"Regional Cities Helping Themselves!" There are a number of different interpretations of tonight's theme. In the vernacular, 'helping yourself' can refer to theft, taking something that doesn't belong to you. Or it can mean selfishness, helping yourself at the expense of others, putting your interests first and foremost, greedy even.

Obviously, neither of these meanings is what you intend. "Regional Cities – Helping Themselves" is about self-reliance, taking care of yourself, not expecting handouts or free rides or bailouts by others. It is about initiative and achievement in your own right as a regional city. It is about creating your own destiny.

One feature all of these interpretations have in common, however, is that they focus on relationships and linkages that are increasingly important not only to an area's social cohesion, but to its economic development.

This focus is quite different from what we would expect to hear in discussions of regional development in the past. Then, the exclusive focus would have been on decentralisation policies, relocation incentives and statistics about land availability and physical planning rules.

The fact that you have chosen the theme of "Regional Cities – Helping Themselves" for tonight's business dinner co-hosted by a university, a TAFE and a local government council tells me that Wagga understands that we are experiencing a seachange in the way business enterprises compete and economies and communities (including regions) prosper.

My task tonight is to help you make sense of that seachange by sharing some of the most up to date intelligence from the Australian Business Foundation's seven years of research into innovation and business competitiveness.

Your task is to use ABF's insights to help the regional city of Wagga Wagga to chart its course as a vibrant, diverse, harmonious and prosperous globally-connected city.

Key learnings from ABF research

The Australian Business Foundation was established by the eminent industry body, Australian Business Limited, which itself predated Australia by 15 years. From this sound pedigree, the Australian Business Foundation prides itself on research that probes beyond the obvious to discern critical current and emerging issues likely to impact on Australian business' competitiveness, whether for good or ill.

ABF works to find meaning, coming up with practical ideas to match the most rigorous scholarship with the contemporary challenges facing business enterprises.

I want to share with you key learnings from ABF's body of research that have a message for regional cities seeking to help themselves.

There are three main points. If they were tabloid headlines, they'd be:

1. "The Knowledge Economy – Truth Exposed."

2. "Hidden Innovation Detected in Ordinary Business."

3. "Australians caught using performance-enhancing substance – collaboration."

Let me elaborate.

Don't underestimate the new knowledge economy – it's real and here to stay.

The business climate has fundamentally shifted, reflected in what has been called the new knowledge economy where what you know is more important than what you own and use. The knowledge and relationships that firms have are increasingly significant in how they can deliver value to customers and make money from their businesses.

Knowledge does not equate with high technology. Businesses succeed in a knowledge economy not by "building a better mousetrap", but by using their brains, know-how and intelligence.

Today assets are mobile, so what makes you distinctive really counts – market intelligence, 'ownership' of customers, tacit knowhow and skills and lessons from past mistakes.

Fundamentally different competitive strategies, based on innovation and knowledge, are vital for a competitive edge.

Doing business is changing and messier. Mass production, segmented pricing, neat supply chains, standardised jobs and one dimensional buyer-seller relationships are giving way to merged offers of products and services, customers making production decisions, floating prices set by online auction and real time information, employees who are also entrepreneurs and messy economic webs of buyers, partners and stakeholders which form and disband project by project.


Don't mistake science & technology for innovation

Business innovation is rarely driven by scientific discovery, rather firms seek to develop new concepts for products and services, based on learning and customer problem-solving.

ABF research shows that successful Australian business innovations, even those with technologically advanced products like Resmed and Cochlear, consistently feature an early and pervasive focus on the needs of customers and an ability to find distinctive solutions to problems. Witness Australia's success in mining and exploration software, scientific and medical instruments, defence electronics and value-added agriculture, like wine.

Professor Keith Smith of the European Commission Joint Research Centre, writing for ABF on innovation and the knowledge economy, points to strongly performing and growing firms, many in traditional old industries, that are low on R&D, but high on knowledge. Their knowledge comes from learning by doing, by using technology and equipment which gives them new capabilities, and by interacting with others like universities, research and professional bodies, consulting engineers or standards organisations.

