell to the world via cloud. This is

innovation.

But old boundaries are blurring and skills will have to change; some skills that once

were prized are becoming automated, while others are still developing. In this aspect,

innovation can destroy as well as create jobs, and Government needs to be aware of

this; it is already occurring. ACS considers that a radically reformed education and

training sector producing work-ready graduates, together with revised business policies

and regulation, will drive increased innovation into the next iteration of Australia’s

growing services economy.

Government has a key role to play here; a ‘bias towards action’ supported by clear

leadership and commitment to change is essential. Driving this change will require a

Chief Innovator who can identify Australia’s ‘unfair advantage’, operate outside and

above normal Government constraints. Reforms to education and business regulation

have enormous potential but the payoff in improved GDP and productivity may take

decades to be realised.

What is clear is that future success is not guaranteed if Australia does not transition to a

new source of growth as commodity prices and investments in resources projects

normalise. And there is no doubt that our firms are now competing against an

increasingly globalised economy.9

                                                                                                                         

9  McKinsey Australia, Compete to Prosper: Improving Australia’s Competitiveness, July 2014, page 1  

 

 

13  

SECTION 3 – Towards an Innovation System

There are many factors that drive innovation. Collaboration, culture and leadership,

appropriate infrastructure, access to capital, global linkages and supply chains, digital

literacy (particularly in the SME sector), government policy settings, and the supply of

an appropriately skilled workforce coming out of our education and training systems.

As the peak body for Australia’s ICT professionals, ACS is particularly focussed on the

skills issue and the closely related issue of SME digital literacy. And part of an effective

response to these issues and challenges will require Governments to think differently

about what they must do and to take a different approach.

3.1 Skills – supply does not meet demand

Driving a more innovative economy will not happen with a business-as-usual approach.

At its most effective, innovation is an inherently human endeavour; “knowledge has two

legs”. Successful innovation happens when people with skills, experience, and

capabilities come together to understand or predict, and then address, other people’s

challenges. Talent, like capital and technology, is a key success factor for innovation.

Inspiring potential talent will drive innovation and growth.

Education is a fundamental element in innovation and access to both basic and

vocational education is key to talent development. ACS recommends that a robust

Australian Innovation System can only be developed on the back of targeted (not

necessarily more) investment in education, building the human infrastructure to drive

innovation and growth. This investment needs to focus not just on foundation skills but

also on so-called “soft skills”, job-readiness and workforce participation.

ACS’s current advocacy focus is the three-pronged platform of early stage, VET and

tertiary sectors, with the aim of raising awareness of the need to start the creation of

imaginative and innovative students as early as possible (K-12), ensuring VET skills are

based on competencies rather than redundant ‘industrial age’ skills, and the tertiary

sector produces job-ready graduates that business can on-ramp to successful careers

easily.

In particular, the changing nature of work and older sectors forced to move to the new

information age, means that vocational training has taken on a new urgency; it is often

the part of the education system that equips people to move from lower to higher value

jobs. The ICT industry moves so fast, that the historical notion that VET qualifications

map to a specific vocational outcome no longer holds true.

It is important to make the distinction here between those seeking to enter the industry

 

 

14  

(such as a traineeship pathway), and those gainfully employed whether in ICT or other

industries. Young people in continuous learning (i.e. doing VET direct from school) have

very different needs from students already employed.

The VET system is angled and designed for TAFE and traineeships but to maximise

productivity, GDP growth and address priority skills we need a system better able to

deal with those already employed or seeking work as adults.

Limitations of the current approach are that it is:

• Overly regulated and 'restrictive'

• Training against national systems adds too much cost for too little reward for

employers

• Focusing on the supply (training outcomes) rather than employer needs

(demand)

The fundamental question to ask is whether skills development funding is failing to

reach businesses to stimulate growth. ACS suggests that the answer to this is in the

affirmative; evidence to support this is the fact that ICT enrolments in VET declined by

40% over the last decade. Corporate un-accredited training continues to grow.

A pragmatic policy solution would be targeted priority purchasing of skills development

at the unit of competency level rather than qualifications, or pre-defined skill sets as

defined in national training packages through ‘consensus’.

Such an approach will:

• Expedite knowledge and skills transfer to the economy

• Fast-track and provide ease of entry into the ICT labour market by those employed

but not currently working in the sector, highlighting transferable skills, and

maximising skills utilisation across the economy

• Cultivate an immediate ROI where many alternative actions have long lead times.

