Members of the GWSRR meet in a private boardroom setting. The theme for the March GWSRR was Manufacturing – How Innovation Assists Growth and was sponsored by KPMG with transcription srrvices provided by Ausflare. The venue was the boardroom of Adina Apartments at Norwest. Following is an editoed transcript of the April GWSRR.
Jim Taggart: Well good morning everyone. Welcome. We have a very interesting subject to discuss today and can I say it’s a pleasure to see so many talented people in the room. For those of you who don’t know, we have what’s called Chatham House rules, and I know most of you would know that. We’ll start with introductions if I may – Mike, we might start with you and go around and just give a brief introduction – no more than one or two minutes, just about who you are.
Michael Walls: Hi everyone, I’m Michael Walls. I’m the publisher of Western Sydney Business Access. The newspaper and website has been going for – operating for about five years now, in Western Sydney. It’s a newspaper that focuses primarily on business, but also has a very strong lifestyle component. We founded these Round Tables with Jim about three years ago and we’ve had about 16 of them so far. I always get a great buzz from them; they are very popular with readers and an influential forum for the region, I think, in terms of education, popularising issues and bringing people together in a unique networking environment. My background prior to WSBA was as an editor and media manager for companies including News Ltd and universities including UNSW and AGSM.
Michael Ribot: Hi Mike Ribot. I’m a founding director and now an executive of a company called Global Orthopaedic Technology. We’re a manufacturing – R&D and manufacturing distribution company selling orthopaedic implants – hips, knees, spine, and so on. We tend not to do our heavy manufacturing in this country nowadays. We do that offshore – not in third world countries – manufacturing in Switzerland, Germany, England and the US. We do our entire R&D here. We do our QC, packaging and so on. There is a desire within the organisation to bring some of that manufacturing – smart manufacturing – back to Australia. So, we’re particularly interested in this type of format.
Sharon Kerr: Hi I’m Sharon Kerr. I’m the Director of Education for – I have the longest title in the world – Manufacturing Engineering Logistics Transport in Mount Druitt College at Western Sydney Institute. It doesn’t all fit on a business card either. That means that I have faculty responsibility within the Institute for mechanical and electrical engineering, all of the metals trades, blacksmithing, electrical trades, maritime – did I say blacksmithing? – and aviation and logistics. And so, it’s quite a broad portfolio. But, I love it.
David Pring: Hi. I’m David Pring. I’m Managing Partner for KPMG in Western Sydney. We opened in Parramatta in January. So, it’s early days for us. We see Western Sydney as being critical from our growth plans. We think the planets are aligned for Western Sydney, across all levels of government, the infrastructures and the property investment that’s going in, the younger workforce, the growing workforce – whichever metric you look at, it seems to be faster in Western Sydney. So, we see the growth of Western Sydney as being pretty critical and an important thing to be part of in the next 10 to 20 years. And I guess, part of all of that is manufacturing companies becoming globally competitive, and being able to find their role and niche in order to take on that role. Part of that’s from a jobs perspective, but part of that’s economic growth.
Wayne Fallon: I’m Wayne Fallon. I’m at University of Western Sydney in the School of Business. I’m an academic in the Management discipline. And I’ve been doing some research in the area of manufacturing. Recently we had some students go to Singapore to study manufacturing over there, to understand how the Singapore experience might contribute to what we’re doing in Western Sydney. And I’ve got more students going to Hong Kong in June/July. People say: Why Singapore and Hong Kong? Well, because maybe the thing is not to compete with China, but to understand how others are doing it, perhaps. Each year I have a few hundred students go out and talk to local businesses about what’s going on in the area. And, as I said, we’ve been doing some research recently into manufacturing in Western Sydney.
Jim Taggart: Thank you. Paul?
