When Mike Cannon-Brookes, co-founder of Australia’s most successful tech company, Atlassian, talks about Australia’s potential in tech innovation, he compares it to our film industry. We won’t beat Silicon Valley, the billionaire says, but just as our filmmakers, actors and cinematographers are among the best in Hollywood, we can stand as equals at the cutting edge of the world’s digital economy.

But are we rising to the challenge in Australia or has economic sclerosis actually set in? You could be forgiven for thinking all the signs are pointing in the wrong direction.

Australian expenditure on research and development has fallen to less than 2.1 per cent of GDP. The OECD average is around 2.4 per cent, while Germany spends 3.0 per cent of its GDP on research and development.

Australia is a high performing creative culture – and we are currently embarked on a major industrial transformation occurring internationally known as the Fourth Industrial Revolution or Industry 4.0. 

Our competitiveness, however, depends on paying close attention to a number of critical factors. Some we’re working on; others need a lot more encouragement.

These are my top six, in no particular order, to help make Australia the envy of the world. I am sure there are more – and each of these is interconnected and divisible into many sub-factors – but here’s a good start.

1. Connected tissue between Australia and global innovation ecosystems

It has become commonplace to say we live in extraordinary times. That doesn’t make it any less true.  Industry 4.0, also known as the Fourth Industrial Revolution, refers to the transformation in industry towards new generation technology (including robotics, 3D printing, artificial intelligence) interconnected via the Industrial Internet of Things, and the development of new business models to support these.

To understand the full extent and ramifications of these developments, our researchers and companies must be embedded in global technology innovation ecosystems. At Swinburne we are building deep partnerships with US institutions, with Germany, and with China. This is about immersion, about enabling our researchers to transform industries in profound ways. In January this year, we partnered with CSIRO in the most mature innovation ecosystem in the world, Silicon Valley – the first Australian university to do so.

2. Industry and research co-creating

Co-creation is a business strategy that gives our companies a tilt at scale. I say this a lot, but it bears repeating: A huge transformation is required in the 2020s to build Australia’s advanced capabilities – and a new model based on co-creation is essential if we are to achieve the hoped-for social and economic impacts.

According to the Global Competitiveness Index, Australia features high in research quality (12th out of 138), but moderate in innovation capacity (22nd) and in research transfer to industry (33rd).

I recently led the formation of the multimillion network of Industry 4.0 Testlabs which will speed up collaboration and co-creation between educational institutions and industry in Australia, particularly small and medium enterprises.

This Testlab initiative is a national platform that serves as a catalyst for engagement, learning and change, and is a vanguard for future university and industry partnerships.  We will have shortly an integrated network of Industry 4.0 pilot plants located at five leading Australian institutions – Swinburne University, University of Western Australia, University of Queensland, University of South Australia and University of Technology Sydney – each of them fostering industrial innovation and research transfer into the private sector.

3. Graduates equipped to succeed in an inexact future

Louis Pasteur famously said chance favors the prepared mind. But how do you prepare for the unpredictable? I’ve studied the innovation literature, and no, you cannot legislate for creativity. What you can do is create environments and capabilities that will enable ideas to flourish.

Our students must rub shoulders with their counterparts in widely varying disciplines. Their diverse backgrounds and instincts must be celebrated, rather than moulded into something else.  With these diverse perspectives, and by fostering collaboration that inspires and multiplies individual efforts, you can expect breakthroughs to occur. 

4. The environment is fertile, adaptive and open

A vast amount of study has shown that diverse teams make the extraordinary out of the ordinary.  But coming up with an idea is one thing.  After they develop the breakthrough idea, the team must also be able to execute it.  The research is clear on this too: diverse and inclusive teams – cutting across functions, sectors and identity – are also more successful in execution. And open access is critical.

The Industry 4.0 Testlabs follow key principles I identified in our Testlabs report including open access to non-competitive collaborative learning environments for industry. Testlabs in Australia will collectively showcase shared experiences and produce joint use cases around Industry 4.0. They will also share use cases and outcomes with their counterparts in Germany and US via our transnational agreements.

Innovation occurs at the intersection of all these places, virtual and real, through international linkages and interdisciplinary cooperation.

5. Investment in human capital

According to a recent World Economic Forum report, businesses will need to recognise that investment in human capital is “an asset rather than a liability” if they are to succeed in the unfolding Fourth Industrial Revolution.  This is where life-long learning comes in, where companies are adaptive and agile.

Our businesses will be rewarded if they allow freedom for employees to create, encourage collaboration around ideas, and enable retraining and upskilling as an integral part of their work. SMEs clustering around the production lifecycle at a Testlab will discover how they and their teams can create new value from Industry 4.0.

6. Innovation with a conscious purpose

Innovation needs a conscious purpose: It must drive impact; it must solve problems.

Each of the Testlabs – all supported by Siemens digitalisation grants rolled out across the network – has a laser-like research and industrial focus. For example, Swinburne works on industry 4.0 processes based on new generation advanced materials – a pilot plant specializing in 3D printing of composites and graphene; UWA’s testlab is a new generation LNG process pilot plant and focused on the resources industry; UQ’s focus is on building capabilities around intelligent distributed renewable energy systems; UoSA’s testlab specialises in digital shipyards; and UTS is specializing in med tech production.

Each has a purpose to drive national and global priorities for industry growth and for society’s betterment.

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Industry 4.0 is emerging as a unifying vision across Australia’s diverse industry sectors, giving us a clearer focus and a roadmap for digital transformation of advanced manufacturing.

We ignore industrial advances and radical new business models at our peril!  The world will carry on without us. There are two futures out there for Australia: one at the cutting edge reaping the economic and social benefits from innovation; the other with our head in the sand.  I know which I would prefer.