VET has been relatively overlooked compared with schools and universities in the public

debate on education; ACS will contribute to the Government’s current review of the VET

system. The priorities for VET are to:

• Make VET a national priority

• Move the focus more to skills (especially ICT) and competencies which produce

a flexible, adaptive workforce

• Resolve roles and responsibilities between the states and Commonwealth

• Better integrate the VET system with other parts of the education system and

 

 

15  

with industry

• Improve regulation in support of a more dynamic, effective and innovative

system, including allowing public providers to operate on a more commercial

basis

• Conduct a thorough assessment of the real future investment requirements of

VET.

The nature of any country’s workforce is crucial to its competitiveness. Workforce

development is heavily influenced by the education and training system including all

levels of traditional education, vocational training and company-based training, as well

as the ability to provide opportunities for life-long learning. Enhancing workforce

capabilities is now even more critical given the competition Australia faces from Asian

region nations with more labour, lower costs and in some cases higher innovation levels.

It is well documented that Australia has an imbalance in skills supply and demand

across many sectors of the economy.10 Whether this is a net skills “shortage” or “skills

gap imbalance” is a moot point; employers struggle to access skills they need to do

business. Across all sectors of the economy, ICT is becoming increasingly important to

drive value, employment and productivity. ICT now accounts for almost ten per cent of

GDP, which is comparable to the mining sector. As the digital economy grows, and older

industry sectors decline, ICT jobs are growing in number and specialism and yet in

Australia there are insufficient numbers of domestic ICT graduates to meet this demand

and those who do graduate face ongoing barriers to entry level jobs in ICT.

The ACS knows that many employers consider graduates from a range of disciplines are

not work-ready – while they have deep technical knowledge they may lack the

professional skills necessary in business. A flexible educational system which focuses on

“T” shaped talent pools of all-rounders who are both technically deep in at least one

area and possess management skills which may have been learned in an older, non-ICT

industry sector. For those whose depth is STEM, the breadth will be “softer” human

skills or business skills - project management, leadership, creativity, finance, and

entrepreneurship. For some, the human or business skills will be the deep part of the

“T”, with technical breadth rather than depth. This approach is equally applicable to

transitioning ‘old’ sectors participants such as autoworkers into ‘new’ skills in the digital

economy.

The ACS also acknowledges that employers may be reluctant to invest in bringing

graduates “up to speed”. The ACS has developed a work-readiness program for

                                                                                                                         

10 ICT Workforce Study, AWPA, 2013

 

 

16  

international ICT graduates who finish degrees at Australian higher education

institutions and seek permanent residency. The ACS Professional year program runs for

44 or 52 weeks and aims to equip student with the professional skills needed to succeed

in the Australian workforce. These include communication skills, business skills and

workplace culture awareness, an internship with a host organisation and online

professional development. ACS is now planning to extend this program to domestic

students.11

Similar employability arguments are pertinent in relation to displaced older

workers and those workers requiring up-skilling or cross-training, an issue that will

increasingly bedevil the Government as older industry sectors decline in Australia. The

ACS program Skills Framework for the Information Age (MySFIA, www.acs.org.au/sfia-

certification/mysfia) is based on the global program conducted out of the UK and can be

used to cross- and/or up-skill workers seeking to transition from older industry sectors

in to the newer economy. It provides a simple framework consisting of competencies on

one axis and levels of responsibility on the other. ICT practitioners can “self-assess” (or

be assessed by qualified practitioners) for their competency levels against a range of

skills and then identify areas for improvement to progress their career paths. For

organisations facing large redundant workforces, this tool is a robust start to up-skilling.

ACS has now commenced working with large private and public sector organisations to

assess their workforces according to the SFIA competency base and to use this as a key

tool in workforce development planning.

The real issues for an Australian Innovation System generally are a continual lack of

focus on attracting young people into ICT as a career, and employer buy-in to any form

of 'growing a graduate' scheme that would skill them for such a career. The ACS has

consistently advocated for a focus on attracting young people into ICT through well

thought-out programs in schools and more targeted levels of support for Higher

Education and the VET Sector. For example, in the current VET sector, the system is

focussed on disciplines packaged into occupational groups and job families, sorted into

the Australian Qualifications Framework. This is an inadequate response for the digital

economy and the up-skilling required to transition a workforce from old industry to

participation in the global digital economy; a renewed focus on competency standards

rather than Training Packages is required.