Paul Van Bergen: Paul Van Bergen. I’m a partner in R&D Tax Incentives, Government Grants, and I’m leading the R&D charge for KPMG in Western Sydney. So, what I try and do is actually help clients not just fill in the paperwork to get an R&D Tax Incentive or get a Grant, but actually work through with clients as proactively as possible around issues such as financing, improving the project viability – actually rethinking how projects are going. Looking at things like market positioning etc, so we can actually survey market size etc, reach to market and that sort of thing; perhaps getting recognition for – particularly around new products and new services. So we help companies, say, apply for certain awards, particularly around export awards etc, which actually gives them credibility as they’re trying to get into new markets and create discipline around the process. I think the days of companies having a little R&D department off to the side and just doing stuff pretty much on its own – and I would probably be the exception – now, the R&D actually is much more pervasive not only across the silos within an organisation, but also how organisations collaborate up and down the supply chain. And, a lot of what we’re doing is actually trying to make sure that we maximise the value across, not only our client itself, but where their tentacles reach out.
Jim Taggart: Thank you. Will?
Will Hird: My name’s Will Hird. I’m a partner at Davies Collison Cave and we’re a firm of Patent & Trademark Attorneys. Essentially, what we do is assist our clients with protecting innovations in – be it in manufacturing or other areas of technology advancement. But – and they can fit into a variety of things. And particularly where manufacturing is concerned, we’re talking about sort of new products which – designs, which might fit into inventions. But also, particularly where manufacturing is concerned, looking at how you can protect trade secrets and knowledge within the industry itself, and how to make the most amount of advantage from those. We’ve been looking at Western Sydney with a lot of excitement in recent years and have opened up an office in Parramatta which I think has been going for two years now – and we’ve had quite a lot of interest and a lot of enquiries from that. We’re now enjoying a good practice in this area of Sydney, which has been quite exciting.
Greg Cummings: I’m Greg Cummings, Mayor of Holroyd. I’ve been elected on Council since 2004. From an industry viewpoint, I’m an electrical fitter by trade. I spent ten years self-employed in the whitegoods industry and then ten years in the air conditioning industry. The last 12 years – the first two years as a CFMEU organiser looking after construction, and then the last nine years as an AMW – Australian Manufacturing Workers’ Union Organiser, again mainly concentrating on construction. From the Council perspective, Holroyd is nearly 110,000 population, 40 square kilometres. A third of our LGA would be traditional manufacturing industry land. We have just recently had gazetted an LEP in 2013 which will allow for 17,000 new dwellings to be constructed in Holroyd over the next 20 years. So, we’re very mindful that, whenever those dwellings are occupied, they need employment. So, from a Council perspective, any way we can assist in job growth, we would surely try to do.
Greg Raft: My name is Greg Raft. I’m the Director of Environmental Planning Services at Holroyd Council. I’ve been in local industry for some 41 years. I’ve been with Holroyd City Council now for six and a half years – seven years in August. My role is providing – in fact, we created it the last two years – it was implemented in August 2013 – our LEP review which sets out the housing targets that Greg has mentioned and certainly provide a fertile ground for development within the city area – so much so, that I was saying earlier, we’ve had two financial years ago some $290 million worth of development in the city area. Last financial year it was some $601 million worth of development. And this year, the way it’s going, we’re trending $1 billion. So certainly, we have an area of some 40 square kilometres, we have a population as Greg said of 110. That will increase by, conservatively, 40% over the next 20 years. So what we’ve done and the impetus that’s happening in Sydney is certainly having an impact on our area. Certainly we now need to engage – and we have been and are engaging community in terms of employment. We’re looking to provide and work, partnering with people like you, to provide employment for the people – the good people of Holroyd. As Greg said, 30% of our area is basically – geographically is industrial. We need to know how we can help. Help us to help you. So, we need your advice as to how we go forward.
Jim Taggart: Thank you.
Michael Mourad: Lucky last. I’m Michael Mourad, Founder and Managing Director of Pace Pallet Services. We’re a specialist custom wood packaging manufacturer based in Wetherill Park. We do things like pallets, crates, boxes, skids. I’m also Vice President of the Cumberland Business Chamber. I am becoming increasingly concerned at the slow erosion of manufacturing in Australia. A lot of my customers are manufacturers. You know, I’m seeing – I’m experiencing some of the issues myself, as a manufacturer. But, across my customers, I’m seeing businesses go from being – you know – a 100 year old Australian manufacturer to becoming a logistics business. And I don’t know all the answers – I’ve got plenty of ideas. But I’m privileged to be here amongst you people.