So, next time you hear someone talking about innovation when all they mean is invention, put them straight.

Unrecognised business innovation is more widespread than you think. It is transforming the pattern of competitive business activity in Australia.

This story is told in ABF's 2002 study, Selling Solutions by Professor Jane Marceau et al at the University of Western Sydney. Bundling together of products and services into packages to meet total customer needs and customised, once-off large scale complex infrastructure or constructions projects are two examples of this dynamic, unrecognised form of innovation often in mature or traditional industries. Outsourcing has been one significant factor in driving this trend. Problem-solving – the discovery and implementation of solutions - is the key dynamic here, and it drives innovation and new competitive business skills at the company level. ABF is also involved in an ANU study of innovation, where international researchers are pointing to Australia's pattern of innovation by problem-solving, which is boosting the global competitiveness of traditional sectors like agriculture and mining and strengthening capabilities in key service industries like consulting engineering and advanced business services.

Innovation involves businesses adapting and doing business more intelligently, better engagement with customers, and proficiency in sustaining all the everyday business systems and management competencies to get attractive products and services to market. Further, innovation involves the ability of firms to respond speedily to changes in market conditions or consumer preferences with continuous improvement and adaptation in their business offerings.

Collaboration is king – and a legal performance-enhancing substance

Clusters, strategic collaboration, networks, people connections and movements, institutions of engagement or intermediaries, mechanisms for technology and knowledge transfer are all recurring themes in innovation success stories, both for industries and nations.

The OECD's entrepreneurship expert, Alistair Nolan, at an ABF function described collaboration as "the oxygen of innovation". Clusters, networks and alliances facilitate the flow of ideas, knowledge and people central to turning a brainwave into a real business opportunity – backed by the business production, distribution and marketing systems that ensure a decent return to the participating enterprises.

The OECD observes that in general, enterprises which work with others do better. Benefits come in the form of everything from lower transaction costs to superior access to information to economics of scale in production.

A home-spun example is the Australian wine industry which has transformed itself over the last two decades from being a domestic commodity industry to a knowledge-driven cluster producing premium global brands and exporting not only wine but skilled people and distinctive know-how.

ABF's study by Professor Ian Marsh and Brendan Shaw found that industry wide collaboration and linkages facilitated three significant changes in the wine industry:

- adopting a global business orientation;
- developing superior marketing capabilities and so becoming market-led, not producer-driven; and
- fostering and diffusing technical developments and innovations.

This collaboration, according to Marsh & Shaw, took hold through various industry champions, institutional arrangements, industry organisations and collaborative planning mechanisms like Strategy 2025, which documented the vision of what the wine industry could become and set the necessary objectives and targets.

A crucial reflection from this study was that the process of collaboration was not orderly, centralised or sequential. Collaboration was a more chaotic product of visionary leaders, responsive and capable firms, practical programs, negotiated agreements, government regulation and standards and unplanned opportunities capitalised on.

In the case of the wine industry, collaboration was the means through which knowledge enhanced competitive performance, specifically in terms of disseminating and realising opportunities for export and for innovation.

Such strategic collaboration holds lessons for other Australian enterprises, because it allows firms to take advantage of their smallness and flexibility on one hand, and to leverage into global markets on the other.


Towards Practical Action

So how does all this help Wagga Wagga to help itself as a regional city?

Firstly, the task you face is actually an age-old one and I'll use an old-fashioned term to describe it – you are doing nothing less than industry-building, perhaps even nation-building.

In undertaking this task, let me suggest a few areas for you to think about.


Play to your strengths

Whether in seeking to attract investment or new businesses to Wagga or in 'growing your own' by expanding the capabilities and reach of existing enterprises, avoid the temptation to become followers of fashion.

The usual suspects invariably named as targeted industry sectors are ICT, biotech, nanotechnology, electronics, tourism or new high tech industries of various sorts.