It is equally important for industries and business, not just Government, to get involved

in enhancing education systems. Advances in information and communication

technologies (ICT) in recent years played a crucial role in transforming traditional

                                                                                                                         

11 Extension of the PYear program will likely commence in 2015.

 

 

17  

education and making it more accessible, affordable, and effective globally. Learning

from other nations facing acute market and financial stress (such as the UK) is

instructive; taking a long-term view towards better skilled graduates in 10-15 years’

time, the UK has mandated the teaching of ICT skills from K-12, commencing

September 2014. The program is supported and funded by Government, industry and

the ACS sister organisation, the British Computer Society who is taking a lead role in

training teachers to help them deliver the revised curriculum.

“The Chancellor of the Exchequer and Education Secretary have today (Tuesday 4

February 2014) announced a new £500,000 fund to train teachers in software coding, so

our schools can inspire the next generation of tech entrepreneurs.

The government will provide match funding from industry and business, allowing new

and existing teachers to be trained by the experts. This will equip schools to teach the

new computing curriculum introduced this September and designed with input from the

Royal Society of Engineering, and industry leaders such as Google and Microsoft.

Introducing children to skills like computing and coding from an early age is all part of

the government’s long term plan to ensure young people have the first class education

they need to succeed, and make sure Britain leads the global race in innovation.”

https://www.gov.uk/government/news/year-of-code-and-500000-fund-to-inspire-

future-tech-experts-launched

By building a world-class technology curriculum at the early stages of K-12, Australia

should hope to avoid the approach of ‘capstone’ subjects such as ICT being taught as

part of home economics or woodwork. Another example of early stage education in

creativity and innovation foundation is Estonia, a country of only 1.29 million people,

where publicly educated students are required to learn coding at ages 7-8 and continue

to the final year of school www.innovatsioonikeskus.ee/en

3.2 Digital literacy of SMEs

SMEs account for 96% of Australia’s businesses, 70% of employment, and 57% of

value-add. But most recent analyses by Governments indicate that SMEs have not

embraced ICT as a work-productivity enabler or a tool to expand their markets both

locally and globally. Their take-up of cloud technology for example, has been low, and

use of social media to enhance online presence is similarly low.

Reasons given for this low take-up include cost and time to implement; most small

businesses focus on their business survival, not ways to improve their growth. They

 

 

18  

will need to embrace ICT products and services as a critical, “must have” element of the

business that drives innovation and builds competitive advantage.

Government has a role to play in lifting this awareness. More facilitative programs to

educate SMEs about ICT tools and online presence, and a vastly improved national

broadband infrastructure capable of supporting SME growth are essential.

3.3 Rethink government levers

Government can do a lot to support innovation and to develop a National Innovation

System. It has a huge influence on how things are done. A third of GDP (including

transfer payments) goes through internal revenue. Its services are among the largest

employers. It is the largest buyer of information technology. Its systems touch

everyone. It sets the rules of the game in health, education, finance and beyond.

Government remains risk averse, but blanket caution is the wrong rule. Government can

do more to offer data for the community to re-use, for example by choosing open data

protocols as standard, and to open government processes to input from innovators,

particularly through the procurement process. This includes providing opportunities for

small and medium sized enterprises to compete effectively and bring to the table,

without disadvantage, innovative new business solutions underpinned by new and

emerging digital technologies. Notwithstanding assertions to the contrary, this is not

happening in the public sector at the moment.

Government can also foster innovation by getting out of the way in many areas. Where

the regulatory burden is high, government should reduce barriers and compliance costs;

on the contrary, regulatory burden on small business has increased over the recent

years. Regulatory changes that permit small firms with new ideas to access capital,

manage cash flows, and share risk will be key. Tax treatment of current employee share

options must be reviewed to provide the encouragement to innovation available in the

pre-2009 regulation.

Finally, Government needs to show leadership by placing innovation on the policy

agenda as a priority. Creation of a Chief Innovator role is essential, together with a

clear statement of national vision for an innovative Australian future, which is not tied

inextricably to resources or agriculture.