Jim Taggart: Thank you, Michael. Ok let me set the background. Here are some thoughts. In terms of looking at manufacturing, we will start at a global scale and then filter back down to Western Sydney. So, I don’t care where we end up, but your experience and relevance will draw that. But I put – I always try to do some homework. I think that’s important as a person who facilitates. What words come to my mind when we look at manufacturing? And I think most of us have looked at that – workforce, markets, skills, governments, investment, planning, threats, challenges and reputation. They were words that I thought around, looking at business – in particular at manufacturing in Western Sydney. In the 60s, approximately 25% worked in manufacturing – in fact, it could even be a bit higher – but around 25%. Today, it’s less than 10%. Some say 6, some say 7. In research, there is European Union data came from 2011 which says that we only spend 2% to 3% on high tech, the US 20%. So high tech innovation investment in Australia is about 2% to 3%. Again, I’m just trying to illustrate a point with regards to matters. The OECD found, in 2012, Australia’s investment in high tech technologies was lower than any other advanced economy. What external factors influence Australia? And these things – exchange rates, terms of trade, barriers to entry, productivity and looking at growth. And we’re going to talk about structural change, but I’m going to look at that in the context of some interesting other matters that are coming, which are non-technological – and the influence that they have on manufacturing, particularly as it relates to Western Sydney. In 2012, manufacturing in Western Sydney employed about 87,000 people – just again, to give you some stats – and contributed in 2011 about $10.6 billion. The GDP, just as a matter of interest, of Western Sydney is about $100 billion – just to give the statistic. And just one final statistic: 200,000 people daily move in and out of Western Sydney. And it would be remiss of me not to say Happy St Patrick’s Day to everyone. David, I’m going to shoot straight to you – David Pring, KPMG, where do you think manufacturing is? So, you’ve had a lot of experience in terms of accounting and tax and so on. For you, what’s going through your mind at this point?
David Pring: So, we look at what’s happening in areas of the economy in Western Sydney, and manufacturing isn’t one that springs to mind in terms of high growth, etc. But, the number of people that are employed and the size of the economy is – it makes it the most significant employer in the region. From my perspective or from our perspective looking at manufacturing, the question becomes: how do manufacturers become globally competitive and find their niche so that they are competitive, and to then prosper and grow? That’s the question on my mind. It moves the conversation along from manufacturing is in a state of decline through to: how do companies change so that they are globally competitive and operating in niche markets?
Jim Taggart: And I think you need to consider that, if I may, we are sitting or we are placed geographically in one of the largest areas of population – and I’m talking about, of course, the Asian belt – that Asia Pacific region.
Wayne Fallon: Good question. Where is manufacturing?
Jim Taggart: Yeah. Just from your experience.
Wayne Fallon: OK. At a Chamber meeting not so long ago, someone said – one of the presenters said that we cannot have an economy without manufacturing. But, manufacturing as it’s conceived in the past I think can’t compete with what’s going on overseas. So, in fact, beforehand we were saying it doesn’t make a lot of sense for Western Sydney to be competing against China, for a lot of reasons. The labour market is one of them. So, how can it compete? It might compete in niche areas. But, I think this might be where the innovation lies. I think a lot of people who talk about innovation think about it in technical terms. I suspect that manufacturing involves a synthesis of technical matters and also business management matters. And, bringing them together is where the innovation might lie. So, some businesses might rethink their business model. So, the product that they have been producing for periods in the past might need to change. Some, according to our research, changed their business model by going into other areas. And Michael talked about logistics, servitisation, manufacturing coupled with servitisation could be interesting. It might get close to customisation and creating a better relationship with clients. In some ways it might simply be business management practice. We don’t live in a static economy; things are constantly changing. And the change that manufacturing might need to deal with is non-technical change as well as technical change.
Jim Taggart: From an education point of view, Sharon, what’s happening there? Tell us about the experience and stories that you’re involved with, particularly at the coalface.
