Australian manufacturing businesses must act together and create advanced high-tech products and services to compete in global marketplaces. A new global order is emerging – the question is, does Australia have the political courage and intellectual policy nous to deal with it?
After decades of local procurement policies from the Northwest shelf to mining, why isn’t Australia a national leader in the export of smart mining technology? In fact, why are we global laggards?
Spinifex is an opinion column. If you would like to contribute, contact us to ask for a detailed brief.
The winners are easy to find. Dense concentrations of industrial small and medium enterprises from Middlestadt in Germany through to the highly innovative regions of northern Italy form the backbone of those nation’s competitiveness and generate massive high value-added manufacturing exports.
Alas, Australia currently ranks 25th out of 132 countries in innovation, according to the Global Innovation Index for 2022. Australia also ranks 91st out of 133 countries in Harvard’s Atlas of Economic Complexity 2022, which predicts our economy is expected to grow only two per cent annually between now and 2030.
Analysis of counts of new businesses reporting Exits and Entries reveals that SMEs are the least likely to survive, and that a third of all manufacturing SMEs will not live longer than four years.
The market is moving the goalposts
The Australian government’s Industry Growth Centres initiative, which wrapped in December 2024, showed that there has been a significant shift of demand towards smart technologies across five major industries: manufacturing, agriculture, mining, cyber security, and medical technologies.
The problem confronting the transition is a lack of career path resources to build cross-industry manufacturing capacity. Unlike SMEs in Sweden, as shown in the picture below.
Understanding cluster mapping
The mapping shows there are two major clusters comprising 11 and nine companies, respectively. Each cluster has sets of interlinked suppliers shared between the two groups of companies. This means that the network of suppliers is shared between the final original equipment manufacturer (OEM) companies, and they share common resources, innovation on products and/or services and skill sets.
There are a few single companies that only have two or three suppliers unconnected in any supply chain network. This characteristic is common to most Australian manufacturing businesses, where there is virtually no network of interconnected supplier businesses. This is a feature that must be addressed if we are to become what the Future Made in Australia policy claims as a sovereign manufacturing country.
A similar survey of some fifty manufacturing businesses in Melbourne showed that the supply chains of all businesses were like the single linked chains shown in the diagram. There were no multi-linked networks as in Sweden.
Why the ecosystem hasn’t emerged yet
A major problem with Australian manufacturing businesses is their difficulty in shifting from traditional legacy manufacturing systems to investing in smart, advanced, technology-based operations to give them a competitive advantage in global marketplaces. Except for some notable cases that have made the transition to high value add businesses, this criticism applies across the board. If Australia’s manufacturing enterprises are to become agile, flexible, and scalable examples of the “factories of the future”, they must make this transition now.
The new government’s industrial policy has omissions in its National Reconstruction Fund and related project items. As the NRF is not an industrial policy, but only a financing mechanism, we must devise a mode to guide local based OEMs to assist their transition to advanced manufacturing businesses.
This means that they will need to collaborate across industry sectors and multi-tier supply chains to build advanced manufacturing capacity to create joint ventures to rebuild GDP levels and grow jobs and services to global customers.
The key elements to be addressed by Australian businesses in their path towards improved innovation must address drivers such as new markets, new customers, competitors, products and services, technology, skill sets, regulations, energy and environmental pressures.
These drivers themselves must address artificial intelligence in design and control algorithms on the internet of things, human interfaces with robotic systems, and utilisation of hyper-computer systems to increase size, efficiency and scale options.
During the drafting of this article, we contacted a colleague, Emeritus Professor Roy Green, as he has also been researching and writing in this area.
In a recent presentation to a CEDA audience, he stated, “The Future Made in Australia initiative is an opportunity to diversify and transform our industrial structure in the context of the global transition and the desire for sovereign capability in areas of current and future competitive advantage, as well as possible geopolitical risk. The scale of the opportunity is huge, with the market for clean energy industries alone estimated to be worth $15 trillion by 2050.”
So, what does a collaboration model look like to help Australia’s manufacturing businesses if they are to realise this opportunity?
Policy laying the groundwork for a solution
The government’s vision is for Australia to be recognised as a high-quality sustainable manufacturing nation that delivers a strong modern and resilient economy both now and into the future. The Department of Industry, Science and Resources (ISR) information on funding opportunities for businesses to collaborate on large-scale manufacturing projects outlines three key funding initiatives: the Collaboration Stream, the Supply Chain Resilience Initiative, and the Manufacturing Modernisation Fund.
“Under the Collaboration Stream (the government) is not seeking to fund business-as -usual but to focus on transformative projects,” the ISR stated.
“It has six National Manufacturing Priorities, which are: resources technology, critical minerals, food and beverages, medical products, recycling and energy, defence, and space. Projects under the Collaboration Stream must align with one or other of these National Manufacturing Priorities and have a manufacturing component… The Modern Manufacturing Initiative is the centrepiece of the Modern Manufacturing Strategy. There are three separate streams under the MMI. The Translation Stream, the Integration Stream, and the Collaboration Stream. This final Steam focuses on very large projects that bring together businesses, researchers, and investors to build economies of scale and compete in international markets.
“The Collaboration Stream supports large scale manufacturing projects with business -to-business research collaboration involving private and public investment to help Australian manufacturers scale and move into higher value activities. The object is to fund a small number of very large transformational projects that feature collaboration ecosystems.”
So why the collaborative stream?
Australian businesses sometimes struggle to collaborate, and Australia ranks low across the OECD in business-to-business and business-to-research collaboration. This is attributed to organisations finding it hard to organise joint activities, a lack of resources, the time required, and problems of building trust between partners. However, the research literature shows that collaboration increases productivity and increases the range of spill overs, such as increased innovation and knowledge diffusion.
The aim is to support collaboration between different organisations coming together to solve a common problem, create a new product or service, or improve a production process. It also aims to help businesses become more competitive in international marketplaces.
The development of joint venture projects needs to follow the format of our “Winning Collaboration” toolkit used by us in Sweden.
It comprises 10 stages as an operational toolkit to guide SMEs in the joint search and creation of joint venture projects and/or services. Winning Collaborations is a proven operational toolkit that guided SMEs in Sweden to achieve that country’s sovereign status amongst its leading manufacturing businesses. It could be successfully employed here by Australia’s leading manufacturing businesses to help achieve the objectives laid down by the ISR in the policy goals.
Joint venture projects are founded by likeminded organisations jointly searching for common solutions to common problems. The search involves joint sharing of innovation practices, test and trial of possible solutions, a dry run of potential solution(s), a check against the FMIA goal objectives, a check for common resources, and the development of interlinked multi-tier supply chain networks.
The Winning Collaborations methodology developed by Rodin Genoff & Associates is an operational toolkit that has proven the methodology applied across joint venture partnerships created by OEMs and SMEs in Denmark and Sweden. The recent publication of Construct Swedish Sovereignty into the European Enterprise Promotion Awards for 2024 is confirmation of its international reputation.
This toolkit was developed here in Australia – maybe it’s time we stopped exporting our best ideas and put them to work here?