SECTION 4 – Terms of Reference

The challenges to Australian industries and jobs posed by increasing global competition

in innovation, science, engineering, research and education, with particular reference to:

(a) The need to attract new investment in innovation to secure high skill, high

 

 

19  

wage jobs and industries in Australia, as well as the role of public policy in

nurturing a culture of innovation and a healthy innovation ecosystem;

The Australian Government has a longstanding traditional role in facilitating

competitiveness and coordinating actions to enable growth. This cuts across many policy

domains, including tax policy, trade and investment, skills and education, regulation and

industry policy, and governance, such as the federation and how government

enterprises are made to compete. “Over the last several years this role has been poorly

coordinated and executed. Risk taking, which is vital to innovation and competitiveness,

has been stifled by heavy-handed regulation, and market design has been poorly

directed.”12

The economic challenges Australia faces in the next twenty years are too vast to be met

by Government, business or industry acting alone. Active collaboration between the

three sectors, including funded R&D institutions, is essential. This will require educators

from primary to secondary levels to develop structured relationships with business and

government leaders so they better understand what type of skills are in demand in the

markets their students will go into. Educators must start to create ‘digital career’

opportunities for their students as well as keep themselves up to date on the changing

nature of careers and markets, and embrace bringing those markets into their

classrooms.

Business must ‘sell’ their needs and opportunities to schools and students early in the

cycle, to acquaint those students with options, requirements and work experience

through internships and apprenticeships. Providing these on-ramps for younger skills

will ease the to-work transition and encourage better job-readiness.

Government needs a more cohesive and joined-up innovation policy that addresses not

just the education issues but also onerous tax and regulation on innovative businesses

coupled with the lack of facilitative incentive schemes. The critical loss of talent due to

the failure of the employee share option scheme also augurs ill for a future innovative

society.

(b) The Australian Government’s approach to innovation, especially with respect to

the funding of education and research, the allocation of investment in

industries, and the maintenance of capabilities across the economy;

Australia has introduced a raft of policies and programs intended to boost innovation,

                                                                                                                         

12  Building Australia’s Comparative Advantage, BCA, page 34  

 

 

20  

support workforce development and improve the education and training system. The

Digital Education Revolution, Job Services Australia, Australian Government Skills

Connect, the Investing in Experience Program are just some of the programs introduced

since 2008. Outcomes from these and other related schemes are negligible. As with

many good programs, they have not been adequately resourced or promoted.

A 2011 Review in School Funding recommended significant changes to funding for

schools to combat declining performance of Australian students. Many of its

recommendations have not been acted upon. In 2006, COAG called for increased in the

proportion of adult workers with skills and qualifications to contribute to the workforce,

but these aspirations have not seen their way into any policy since then. More practical

schemes such as Enterprise Connect and Commercialisation Australia have been

terminated, replaced by the Entrepreneurs Infrastructure Program (EIP), which is not

geared towards risk-taking innovative activities, but more focused on rewarding those

who are already successful.

Combined with severe funding cuts to NICTA and CSIRO, institutions that have

developed and commercialised successful innovative products, this approach to building

a successful innovation culture and system in Australia is disappointing, especially when

compared with activities and policies in like-minded economies such as the UK and the

US.

(c) The importance of translating research output into social and economic benefits

for Australians, and mechanisms by which it can be promoted;

While there are some excellent examples of university-based research resulting in

commercially valuable innovation in Australia, in general the main priorities of university

personnel in the past have been academic publication and high quality teaching, rather

than seeking a commercialisation avenue for any successful idea. This is not necessarily

the fault of the university sector; AVCAL notes in its submission to this Committee that

current research funding priorities are skewed towards academic publications,

consultancy reports, major exhibitions, invited keynotes and other contributions to the

research field, citing ARC principles on Performance Evidence for successful grants.13

The challenge of how best to commercialise high quality research brings us to the issue

of a research institution such as NICTA. Companies tend to base their research activities

at optimal locations for skills, regulation environments, ease of doing business and

strength of ideas. Independent research institutions, tasked to commercialise as many

of their ideas as practicable in local and global markets, are also perhaps better venues

                                                                                                                         

13 Australian Private Equity & Venture Capital Association Ltd, Submission to Senate Inquiry into Australia’s Innovation System, page 10.

 

 

21  

for commercially directed research.