Sharon Kerr: Look, I think there’s been such a significant change. And part of the problem is the image of manufacturing because when people hear the word “manufacturing”, they view it in a deficit lens instead of thinking about it as all the innovative and rapid technology and prototyping that actually happens in manufacturing. It’s not just welding and fitting and machining and doing other things. In fact, in its broader sense, you know, it encompasses making a pie. So, I think part of the problem is changing the image and stop using “manufacturing” in a deficit term. In terms of education, look, it’s swings and roundabouts. As you know, you know, five years ago, manufacturing in Western Sydney was one third of NSW GDP. It has significantly dropped. And it’s dropped because mum and dad businesses have gone out of business. They’re struggling to stay in business. Many of those organisations have gone from making a pen to making the nib or the lid. And part of – you know, one of the things that we’ve been trying to have a conversation with the Regional Centre of Excellence is setting up a hub where organisations can come together and have innovation hubs so that they actually – instead of having a single grant, they come together as a consortium. And I think that is one of the things that Western Sydney needs to get better at, in terms of being able to grow manufacturing in its truer sense. Given that Marsden Park area is going to be three times the size of Norwest within the next 15 years, as leaders in manufacturing, we have significant opportunity to influence that. And I think we need to do something about it. And I mean, in terms of education, we’ve had our strongest year yet for an intake of apprentices. And I think taking an apprentice on, is one of the backbones of an organisation at entry level. But we have to take them to the next level for higher order skills in terms of true engineering and innovation. And it’s about providing those opportunities. As you said, you’re doing – you know – your manufacturing overseas. So, how do we make it so it’s attractive here. We’re so well placed as a country to take a share of that Asian market. And we shouldn’t actually be looking to compete with China because, you know, India’s the next big thing in terms of – India and the Philippines – because China’s now becoming so expensive itself to manufacture that they’re outsourcing. So you know, in turn, we shouldn’t be looking to compete with China. We should be looking at what is the next thing for us to compete with. And I think it’s giving opportunities like this, to come together, but giving the mum and dad – the small to medium – the big end of town, they’re going to do it because they’ve got the money. They can invest in R&D. But giving, you know, just small to medium enterprises opportunities to come together as innovation hubs or whatever it is – or just the opportunity to sit and talk – I think is increasingly valuable.
Jim Taggart: Sharon, thank you for that. It’s quite interesting. If I can add just one comment; the next wave, if you like, is actually the African and South American countries.
Sharon Kerr: Yeah.
Jim Taggart: And I’m sure you’re aware of that. Let me ask you this: in terms of education – I just want to hone in on education because a lot of the literature and government reports that have been released recently that speak a lot about skills and skill acquisition and development in knowledge economies and all that. Where do you see education? As a leader or as an organisation that is reacting?
Sharon Kerr: I think it’s both. Actually I don’t think we’ve done it very well. I think because the space between the Universities and TAFE – there’s always been a vacuum ………..TAFE has traditionally been known as having apprentices – and in actual fact we have Associate Degree students who are magnificent engineers and who I would love to be able to offer them to industry in Western Sydney and say: Bring your problems. Let my students solve those issues for you – because it’s a real life problem for them. Then they become leaders. Then they start to have input and thinking at higher order levels – and that’s what we need them to do. It’s not just entry level.
Jim Taggart: I’m trying to home in, if I may, just on – again to get some structure around skills. At the moment there’s lots of them. But, if you want to take it somewhere, please just take it and let’s contribute to that.
Wayne Fallon: I just want to say two things about education. One is: I take your point, Sharon. You’re an engineer, a technical person – I am definitely not. And I think that’s an indication of where we are. We’re a bit siloed around disciplines. And what would be good would be to have people in this industry who aren’t hampered by the restrictions or limitations of boundaries, or silos. And Paul asked me earlier about any of my students who are doing Engineering and Business, well, no, not a lot. Maybe education can sometimes put people into silos, when in fact what we need to do perhaps, around manufacturing, is break down some of those boundaries.
Sharon Kerr: Absolutely.
