BlueNotes Debate: how do you teach innovation?

"There are too many people coming out of school going straight to university and graduating without the soft skills they need."
David Hodges, MD, Loc8.com

In a roundtable in conjunction with PwC, BlueNotes managing editor Andrew Cornell discussed the issue with PWC Global regulatory leader Jan McCahey, ASIC Commissioner John Price and Loc8.com MD David Hodges.

You can read the first of this two-part series here. In this, the second, we began by asking if a focus on getting people collaborating in universities, rather than teaching skills, is the right one.

DH:  I think practical work is where we need more focus. There are too many people coming out of school going straight to university and graduating without the soft skills they need.

I think a combination of TAFE-style application where people are actually working in a hands-on capacity, but studying the theory the rest of the time, would be a better mix. I also think we need to encourage businesses to hire people who are both working and studying at the same time.

One of the issues I see, particularly in Australian software companies and technology companies, is too many of them go offshore. That’s partly because the founders, the owners and the board members don’t have a connection with Australia, don’t believe the technology is here or aren’t able to effectively use their connections within Australia for growth and financing.

A true innovation community and mentoring culture helps drive that connection.

I would love to see more people coming in to the innovation ecosystem from different backgrounds – my tech start-up has hired plumbers, painters. We have all sorts of different people coming through. They are some of the best people we have. There are also people who are working two or three nights a week and studying two or three days a week. That’s where the more formal, regulatory or policy-based processes can work to encourage employers.

AC:  Back to John and your facilitator role at ASIC, how does that play out?

JP: I certainly think developing skills is important right across the board. With the amount of algorithmic trading we see in the market or roboadvice, I can see a time in the not too distant future where ASIC will need to move away from the skill set of legal and accounting and look at a much broader range of skills.

Behavioural economics is one example that springs to mind in terms of how investors really behave. IT skills are another in terms of assessing various algorithms and so forth.

In terms of ASIC’s facilitation role all we can try and do is link back to our purpose around trust and confidence in financial markets - in the end we are really focussed on financial services and financial markets rather than the training piece.

There’s also an important role around financial literacy and making sure people know who they are dealing with and the obligations of others in advising on products.

AC: Is technology evolving ASIC’s thinking in this regard?

JP: With the internet there is a real ability to get to the information people want very quickly and there is an opportunity to layer information in a helpful way. Financial literacy issues aside, I think that aspect of technology is very positive.

You also see business models around things like comparison websites. Now there are risks in some of those too of course (some of them may be misleading which is clearly is a problem) but there are also great benefits if the technology is used in the right way.

JM: It’s interesting isn’t it, because some of the market self regulates effectively too. As soon as a website is shown by somebody to be inappropriate, pretty soon the whole world. Social media is helping us here and it’s been transformative for the community.

JP: Yes, I agree. I think the big issue in those sorts of circumstances is if someone has acted on information to their detriment and the person advising no longer has any money to redress the issue. So things like professional indemnity insurance, external dispute resolution…these key consumer protection mechanisms are important

AC: John’s mentioned the UK as being well advanced in some of these issues. Do you see that from your side David?

DH: They have been able to create a location or ‘place’, which Australia doesn’t yet have. You ask anyone out there in different sectors where you go, where should we set up office, where should we take our idea, where should I start anew, it’s disparate….but not often is it Australia.

JM: I think the role of Boris Johnston as the London Mayor has been central to some of what’s been achieved because he has this personal mindset for innovation.

I think what we first heard Malcolm Turnbull say when he came to power was similar. But we don’t hear a lot of others rally on about innovation nearly in the same way from a face so well known.

We have a few politicians here but none of them seem to have the power to make the commitment to do something, which is a key difference with Johnston I think.

JP: I think there really is a great opportunity for Australia. While as a nation we are making good progress, we did start a little behind some of the other jurisdictions. But if we take a collaborative approach and really work together then I am confident we can be a real leader in the Asian market.

AC: How do you make Australia a desirable destination?

DH: It’s always lifestyle. People love Melbourne, they love Sydney but I don’t think many people are moving here for our industry, technology or innovation.

JM:  Maybe an exception is our medical research - we have a strong global reputation in some areas of medical research. I think what we call the Parkville Precinct is very attractive to medical researchers who see great use for the technology and the culture.

