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June 2011
Vol. 33
The Australian Business Foundation is entering a period of significant revitalization and growth. We are expanding our member base, forging new relationships, and continuing to undertake vital research projects, as well as finding new ways to share our knowledge with Australian business.Our recent projects have included Dr Nicholas Gruen’s paper on the now-successful R&D tax legislation, which will lead to a stakeholder dialogue with Federal Minister Kim Carr next month. We also co-hosted an event with the Sydney Business Chamber with Nicholas Davis of the World Economic Forum. The World Economic Forum’s 2011 CEO Global Risk Report has identified long-term global risks such as food, water and energy security, and economic disparity on both an international and national level. Although these may initially appear to be far-distant issues, all Australian organisations should understand that these threats could significantly impact on our businesses, economy and society now and into the future. As our businesses and governments develop our day-to-day strategies, we should be keeping a weather eye on these trends, and ensuring that our decisions and directions are robust enough to withstand them. The Foundation will be taking the opportunity to examine the impact of these and many other issues on Australia,and we look forward to sharing our insightswith you. The Global Risk Report can be found on our website.
Keep your eye on our website for information about our research focus, upcoming events and other member news.
Leslie Butterfield
Chairperson
From the Deputy CEO
My first months at the Foundation have flown by, and there has been a great deal of action as we shape the Foundation in its new strategic direction.
It has been a great pleasure to meet so many of the Foundation’s members and stakeholders, and incredibly valuable to share ideas for enriched research and expanded events and communications programs. Even more valuable to listen to your aspirations for the Foundation, and to receive your suggestions and feedback about what you would like as members. We will amplify our quest for your feedback with a stakeholder survey in the coming weeks, and I invite as many of you as possible to provide your ideas and suggestions.
You may have noticed that we are in the process of strengthening our web site capability, as well as rewarding our loyal members with a special members only section. Members will have access to reports, papers, presentations, and as the site reaches maturity, an enhanced interactive capability. Our research reports will continue to be available in the general area.
New initiatives include a robust events calendar, which has already kicked off with presentations from Nicholas Davis of the World Economic Forum, and Professor Arie Lewin of the Offshoring Research network. See separate articles below for a synopsis of those events. We are delighted to announce that Senator the Hon Kim Carr will join the Foundation at a seminar in Melbourne on 22 July, to examine and discuss the forthcoming R&D tax legislation, its impact on Australian businesses and how R&D fits into the innovation landscape. Invitations to this event will be distributed shortly.
We are also pleased to announce a new membership structure for the Foundation, which we trust will make membership more accessible to a broader range of businesses. In addition, we have introduced membership for academic institutions and allied organisations, and we’re particularly excited about the introduction of membership for students. You will see and hear more about this in the coming weeks!
It’s a time of exciting revitalisation at the Foundation, and we’ll have much more information for you over the next few months. In the meantime, I invite you to contact the team at any time to become involved!
Jo Spencer
Deputy CEO
Become a Member of the Foundation!
As Jo mentioned in her article, the Foundation is introducing a range of membership options. As part of our new strategic direction, we want to enable membership by large business and small, governments agencies, academic institutions, individuals, and students. Part of opening up membership opportunities is ensuring that the Foundation’s knowledge is more accessible to more people, and members are able to participate in our programs and share and exchange ideas and information.
There will be more information coming out in the next couple of weeks, so keep your eye on our website!
World Economic Forum's 2011 Global Risk Report
The Foundation recently joined with the Sydney Business Chamber to co-host a lunchtime presentation from Nicholas Davis from the World Economic Forum, co-editor of the recent CEO Global Risks Report 2011.
Each year, hundreds of business leaders around the world are asked what they think are the biggest risks to the turbulent global economy over the next ten years. This year’s report has identified two major cross-cutting risks: economic disparity, and global governance failures.
In addition to these, there are also three smaller clusters of risk: the macro-economic imbalance nexus, the illegal economy nexus and most importantly, the water-food-energy nexus.
Nicholas warns that these risks could affect the fragile Australian economy. Australia needs to watch out for a possible second Global Financial Crisis caused by the defaults in the European Union, shifts in the resource boom, climate change, and political turmoil.
To find out more about this event and to read the Global Risks report, please click here.
Why are Micro-multinationals Offshoring Innovation?
The Foundation hosted a seminar with Professor Arie Lewin from Duke University and Anni Rowland-Campbell, director of micro-multinational company DigitalBrand.Professor Lewin is the principal investigator for the Offshoring Research Network, which examines the rate of and reasons behind global offshoring. Offshoring is becoming a major component of not only production and services, but also intangible assets. A lack of science and technology experts in Western countries plus pressure to get new products to market quickly means that processes such as innovation are becoming increasingly outsourced.
However, the internet is allowing smaller organisations, such as micro-multinationals, to compete in the offshoring marketplace. The internet allows for the discovery of talent, removes geographical boundaries, and facilitates quick turnaround times using employees working around the world. Micro-multinationals often have more advanced technological capabilities than large organisations working with inherited IT systems, which puts them at a distinct advantage.
To read more about this event, please click here.
The BERD in the Hand: Update
In early May the Foundation released its latest report, The BERD in the Hand: Supporting Business Investment in Research and Development by Dr Nicholas Gruen. The launch at Parliament House in Canberra was very successful, and generated several articles in print media and on the web. The Foundation is working with industry and government to continue the dialogue about this significant legislation, with an important event to be announced soon for 22 July 2011.
Copies of the report are available here.
