How can we remain in a state of transformation?

It was always going to be difficult to contain the official unemployment rate in South Australia to under eight per cent in the wake of the closure of the automotive industry.

In May 2018, six months after the closure, the trend unemployment rate was below six per cent. This exceeded all expectations, indicating that measures implemented to help workers and companies transition were working. But while the transition programs appear to have been a great success, other measures of the health of the labour market demonstrated that there was no room for complacency. South Australia’s labour underutilisation rate hovered around 17 per cent at the end of 2017, reminding us that there was much work to be done to build a more robust and secure employment base in the state.

This is a monumental challenge requiring government, industry and the community to forge a new consensus on what it takes to achieve full employment in the 21st century. It is a challenge confounded by the complexity of the modern world and our relationship with the planet that sustains us.

In the short-term we face the challenge of ensuring that South Australia and the nation are well positioned to take full advantage of the digital revolution: preparing our population, educational institutions, managers, leaders, workforce and workplaces to be active shapers rather than followers, digital leaders and innovators across all fields of endeavour.

There are some obvious catalysts for this, including naval shipbuilding projects, tackling climate change; population ageing; the introduction of the National Disability Insurance Scheme and growing demand for Australian commodities, goods and services in the Asia Pacific region. The Liberal state government, led by Steven Marshall, comes to power at critical point in South Australian history: a time when the pace of industrial transformation must accelerate to ensure that South Australians have a secure place in the digital economy.

Critical to successful industrial transformation in the face of challenges (like the closure of the automotive manufacturing industry and the Fourth Industrial Revolution) is building a robust innovation ecosystem characterised by high levels of mature collaboration between firms, researchers, policymakers, NGOs, community stakeholders and end users. We lack a clear understanding of the strengths and weaknesses of our innovation ecosystem and the contribution that it can make to accelerating industrial diversification and high skill jobs growth.

From Western Europe, a broader approach is observable. It emphasises the demand-side drivers from addressing societal challenges that are shaping demand for new products and services, such as environmental sustainability and population health and ageing. The focus is not on startups and small companies alone, but also on complex value chains and lead customer relationships linking large, medium and small firms, and transforming existing businesses.

It emphasises the full range of key enabling technologies (like photonics, nano-technology), not only digital ones, and their broad and rapid diffusion, not just origination or invention. It also emphasises innovation in business models and firm organisation alongside the new technology platforms. This more integrated approach is one we must do more than emulate. We must learn from this experience but not slavishly apply it.

Networks, collaborations and institutions vital to sustaining successful innovation and industrial transformation in advanced industrial nations like Germany, Finland, Sweden and Denmark are seriously underdeveloped in Australia. With this comes a deficiency of innovation leadership and a failure to harness demand-side drivers, with a too-frequent emphasis on technological innovation and supply-side policies at the expense of non-technological forms of innovation.

Fortunately, the notion of an ‘Ideas Boom’ at the heart of the present science and innovation agenda in Australia focuses greater attention on the importance of knowledge and technologically intensive economic development. It warns against over-reliance on mineral exports and advocates much greater dependence on transformation and innovation as drivers of sustainable growth over the medium term.

Change to higher education funding arrangements and to the culture and operation of our higher education institutions is necessary to help realise a more ambitious innovation agenda in Australia. Researchers need to be rewarded not only for the rigour and quality of their publications but also for the rigour and quality of their engagement with industry and government.

We need to invest more in our innovation districts, strengthening existing ones like Tonsley, the North Terrace medical precinct, Thebarton precinct, Mawson Lakes, the Waite Research Institute and Edinburgh Parks. These are well-established sites that have the potential to play an even greater role in the state’s economic transformation. Arguably consolidation is needed to generate fewer, more substantial collaboration districts capable of supporting new ventures and targeting high value opportunities for industry and employment growth.

To date little thought has been given to what a coherent innovation ecosystem might look like in South Australia and how it can act as a catalyst for knowledge intensive industry and jobs growth over the next decade. Acting on this would certainly help to maximise the potential economic dividend that can flow from major investments in shipbuilding in South Australia over decades to come.

This is an edited extract from John Spoehr’s forthcoming edited book, State of Transformation (Wakefield Press). It will be released in October 2018.