They are developing some of the technology for scanning and so forth and they are right at the cutting edge. I think it is this great model and collaboration which individuals like Rufus Black are leading and trying to capture and promote through the Wade Institute attached to Ormond College. I think that example counters the rest, but otherwise David I agree with you.

AC: Is it too broad, the ambition? Should we say forget about a bunch of these others and instead say “look we have medical technology as a great opportunity” here in the present? Should we pick winners?

JM: I don’t think it’s only about medical research. I’d have thought there must be something in agriculture technology Australians could specialise in.

It feels as though it would be right because we need to look to better serve the emerging middle class in Asia - we would love it if we could be the food hub.

Of course there are challenges for us in doing this - infrastructure and how we get stuff to market is a big one.

DH: I’m a big believer in the agricultural tech area - it has a huge amount of growth ahead of it. We have two issues there though.

First, regionally we do a really lousy job supporting our regional infrastructure and encouraging regional job growth. We did quite well some years ago shifting a lot of government organisations to regional areas but that has contracted in the last five to 10 years and I think we need to relook because getting talent to these areas is still an important issue.

Second, in order to move into Asia, we have to understand the Asian markets and we don’t yet. We don’t educate our kids on it; we don’t educate ourselves on it. You look at Australian organisations without proper ideas for Asia, they fail endlessly.

We lack innovative ideas from the large regional areas in each state – you’ve got big areas in the Wagga’s, the Dubbo’s, the Wodonga’s and the Albury’s. All of these areas have relatively big populations for Australia but very little commercialised innovation comes out of those areas.

JP:  Some of it comes back to the mentoring process. Take your medical example, Jan. The reason it is so successful is because of all those senior experienced people are there which fosters a culture of collaboration. It hasn’t translated into commercialisation but it has certainly taken good step towards it.

JM: It does embed a certain culture for sure –medical students seeing experienced practitioners running discussion sessions on Saturdays for residents and so forth. It just doesn’t happen enough outside of that industry. It’s a very different culture.

AC: So what’s the way forward on this discussion about regulation and innovation?

JM:  I think it would be good not to have a new regulatory initiative. I think we’ve got to allow some of these things that encourage experimentation to play out.

I’ve had some discussions with others around the benefits of opening up a box or sandpit to play in and then once they’ve been playing for a while, let’s work out the fences to build around it.

I think in a way that’s the sort of thing we need to do. That’s not to say John shouldn’t be having an eye on it - ASIC should certainly be involved in what’s going on. But I don’t think we need to race to a set of rules.

There is this issue bubbling over in the UK about Uber, which the taxi industry had gotten anxious about. In response, Transport for London, the public authority with responsibility for organising transport in London, decided Uber couldn’t display a picture showing you how far away your car was.

Instead you had to put your order in and then wait five or 10 minutes before finding out if your driver was five minutes or 30 minutes away. This is a crazy response to protect incumbents who also have access to the same technology.

DH: There’s a great current day example of it with Metro Trains. If you want to sell technology services to Metro then you first have to sign a contract with Metro to get it over the line.

Then you have to sign a contract with the Department of Transport and to have a contract with the Department of Transport you have to have $A15 million in insurance policy instead of Metro’s $A2 million insurance policy. Then all of these costs increase and it becomes this cascading issue which rules out smaller, innovative players. 

I think this is part of the litigious or risk-adverse culture, which sometimes comes into play at a contract level, is a barrier to entry for smaller businesses. The irony is the benefit to, say Metro Trains, for a piece of technology could be absolutely enormous but they may not be able to take it on because it gets stopped at a departmental level.

At an ASIC level some of the changes John has talked about are very useful but I also think there are some aspects of shareholding, board and minority shareholder protections have probably gone too far.

What it means is when you start a business with multiple shareholders (some of whom will naturally be in the minority) it can become restrictive after the fact to make changes to the structure.

The reality is to commercialise that style of business the shareholding has to change. The success of a commercialisation process ultimately means original businesses have to change dramatically and probably some of those people can’t or shouldn’t be a part of the venture anymore.

Some people are more suited to start-ups and some people are more suited to commercialisation. I think some of the protections afforded to all directors and minority shareholders restrict the ability for a start up to make that leap to being a commercial exporter.

Louise Halliwell is a Director of Public Policy & Regulatory Affairs at PWC

You can read the first of this two-part series here