Mechanisms such as a venture capital, effective R&D schemes, incentives for innovative

start-ups trying to commercialise and an effective share option scheme to assist

innovative start-ups through the ‘valley of death’ to commercialisation are lacking in

Australia. Examples of appropriate mechanisms from the UK are instructive, and should

be worthy of possible introduction in Australia.

• R&D Tax Credits; Qualifying R&D spend by SMEs is eligible for a corporate tax super deduction currently of up to 200% and, under certain circumstances a tax credit repayment.

• Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS); Offers income and capital gains tax reliefs for investors in certain small, higher-risk companies.

• Enterprise Management Incentive (EMI); Allows small and medium sized businesses to reward employees through provision of share options in a very tax effective manner

• Entrepreneur’s Relief; Reduces CGT on qualifying gains to an effective rate of 10% up to a lifetime limit of £10m of gains

• Optimising capital allowances; Alongside the standard capital allowances scheme there are enhanced allowances for investing in R&D, energy efficient equipment and investment in certain Enterprise Zones

• Small Business Rate Relief; Qualifying small businesses may be eligible for relief of up to 100% on business rates for 2012/13

(d) The relationship between advanced manufacturing and a dynamic

innovation culture

ACS has no particular comment on this term of reference except to say that no sector of

the economy, including manufacturing, can expect to compete effectively in today’s

globalised world unless it embraces an innovation culture.

(e) Current policies, funding and procedures of Australia’s publicly-funded

research agencies, universities, and other actors in the innovation system;

ACS considers that the termination of all government funding for NICTA after 2016 must

be reviewed, to allow for appropriate transition to a self-funded model over a longer

period of time, and to consider alternative funding models as has been done in the UK

with the Catapult Networks, which serve as an example;

 

 

22  

The UK has developed ‘Catapult networks’, which are designed to transform the UK’s

capability for innovation in seven specific areas and help drive future economic growth.

The seven areas are high-value manufacturing, cell therapy, offshore renewable energy,

satellite applications, connected digital economy, future cities and transport systems.

The Catapult networks are a series of physical centres where the very best of the UK’s

businesses, scientists and engineers work side by side on late-stage research and

development, transforming high-potential ideas into new products and services to

generate economic growth. The funding model will vary through the life of the

technology and innovation centre and can be expressed in simplified terms as following

the one-third, one-third, one-third model. Under this model, centres are required, when

fully established, to generate their funding broadly equally from three sources:

•Business-funded R&D contracts, won competitively

•Collaborative applied R&D projects, funded jointly by the public and private sectors,

also won competitively

•Core public funding for long-term investment in infrastructure, expertise and skills

development.

Each Catapult centre is its own separate legal entity, controlled by their own boards with

an executive management team responsible for the day-to-day management of the

centre.14

NICTA’s success in spin-off companies (fourteen so far), attracting funding from other

sources, conducting a successful PhD program and collaborating with both private sector

bodies and state governments indicates that it can move to a self-sustaining model but

will require more time for that transition.

In addition, University curricula must be reformed to link more closely with business and

industry needs; in this regard the Australia Council of Deans of ICT, working

collaboratively with ACS for accreditation of ICT courses, is well positioned to affect this

reform under guidance. The current methodology of using the Common Body of

Knowledge (CBoK) approach is being updated to ensure it remains relevant to skills for

the information age.

(f) Potential governance and funding models for Australia’s research

infrastructure and agencies, and policy options to diversify science and research

                                                                                                                         

14  See BCA op.cit, page 35  

 

 

23  

financing;

It is widely agreed there is insufficient funding15 in Australia to support innovative

activity and entrepreneurship; many innovations leave Australia for more encouraging

environments where access to capital and clusters of research are fostered by other,

more pro-active governments.

Industry and business need to work cooperatively with government to develop joint

funding schemes based on commercialisation success for research coming out of

independent research institutions, and those universities with sustained histories of

successful research leading to spin-offs or other commercial outcomes. Not all

universities are suited to research; government should fund those that have displayed

successful commercialisation.16

(g) The effectiveness of mechanisms within Australian universities and industry

for developing research pathways, particularly in regards to early and mid-

career researchers;

Given the data presented in the previous response, ACS considers that funding grants to

universities must be changed so that research outputs are classified more appropriately

by the ARC.