Wayne Fallon: Another thought that occurs to me, looking – not so much at young people going into the workforce – but businesses currently there. I think a premise of education is: people need to want the education or participate in that education process; some businesses might not see the need for education – rethinking the way they do things. That might be where hubs and clusters come to and the Business Chambers – perhaps those sorts of things are examples of where people can come together and see what others are doing. Personally, I have a big belief in champions – industry champions. They needn’t be big, necessarily – though they might be big. But they may equally be relatively small – a niche business.
Michael Mourad: Participation is it. I mean that’s where the challenge is, I think – because I know if we use me as an example, I spent many years with my head in my own business – and pulling your head out and actually connecting with other people and joining a Business Chamber.
Sharon Kerr: That’s right.
Michael Mourad: Or even trying to educate yourself.
Sharon Kerr: Because you’re trying to survive.
Michael Mourad: It’s a very difficult thing to do. You’re fighting your bottom line, all the time.
David Pring: And I think there’s a real intersection here of some issues that are there. You’ve got business – and, you know, two people have said here today: If I can find the right people, I can hire them. There’s a role also for education to actually understand what business needs. And if you think about some of those big ticket issues that we’re facing – ageing – you know, ageing population.
Sharon Kerr: Absolutely.
David Pring: The country can’t afford to pension people off until they’re 90. So, the whole metric is we’ll have older workers who need to be trained for the manufacturing workforce of the future. We have long term unemployed. We have indigenous people who, historically, have been excluded from a lot of the opportunities apart from unskilled work. Your career has to reinvent itself. So, there’s a need for actually business – and I think Chambers are the right way – for the Chambers to talk to the Mount Druitts about what sort of Apprentices they need, and for the Chambers to talk to the UWSes to actually say: Well, this is what we actually need around this. And I think that’s part of the issue around manufacturing is not so much can we compete with China – it is can we get workers who can actually add value from the day that they arrive and who can adapt. Because, you know, survival of fittest, it wasn’t the strongest will survive; it’s about who can adopt.
Greg Cummings: Well, from a Council perspective, I’m just looking at the last stats I got - 30% of school leavers in the Western Sydney do not complete their HSC. And from a social point of view – a community point of view – that’s heading us down a dangerous path. The unemployment – youth unemployment rate – and Holroyd I think is better than most Councils at supplying services – we have a very diverse community – over 50% of Holroyd wasn’t born in Australia. Unless they have jobs, then we’re heading down a very dangerous social path. I don’t know what the answer is. I’m more than happy to help facilitate for industry to try and work and grow. And you’re right – there is a stigma about trades. I don’t know why. I’ve seen some very successful tradespeople. But, where’s government – and now, I’m talking about State and Federal – to try and seed the ground, rather than just leaving it to the market to dictate where we go – because these people coming out of school need semi-skilled jobs. They need to start from the bottom and work. And, unless they get a purpose in life, then I’m sorry – we’re treading on very dangerous territory.
Greg Raft: Yeah. It’s just interesting too, just in terms of how important employment – manufacturing is for Holroyd. It was interesting listening to your figures. You were saying in 1960 it was 25%. You thought now it’s less than 10%. Well, our latest figures for the city area that we have is that manufacturing still remains the highest employer of our jobs. In fact it’s 25%. Now it might well have been higher than this actually. But now it currently is 25%. It makes up over a quarter of the jobs. So, it’s vital for us to ensure that we work out how we maintain it – in fact, how we enhance that. How do we attract manufacturing to the city of Holroyd? We’re carrying out currently, or about to carry out an audit of all manufacturing businesses within our areas, to know exactly what we’ve got – who’s who in the zoo. And we want also to determine just how many vacancies we’re getting. I mean we had Alcoa just recently closed down. It is prime. It was – I don’t know – hundreds – 4, 500. Greg would know better than I.
Greg Cummings: Yeah - 4 or 5.
