•  Fundamentally different competitive strategies, based on innovation and knowledge, are vital in the face of an increasingly volatile and globalised business environment.
• globalisation in the form of free and fast flows of information, skills, ideas and capital worldwide that increase the ease and speed of business imitations;
• the truly revolutionary way online technologies are transforming how business is being done and increasing the power of consumers in production decisions;
• the greater significance of intangible assets, like knowledge and relationships, to where money can be made in a business and value delivered to customers;
• rapid technological advances and convergence creating and often re-inventing entire industries, from nanotechnology and new materials to biosciences and broadcasting; and
• greater recognition by enterprises that their social, governance and environmental record needs as much attention as their financial and productivity performance.

The origins "By their deeds you shall know them", so the wisdom goes. This is certainly the case when it comes to distinguishing Australian Business Limited (ABL) from the pack of Australia's multiple industry associations and business lobbyists.

Five years ago, Australian Business Limited set itself apart by founding and sponsoring the Australian Business Foundation. It established the Foundation at arm's length from itself as an independent not for profit research think tank, a separate company limited by guarantee with its own Board, governance and budget.

The deliberate decision to create an independent entity was designed to give the Australian Business Foundation freedom to research and reach conclusions that did not necessarily support ABL's stated policies or member interests.

This foresight and bravery, not to mention generosity, from Australian Business Limited is unprecedented among Australia's business organisations and it fits the pedigree of an organisation that started life fifteen years before Australia's Federation tasked with championing the then colony's industrial capability and prosperity.

The need

Why did Australian Business Limited create the Australian Business Foundation?

Firstly, it was concerned with Australia's declining position on world competitiveness benchmarks and the paucity of informed analysis and fresh insights to address this. ABL wanted a vehicle that could undertake this leading edge research and flesh out imaginative solutions, in partnership with expert researchers and thinkers worldwide.

There was a desire to look beyond just today's pressing business concerns and to anticipate and prepare for sustainable business performance and success in the future. ABL wanted to lead debates about Australia's business competitiveness, not just respond to them.

Finally, in creating the Australian Business Foundation, there was an aspiration to put to good use the legacies of ABL's past as a pioneering and prosperous industry organisation, by advancing not only business interests, but those of Australia as a whole.

Who we are

This culminated in the formal establishment of the Australian Business Foundation Limited on 19 March 1997. It has a single mission – to conduct and disseminate ground-breaking research that advances knowledge and fosters new thinking and best practice on Australia's business competitiveness, prosperity and jobs.

It has delivered on this purpose by producing a body of research – ten published studies to date – that is a key source of authoritative intelligence on innovation, new business models and new forms of competitiveness in a knowledge-based economy.

My task this evening is to distill and share some key insights about Australia's business environment, challenges and opportunities from the Foundation's research findings.

What we've learnt

While each of the research studies conducted by the Australian Business Foundation brings its own particular lessons, let me highlight three projects specifically. Firstly, our inaugural study in 1997 by Professor Jane Marceau, Derek Sicklen and Dr Karen Manley called The High Road or the Low Road and its sequel by Marceau and Manley in 1999, Innovation Checkpoint. These stacked Australia against the characteristics of high growth, high return economies and found some structural flaws in our patterns of innovation, R&D investment, trade and industry structures.

A far-sighted exploration into the future with Global Business Network Australia to produce four alternative future scenarios for business in Australia to the year 2015, published as Alternative Business Futures in 2000.

The third element of the Foundation's work to highlight are several studies that examine competitiveness at the firm level – notably Marsh and Shaw's analysis of the success of the Australian wine industry; the online commentaries by expatriate Australians called Tales from Silicon Valley; and our most recent study again from Professor Jane Marceau and her colleagues at the Australian Expert Group in Industry Studies at the University of Western Sydney about the new competitive business strategies emerging as Australian manufacturers find innovative ways of blending products and services to respond to tough, crowded and customer-sensitive markets.

If I had to crystallise a single piece of intelligence from the Australian Business Foundation's research, it is this:
A seachange has taken place in the environment facing Australian enterprises, both big and small. It transcends meaningless distinctions between the so-called 'old' and 'new' economies. The new economy is exactly like the old economy – only faster, more inter-connected and knowledge-driven.