(h) Policy actions to attract, train and retain a healthy research and innovation

workforce;

Development of better Government leadership and vision for an innovative Australia is

essential; innovation and the ‘smart economy’ are not particularly evident in the current

Government agenda. If we do not address the innovation issue with real urgency, Asian

competition will very soon attract our better skills out of Australia to more encouraging

environments.

To encourage and direct innovative ideas in our local environment, the Government

needs to appoint a Chief Innovator from the private sector (similar to the current Chief

Scientist but with an exclusive focus on innovation), not connected to any department or

agency, reporting to the Prime Minister and responsible for the comprehensive

development of an Innovation System based on joined-up and cohesive policies and

programs which are properly resourced and targeted. Qualities required for a Chief

                                                                                                                         

15  Australia provides approx $8.6 billion in funding to research and development each year; $2.9 billion goes to the University sector. Source: BCA, page 52 16  AVCAL notes that there is a low priority given to translating these funds into commercial outcomes, with total Government support for commercialisation amounting to 2% of the federal budget allocation in 2012. Op.cit, page 10

 

 

24  

Innovator are:

• seek out potential new ideas

• see benefits and opportunities others don’t

• allow for reasonable failure rates

• have a longer term vision

• entrepreneurial and realise the benefits of adaptation

• lead by example, good mentor and well connected

(i) Policy actions to ensure strategic international engagement in science, research

and innovation; and

The government should look to emulate the UK’s successful innovation program to

develop areas where Australia has potential comparative (or “unfair”) advantages, such

as the professional services sector. It should also implement changes to the

arrangements surrounding employee share schemes that will improve the

competitiveness of Australian businesses and enhance the operation of the Australian

innovation system. This should be done by bringing Australia into line with the rest of

the world by making the point of taxation for employee share schemes at the time at

which the shares, or rights are exercised. The government should further develop the

Entrepreneurs’ Infrastructure Program. To ensure its effective operation, the program

should be focused on driving collaboration, genuine risk-centred innovations and

providing access to networks.

If Government can attract international venture capital to Australia to assist with filling

the funding gap, innovators and entrepreneurs will have more confidence in this market

and the Government’s commitment to address market failure. This will require changes

to the current capital market, the possible introduction of corporate venturing programs

(where large companies invest in smaller start-up, with no tax disadvantage) and the

reduction of capital gains tax for technology start-ups.

(j) Policy options to create a seamless innovation pipeline, including support

for emerging industries, with a view to identifying key areas of future

competitive advantage.

The government has a role to articulate a direction and growth strategy. “It should

explain where Australia stands today, how the government plans to build prosperity, the

benefits of reform that will accrue to Australians, and the role of major government

policy elements – tax, fiscal policy, population policy, employment policy, better

regulation, industry policy – in helping to achieve this direction. By clearly articulating a

direction, it enables and encourages the public service, the community and businesses

to organise their activities, strategies and approach in order to contribute to achieving

 

 

25  

this direction. Businesses act on signals; it is essential that these signals are clear and

consistent.”17

Government needs to better understand how innovation works. Innovation generally

starts with bright ideas, and these ideas grow within a vibrant and creative education

system; the ‘pipeline’ thereafter is usually towards venture capital, a start-up company

and market success or failure. For each stage in that pipeline, government provides

support or sets legal frameworks.

But there are leaks in the pipeline. Education systems at all levels are not producing

work-ready creative thinkers. Much research is never cited and much cited research is

not applied. Some intellectual property may not be worth protecting. Employee share

taxation is failing start-ups, which rarely use a tool that should be a great fit for them.

R&D tax concessions are too difficult to use. All these breaks in the innovation channel

require attention by the Government, combined with a robust high-speed broadband

infrastructure (which we still do not have) to support collaboration between all

stakeholders.

Conclusion

Innovation has always been important to Australia’s economic development; from

wealth sources such as land, natural resources, unskilled labour, manufactured assets

and finally to the creation of intangible assets such as knowledge. Today’s advanced

economies are characterised (and dominated) by people who work with their heads, not

their hands.

This is reflected by the dominance of the service sector in those advanced economies.

No nation today can become truly prosperous unless it develops a knowledge-innovation

economy, and this has implications for every aspect of a country’s education system,

tax and regulation system, and political leadership generally. ACS strongly urges the

Government to seize what may be the last chance to develop policies and environments

that support Australia moving towards an innovative future.

___________________________________

                                                                                                                         

17  Building Australia’s Comparative Advantage, op.cit, page 34