Will Hird: I just wanted to focus again, I think, on a point that Sharon made, which is just about the idea of manufacturing – but perhaps a stigma associated with that. I think that’s quite an interesting point. I mean we’re talking today about sort of innovation and manufacturing industry. And I think that you would agree that it’s fairly well established that innovation generally leads in manufacturing to new product development – and hence, higher revenues and so on. But from my experience – and I’ve had the privilege of working with a number of interesting organisations around Sydney – the most innovative, if I can use that word which is a bit nebulous, companies that I’ve worked on really foster a culture of innovation. Now, they have – like right across the board through your tradespeople – right through there – there’s this idea of trying to assist and providing some good associated with the product development or whatever type of activity the organisation’s with. And they’re the types of companies that I often see the best results – whether it be from interesting product development, or actually just going out and doing business in a certain way that’s a bit unique. And that is really, I think, a culture that should start potentially at the education level – start thinking outside the box. But it really has to be taken up by industry too. And people get excited about that. I know – I have a background in Engineering, and I have a lot of colleagues in various different aspects of the Engineering profession in Australia. And it’s been knocked about dramatically. A lot of that has come from the success that we’ve had through the mining boom, because we really have not had to worry about a lot of this, as a result. But that’s fading off. And I think we really are in a repositioning phase where we now have to really take stock of the talent, work out how to retain it and really start developing a culture of innovation again, amongst it. And to me, I think that is one of the key ingredients to ensuring that manufacturing in Western Sydney, just as an example, has a long term future.
Jim Taggart: Well that’s where I was really going, if I can. Sorry David – go on.
David Pring: Well just picking up on that, in terms of that innovative culture, the technology that is being produced, the educated workforce is always which manufacturers can compete. The concept that China is a business that we cannot compete with China is a low cost producer, and there’s always been a China that Australia has had to deal with. It hasn’t always been called China. It’s been Japan, it was Taiwan, it was Korea.
Sharon Kerr: That’s right.
David Pring: And, you know, as Sharon said, it’s going to be India. It’s coming closer and closer to Vietnam, etc. So, while we may not compete with the low cost producer in the world, there’s got to be ways that we can compete by technology, innovation, skilled workforce, etc. And you know, frankly, manufacturing products that can’t be transported. And that’s where I come back to what are the niche areas that we can do much better than the current low cost producer – thecurrent China.
Jim Taggart: Well, I just want to give you – sorry, for the moment, Will – Sharon, I think we can share with people what you’re doing with the blacksmith horsing industry. I think that’s an amazing story.
Sharon Kerr: What? Racing NSW?
Jim Taggart: Yes.
Sharon Kerr: So we actually work with Racing NSW in every aspect of their training –right from the strappers to the jockeys to the blacksmiths. And, you know, we have Malcolm Johnston – all of those, you know, jockeys that you would know. They’re all actually working for us. And we put the jockeys through a program where part of their winnings goes to their future. And it was an industry that there was very little accredited training in – and the training that they did get, wasn’t a portable training. And so, the portability and visibility within the industry means that they can now go Australia-wide with their training. And it’s been a very successful program.
Michael Walls: Can I ask you a question, Sharon? Is it part of the whole manufacturing sector – is it that the culture of manufacturing is in fact to not to have a culture? I mean Will said that the successful ones do have a culture. Why aren’t more manufacturing businesses doing that, if that’s the road to success?
Sharon Kerr: Because it’s exactly what Michael said – they’re trying to survive. Many people in manufacturing are small.
Will Hird: There’s also an inherent risk associated with it, too, I think. I mean I generally find just in the demographics of people that I deal with – the businesses with – you know, you get these young guys coming out that they’ve seen the dot-coms go and make a million dollars in their backyards and all that sort of thing. And they are willing to risk it all. And fair enough too – they don’t have any families to provide for and all of that type of thing. And I think, as an established manufacturing entity that has always done very well but hasn’t necessarily relied on significant R&D and developing new products, it’s very difficult for them to then go out and say: Alright. We’re now going to spend X amount of dollars on R&D, reposition ourselves and work out how we’re going to survive. That’s something – unless you get a real cultural shift within the management structure of that organisation, it’s something that’s difficult to achieve. But quite frankly, I think it’s necessary.
Jim Taggart: Michael, I’m going to shoot to you, because you’ve been sitting here for 50 minutes and, no doubt, reflecting.
Mike Ribot: I’m a good listener.
