Australia:Taking Bigger Steps

Are Australia’s best days over?Or ahead of us?Australia may be theenvy of the world, butthe country needs todo more to prepare forthe imminent wave oftechnology disruptions.

Australia: Taking Bigger Steps

Australia: Taking Bigger StepsG

eopo

litic

al c

ohes

ion

Hig

hLo

w

Low HighEconomic growth

Regional trade agreements

CommonisationAddressing climate change

Rise of knowledge economy

Automation and 3D printing

Growth in sharing economy

Globalisation 3.0 Increased prosperity

Dramatic improvements in ICT

Low commodity prices

Polarisation

Risinginequality

IslandisationPersistent macroeconomic uncertainty

Heightened nationalism and protectionism

Return of geopolitics

Four economic scenarios could play out on theworld stage

Note: ICT is information and communication technologies.Source: "From Globalization to Islandization," Global Business Policy Council Perspective, January 2016

Australia: Taking Bigger Steps

Which scenario is most likely to unfold?

Trade flow

Capital flow

Globalisation 3.0

Economicgrowth

Unemployment

Inequality

Low

Moderate

High

High

High

Internationalmigration

High

Regulatory convergence

High

Polarisation

Moderate

Moderate

Moderate

Moderate

Moderate

Moderate

Moderate

Islandisation

Moderate

High

Low

Low

Low

Low

Low

Commonisation

Low

Low

Moderate

Low

Low

Low

Low

Source: "From Globalization to Islandization," Global Business Policy Council Perspective, January 2016

Since 2014, increasing evidencepoints to “Islandisation” as themost likely scenario for Australia:• Global trade is falling and protectionism is rising

• Many traditional fiscal and monetary policy instruments are no longer relevant

• Fringe and populist political movements are on the rise

• Geopolitics has returned

• The international system is under serious strain

Australia: Taking Bigger Steps

The lucky countryAustralia ranks second afterSwitzerland on The Economist’s where-to-be-born index, o�ering the best futureto its newly born citizens. Can Australia maintain this position?

Australia: Taking Bigger Steps

A formula for sustained prosperityThree areas stand outas critical enablers forAustralian businesses:• Productivity• Innovation• Globalisation

Australia: Taking Bigger Steps

Australia: Taking Bigger Steps

Australia’s position does not appearstrong enough to withstand thecentripetal force of Islandisation

Productivity

SingaporeAustriaFinlandAustraliaCanadaSpainItaly

11121314151617

Innovation

CanadaFranceAustraliaNorwayJapanBelgiumSpain

15161718192021

Globalization

NorwayUnited KindomFranceAustraliaItalyPolandMalaysia

12131415161718

Source: A.T. Kearney analysis

Australia: Taking Bigger Steps

12 disruptive technologies will have profound implications for Australia’s economic structure

Near term (now)1 Medium term (<5 years) Longer term (>5 years)

Mobile technology and applications

Cloud technology and applications

Data, applications, and services stored, secured, managed, and accessible remotely

Connected mobile devices and supported applications

Internet of Things

Renewableenergy

Systems that generate electricity from non-depleting natural resources

Objects transferring data to one another

Virtual reality 3D printing

Successive layers of material formed under computer control to create an object

Simulation of physical presence in a real or imagined world

Blockchain

Mechanism of storing ledgers across a network of connected computers

Advanced robotics

Machines with enhanced senses, dexterity, and intelligence

Genomics

Reading and writing the genome of organisms, including humans

Energy storage

Devices that capture energy produced at one time for use at another

Autonomous vehicles

Driverless or self-directed machines

Artificial intelligence

Computer system capable of generating its own insights

1 Timing of impact defined as when technologies have “crossed the chasm” from early adopter (technology enthusiasts) to the early majority (pragmatists), Geo�rey A. Moore, Crossing the Chasm, HarperCollins, 1991Source: A.T. Kearney analysis

Australia: Taking Bigger Steps

The industrial impactIt is not a question of if an industry willbe disrupted, but rather when it will be disrupted, how many technologies willa�ect it, and to what degree.

Australia: Taking Bigger Steps

No Australian industry is immune to technology disruption

HighImpact: Low

1 Others include construction, wholesale trade, transportation, real estate, and government2 ABS Cat. No. 5206.0, table 37, Jun 20153 ABS Cat. No. 6291.0, table 04 (seasonably adjusted), Nov 2015Source: A.T. Kearney analysis

IndustrySelect disruptiveplayers

GDP($Bn)2 D

isru

ptio

n im

pact

Mob

ile te

ch

Inte

rnet

of T

hing

s

Clo

ud te

chno

logy

Rene

wab

le e

nerg

y

Vir

tual

real

ity

Bloc

kcha

in

3D p

rint

ing

Aut

onom

ous

vehi

cles

Art

ifici

al in

telli

genc

e

Ener

gy s

tora

ge

Adv

ance

d ro

botic

s

Gen

omic

s

Number ofemployees(k)3

Medium term

Disruptors

Near term Longer term

Retail

Health

Manufacturing

Telco and tech

Utilities

Finance

Logistics

Education

Agriculture

Tourism

Others1

Total

Mining

Professional services

Kogan.com, Amazon.com

Scanadu

Stratasys

Tesla, Nest

PiggyBee, FedEx

Khan Academy

Komatsu

WhatsApp, Snapchat, Google

Bitcoin, Nest, Simple

The Climate Corporation

Xero

Airbnb

72

105

100

47

44

141

74

76

139

96

36

39

544

1,512

1,277

1,522

848

223

140

450

609

937

226

1,020

309

823

3,514

11,900

High

Med

Australia: Taking Bigger Steps

Defensive crouch

Lower risk, lower growth potential

• Double down on traditional core business

• Structurally insulate from imminent disruptions

• Limit or exit international investments

Global o�ensive

Higher risk, higher growth potential

• Focus and invest in R&D and innovation

• Take risks and embrace disruptions

• Pursue new international opportunities

2003 World Cup FinalThe Wallabies pack down against England; Newspix

1991 World CupDavid Campese, Man of the Tournament; INPHO

What will Australia choose?Defensive crouch or aggressive o�ence?

Source: A.T. Kearney analysis

Australia: Taking Bigger Steps

ProductivityDiscrete, businessunit-led programs

Whole-of-companymega transformation

InnovationAustralia-focusedinnovation

Innovationfor the world

Growth andglobalisation

Smaller, low-risk bets,proximal markets

Bigger, long-terminvestments

Companies must rise to the challengeand take bigger steps in three key areas

Source: A.T. Kearney analysis

Australia: Taking Bigger Steps

Carpe diem, AustraliaIn the face of future adversity, how will AustralianCEOs and boards respond?“If we want to change, the change begins with us.””If not you, then who? If not now, then when?”

For more information about Australia: Taking Bigger Steps,please visit: www.atkearney.com.au/strategy/australia-taking-bigger-steps

Australia: Taking Bigger Steps