Feature Article
Global Knowledge Sourcing Leverages Organisational Innovation Capabilities: Implications for Australian Business and Economy
Stephen Chen (School of Business, Macquarie University), Oscar Hauptman (Centre for Industry and Innovation Studies, University of Western Sydney), Arie Lewin (Offshoring Research Network, CIBER, Duke University, USA), and Nidthida Lin (Centre for Industry and Innovation Studies and School of Marketing, College of Business and Law, University of Western Sydney)Introduction: Offshoring Research Network
This article adds to the summary of a recent presentation at the Australian Business Foundation presented by Dr. Arie Lewin. Arie Lewin is professor of strategy and international business at Duke University's Fuqua School of Business and director of its Center for International Business Education and Research (CIBER). He also directs the Offshoring Research Network (ORN), which has an Australian presence, with Western Sydney University’s Centre for Industry and Innovation Studies joining Macquarie University, as Australian co-partners of the ORN.
Innovation has always been one of the major means of global competitiveness for nations and corporations. Global sourcing of knowledge services, to include R&D, IT and software development, and more recently financial and legal segments, has been growing dramatically in the last decade. Several sources put the volume of internationally sourced services at between US$200 and $350 billion a year (e.g., OECD 2008 report prediction is of $252 Billion in 2010). Dr. Lewin says: “Offshoring, or global sourcing, isn’t traditionally used for innovation projects, but global sourcing of business services is now a major component in the international trade of services and intangible assets.”
The focus of the ORN is to study the phenomenon of knowledge and service sourcing globally. The ORN’s researchers, across fifteen countries and universities, have been establishing the basis for deep and detailed understanding of this phenomenon, and are forging ahead with the mapping of its patterns in terms of processes and functions being moved offshore, what drives these trajectories, and what works better in what context. Corporate participants are shaping the focus of research, providing invaluable information and benefitting from reports, focus group discussions and roundtables. The global nature of the phenomenon as understood through ORN research offers cross-national comparisons, benchmarks, and identification of best practices.
The Australian Angle
Global sourcing is of particular importance to Australian companies given the acute skills shortages in some sectors. Many Australian companies are turning toward a third option: global sourcing.
However, very few companies – in Australia or elsewhere – understand the strategic value of global sourcing. “Even today, just five percent of companies that source IT services globally do it really well,” says Professor Lewin. Those companies have implemented a corporate-wide strategy to guide global sourcing decisions. For example, those companies already have in place strategy for tier-two and tier-three cities in India and are among the first companies establishing a presence in China. They were first to demand that their providers offer nearshore options close to the company’s main centre of operations.
The companies that have embraced global sourcing’s strategic value often consider the practice as a core capability rather than an ancillary option. Some research being conducted by Dr. Stephen Chen and PhD student Hassan Kharroubi at Macquarie University on the benefits of global sourcing to Australian companies suggests that companies should take a long-term strategic perspective to global sourcing – as opposed to using it as a “quick-fix,” in order to obtain more bottom-line benefits (see ORN report The State of Offshoring in Australia: Preparing for Take-off, 2010). And, despite concerns about resulting job losses, most companies surveyed have actually grown and taken on more staff as a result of adopting global sourcing. Major global sourcing companies such as IBM, HP, Accenture, WIPRO, Infosys and TCS have also set up centres in Australia creating new jobs in Australia.
Global sourcing is now an essential element of business functions, especially aimed at boosting the innovation capabilities of companies. Innovation is the most outsourced category in the manufacturing industry, and the second highest outsourced function overall. Global competition for outsourced business is growing fierce, which is leading to greater commoditization and therefore lower prices. As the world recovers from the global financial crisis, exploiting and attracting global sourcing will become a priority for boosting economies worldwide, including Australia.
In addition to its contribution to organisational competitiveness, global sourcing of services and knowledge has major implications for national and regional innovation policies, educational strategies, incentives and curricula, and policies of skill-based migration. Better and deeper understanding of macro-economic and national developmental impacts of these activities is another challenging and critical aspect of what the research highlighted in this brief paper has to offer.
To find out more about the ORN and how you and your organisation could benefit from becoming involved in its activities, participate in shaping its research, and add to better understanding of its implication for Australian economic competitiveness, please click here.
Upcoming Research
Strategic Serendipity
Written by Darren Horrigan, this report summarises and distills the study Northern Sydney's Global Technology Corridor: A Scoping Study of Cluster Development by Professor Roy Green and Kate Hughes. This study looks at what drives successful industry clustering in Australia, specifically in the Northern Sydney region. It also provides an account of the attractors for businesses to a region, and of the opportunities for growth and the sustainable development of regions through clustering activities.
Business Model Innovation
This study by Don Scott-Kemmis of the Australia Centre for Innovation examines the characteristics of business model innovation illustrated by Australian business case studies.
Green Chrysalis: Innovation Towards Australia's New Economy
Led by Professor Stuart White for the UTS Institute for Sustainable Futures, this study looks at the processes driving innovative business activity in response to the new operating conditions and opportunities of the 'green economy'.
Borders Blurred: The Changing Nature of Trade in a Globalised World
This study explores the participation of Australian firms in international trade and innovation behaviour and their links with business productivity. This study was undertaken by Professor Christopher Findlay and colleagues at the University of Adelaide.
The reports will be available over the coming months and will be available on the Foundation's website or as a printed copy. Please check the Foundation website for updates.
Recognising Our Supporters
The Last Word
If you or your organisation is working on a product, service, research project or event that furthers new thinking on Australia's business competitiveness, innovative capacity and opportunities from a knowledge-based economy, please contact us and we will spread the word!If you have comments, questions, suggestions, please contact us:
Australian Business Foundation
Level 12, 83 Clarence Street
Sydney NSW 2000
Ph: (02) 9350 8102
Fax: (02) 9350 8199
foundation@abfoundation.com.au
www.abfoundation.com.au