Jim Taggart: Yeah. Well that’s why you’re successful probably.
Mike Ribot: The MedTech area is a little different in others in that there’s a whole – another layer of regulatory burden that we have to face. And therefore, if I was starting out again today, I probably wouldn’t go into that area, simply because too many regulators, too many lawyers. So, I’d stay away. What jumps off the page to me, when we talk about these things, is that – we talk about Asia and we kind of group it. The fact is that it’s the middle class of Asia that we should be targeting. Let’s forget about everybody else – seriously forget about them and just see only that band of people. And, in India for instance – you know – their middle class is bigger than Australia in total by whatever factor. One of the things that we, as Australians, do very poorly is market our quality brand. We market: Put a shrimp on the Barbie. We do all of that stuff. We’ve got all this beautiful countryside. But we don’t actually go to these people as a nation and say: We actually have a quality mark. The Swiss do that. They sell their watches. And the Germans do that with their motor cars, and so on. These people – the middle class in these countries – right across the board – even when you go to South America – Brazil and so on – the middle class won’t buy the locally manufactured product. And it certainly applies in orthopaedics. We’re going through the process of taking our products into China at the moment. It’s a long and difficult process, but we will get there. And the market is there. The middle class or even sort of upper class, if there is such a thing in China, person won’t have a locally manufactured orthopaedic implant. And I can tell you, having been through the factories there, that there is nothing wrong with the local product. But it doesn’t have the brand. And so, if we’re going to bring these young people and older people out of College, Universities and so on, we have to provide them with a market. We can manufacture stuff, but unless we can sell it – unless the folks that you’re working with, can actually export their product, we’re in trouble. So yeah, with the dollar where it is at the moment, we’re competitive again. But we have to target the correct markets. The other thing I’d say is that as a culture, we have to move more quickly. And I did a little bit of research into the automotive industry just through an association that I have with a particular person. And the reality is that we can do it as well as everybody else. We might not be able to do it as some of the really lowly paid people in China. But, in the US, they can manufacture a Camry in less time for less money than what we can here – and they’re paid the same money. You know. So, the problem is: we just don’t move quickly enough. And you’ve only got to walk around an airport – I think most of the people in this room who are at an airport, they’re just walking in, they’re overtaking people and carrying on. People in this country don’t move quick enough. Simple. And if they move more quickly – it doesn’t mean you have to work harder, longer. They just need to move more quickly – and then we can get that competitive advantage.
Michael Walls: Is that at all levels in decision making?
Mike Ribot: Not so much – decision making is different. I think you can take your time there. We know that 70% of the decisions we make in the fullness of time will be proven to be incorrect. So, the longer you take, sometimes I think the better off you’re going to be. I’m passionate about bringing manufacturing back into this country – but a different type of manufacturing. No more big dumb machines – you know – milling centres and things like that. Everybody’s got one of those. We can do it using different technology. But we have to have the market and we have to create the brand. So, I think we should all be lobbying our local State and Federal politicians to stop selling beach and the bloody coral reefs, and start selling the quality that is around the table – and the brains that we’re producing out of our Universities and TAFES and learning institutions.
Paul Van Bergen: You touched on an area that actually goes to what I’d call mindset. And I think Will made the comment – and echoing others – you’re a successful manufacturing business or you’re trying to survive, etc. And then, on the other hand, Michael’s saying: we can manufacture, we can bring manufacturing back here. It was interesting. Of the 1500 CEOs that KPMG surveys as part of its private business, 400 were in what you would call manufacturing, which includes making the pies and actually putting stuff together – and some of it you might call the mining sector, but it’s actually people, you know, building the train carriages and the wheels and all of that sort of thing. And they’re actually optimistic about the future – which is a contrast. If you read the paper it’s all doom and gloom. The economy – you know, it’s a low speed economy. When the mining boom was on, it was a two speed economy, etc. And yet, there’s optimism amongst the CEOs. And it’s interesting – when they were then asked – the optimistic CEOs – was: well, what are the things that you’re looking at – they’re sort of saying: OK. One of the success factors – and it’s actually the ability to process new experiences and not just take last year as the guide – it’s having forward thinking people in your team, not just people who rely on the past; an environment of experimentation. Fail fast and cheaply. Now, if you’re going to build a submarine, yeah, you don’t want to fail fast and cheaply. But there’s a thousand things you do to build the submarine and each of those can be improved. And if you think of say, the Toyota or the Honda philosophy, you know, each model-iteration has about 700 innovations. Two or three are big ones. But the other 680 are just the little things that they do. And that’s – and that’s the sort of – that’s that culture of innovation, but it’s got to be – and I think Sharon hit the nail on the head. It’s got to be driven from the top. The top guy has to be actually living and breathing the concept of innovation and not just – you know, not just the Engineers, but actually the Fitter and Turner, the guy who’s running the Clean Room, etc, all looking: Actually, how can we make this better.