Think about where you should focus your attention. Are there sectors where you already have comparative advantage or distinctive nascent capabilities that you can build on? Are there sectors more likely than others to deliver the economic benefits and jobs growth that match your needs? Are there gaps in your region's economic base that are relatively easy to fill or a niche in a supply or production chain that you are well-suited to exploit?

Agribiotech and food sciences all along the value chain might be a case in point for Wagga.

Keep your antennae out for new opportunities, especially those that come from unexpected quarters.

Often opportunities don't follow the trend line. To discern and capture these opportunities requires imagination and superior ability to detect the 'soft signals' and the discontinuities that have the potential both to disrupt and to transform businesses.

Logistics and supply chain management are examples of advanced business services, where new business activity is being created as enterprises respond to the trend of outsourcing. Outsourcing and unbundling the services that are done in-house and those that are contracted out has created a new set of industries. These industries offer new opportunities for businesses and regions with the eyes to see and the wit to capitalise on them.

Another area for Wagga's attention that arguably matches your strengths.


Take a new angle on infrastructure for greater economic benefits to your region.

The Australian Business Foundation undertook an analysis with regional infrastructure specialists and users to identify several potent ways in which infrastructure could be used more imaginatively to foster stronger regional economic development.

Two particular strategies are:

- Invest in knowledge infrastructure like industry clusters, education/business linkages and technology parks that turn regions into hubs of high performing industries; and

- Pay attention to connectivity infrastructure that connects people and places in and between regions, particularly world class transport and telecommunications.

I note that in a recent paper Ed Blakely, the Chair of the Metropolitan Sydney Strategy Plan panel and well-respected international urban and economic development academic and consultant, identified connectivity as one of the key regional economic development forces driving the creation of globalised regional cities.

Blakely defined connectivity as high quality and reliable telecommunications, airports, seaports and efficient cross regional connectivity by public and private transportation systems. Examples cited were Frankfurt, Chicago and Denver, who used this connectivity infrastructure as the focus of the development of their city.


Focus on people, not just on organisations

People, not organisations, are ultimately the enablers of business innovation and a key ingredient in the economic (and social) success of regional cities.

This message is being transmitted from a variety of sources and its getting louder. I heard a report of an IBM global survey of CEO's about their intentions for growing their firms. A significant proportion nominated innovation in the form of new products and services as a key source of growth, but most identified skills deficiencies as a major obstacle.

This accords with recent surveying of ABL members on their priority business concerns – skills shortages was up the top of the list.

We are all familiar with the work of Professor Richard Florida on the rise of the creative classes. Florida's thesis is that regional economic development is powered by creative people who prefer places that are diverse, tolerant and open to new ideas.

The "vibe" or the "energy" of a community is being cited as a factor in business location decisions, along with the more hardnosed economic considerations. People not place, are the primary driver.

There's no substitute for a global mindset

Even if you are a domestic enterprise and not exporting, what's happening internationally can impact on you – new low cost competitors; emerging markets like China and India moving into high value-added branded products and services, not just commodities; FreeTrade Agreements bringing both new opportunities and threats, to name a few.

On the upside, globalisation and massive ICT advances make us both more mobile and more connected. They allow Australia to create our own truly international brands and companies and to position ourselves in the value chains of lage global enterprises and in distributed production supply lines worldwide.

Further, given Australia's concentration of large MNC's, there is also potential for Australian firms to piggyback on MNC's to extend their international reach and as a source of personnel, knowledge transfer and technology diffusion.

There are also opportunities from making more of our connections with high flying Australian expatriates working overseas. The Lowy Institute just released this week a book on the Australian Diaspora by Michael Fullilove and Chloe Flutter that makes this point.

Conclusion

To summarise ABF's answer to Regional Cities – Helping Themselves – it's a paradox. Our research highlights a number of paradoxes, like:

Collaboration enhances competition.
There's more money to be made in giving knowledge away than hoarding it.

So, regional cities might best help themselves by helping others. To benefit those within the city, you might have to first concentrate your efforts outside the city. In a word, collaborate!