Business competitiveness is being profoundly affected by potent trends and forces for change like:

In the face of such factors, innovation – for firms and for nations – is a survival strategy. Competing on the basis of innovation and know-how creates greater growth and prosperity, than a focus on efficiencies and low-cost production alone.

Successful firms compete by recognising, creating and mobilising their distinctive sources of know-how. Today, assets are mobile. Anyone can access raw materials, money and the latest technology, often with just the click of a mouse. So, an enterprise's own distinctive assets are crucial. Such assets include the ideas and knowledge held in the business by employees, suppliers, customers, and even competitors and external stakeholders.

These assets are often intangible, like market intelligence, skills, tacit knowledge, experience, technical know-how, customer relationships and the learning gathered from past mistakes or failures. The challenge remains to harness and manage this knowledge so that it can be turned into new competitive capabilities for the enterprise.

Innovation is the key to sustained business performance – not just inventing new products, but doing business more intelligently and re-inventing business offerings in response to market changes. Being an innovative enterprise involves continually improving the way work is done, how people are managed and the way relationships and alliances are fostered. Such enterprises are adept at creating or enhancing products and services in response to customer feedback, advances by competitors, emerging technologies or new consumer demands.

In short, successful firms turn knowledge into fresh capabilities based on a deep understanding of market demands and competitive pressures. They rediscover where the real value to the customer is in their business and deliberately reflect this in their strategy and operations, eg. Blundstone Boots capitalising on their association with dance and entertainment to turn sound workboot footwear technology into premium priced fashion accessories, with all the investment in branding and marketing that goes with this approach.

The most prized business skills in the new economy are: the ability to inspire and retain talented people and to master the art of strategic collaboration; managing multiple and complex business alliances; and maintaining effective working teams and changing economic webs of partners and stakeholders over successive business cycles and projects. A poster child for this is Australia's wine industry where strategic collaboration has driven their success in going global, their superior marketing and capacity to generate and adopt innovative technologies across the industry.

What is the impact of all this for Australia as a nation? The Australian Business Foundation's work suggests that the key to Australia's future competitiveness lies with business enterprises being continually innovative, nimble, close to customers and globally-connected. But, given Australia's market size and industry structure, businesses are unlikely to succeed alone, nor to create the critical mass of capabilities necessary for export and investment in the high-growth, high return activities of a dynamic, modern, balanced economy.

Government policies, regulations and institutions have a critical role to play in creating the environment that allows businesses to take risks, access new opportunities and global markets and capitalise on technological advances, knowledge and innovation.

In the past, industry policies have been about debates on protection and tariffs and interventionist approaches by government like tax breaks, decentralisation incentives and business bail-outs. Modern industry policy is about economic growth, business competitiveness, productivity and distinctive competitive advantage. These are not achieved just by sound economic management and freeing up or reforming markets, but by deliberate actions to foster business innovation, market development and clusters of world class capability.

Central to this is Australia's approach to attracting inwards investment. Australia's investment attraction efforts should be biased in favour of those investments that explicitly strengthen our knowledge, skill and technology capabilities in a long-lasting fashion and add to our ability to perform as a global centre of excellence in high value-added sectors. Forget administrative back offices that can be here today and gone tomorrow, taking with them their much-heralded jobs to cheaper locations with more generous hand-outs.

A strategic, not blanket, approach to investment attraction is required, so that each investment deepens the local level of expertise and anchors it here, and this in turn, acts as a magnet for further investment in a virtuous circle.


Future directions

The Australian Business Foundation takes pride in its rigorous research into contemporary and emerging business issues and in its influential and credible body of published work.

The challenge is to ensure its impact, both on public policy and on business strategies. This can only be achieved if we generate around us a dynamic and robust community of interest to debate ideas, introduce new thinking, and road test practical but imaginative approaches to Australia's future competitiveness.

I invite the members of Chief Executive Women, as part of your alliance with our founder, ABL, to become active citizens in the 'thinking community' that the Australian Business Foundation has set in motion.