Jim Taggart: So if we take that point, Paul – let’s just home in on Holroyd, if I can – are we looking to local Council, through other areas as well, State and Federal, to provide resources with Chambers of Commerce? Is that the new model going forward?
Sharon Kerr: I think there’s absolutely a place for Council to be involved. And I know there’s another Council in the region that are working very closely with new business and working with high schools to get people involved and employed in those, and attracting a certain type of business to their area. So, I absolutely believe that it is part of your mantra to be in that space.
Greg Cummings: We actually hosted a Seek-A-Skill Expo at Gipps Road in Greystanes. We would have had 40 exhibitions from different industries around. We obviously had TAFE there - 600 potential school leavers visited each day. So, 1200 students had an opportunity to see that there’s alternatives in employment and it was very successful. And it was trying to drag in the local industry from the area because basically Holroyd’s main industrial base is Yennora and Smithfield which obviously backs on to Wetherill Park, which is Fairfield, and goes out to Eastern Creek – in my understanding, the largest industrial area in the southern hemisphere. I’m more than happy to work with other Councils. But I go back to: we need State and Federal governments to get involved, and help establish and help drive this thing. You talked about rail before. I get very frustrated when I hear – and I’ll go back to the previous State Labor government who imported – I forget how many freight cars from Mongolia and they all had to be reworked in Newcastle. Just the employment in itself in the local economy by using local manufacturers keeps that economy flowing. And the offshoot – the decommissioning of the car industry – what is the main driver of research and development – what was, as far as manufacturing – was the auto industry. Gone. And, you know, the token half billion, just so that that doesn’t coincide with the next Federal election was rather cynical. No. You’ve elected there to drive something. That’s what the community needs. That’s what the young people need – and, as you say, the ageing population. If we don’t keep young people engaged, then we’re – again, I go back – we’re heading down a dangerous path.
Jim Taggart: From a planning point of view, Greg, where do you sit in that?
Greg Raft: Well, in terms again, from a planning perspective, we would think that we provide fertile ground for development, for the populous, for manufacturing. But, from a planning perspective, we can do so much. I mean what we’re seeking to do now is to engage, and it’s from an economic perspective. And we’re not alone with that. Most councils do that. We’re doing that because we’re just seeking to drive employment in the area. I mean I talked about a total of what, 31,000 people employed in the city at the moment, out of a population of 108,000 – and rising. What we need is to engage from a planning perspective. I mean when you look at Holroyd, you look at Parramatta and these areas – we’re centrally located. Here we are – Central Sydney. We’ve got two railway lines. We’ve got the Great Western Highway. We’ve got the M4. We’ve got the Cumberland Highway. We’re – from a planning perspective, strategically we are ideally set. The thing that I think we need to do as a Council is to market ourselves. I think we need to say to you folk: Hey, did you know we exist? Here’s my card. Here’s our economic development strategy. Have a read. Come back – have a cup of tea. How can we help you? What are we doing right? And more importantly, what are we doing wrong? We’re local government, but we have strong ties with State government – and indeed, to a certain extent, with Federal government. How can we lobby on your behalf? You know. Michael, we’re your partner. We’re catching up with Michael next Monday, and a whole group of people from the Cumberland Business Chamber. And I’m going to be espousing economic development. And I’m going to be saying to them: from a planning perspective, I don’t have all the answers. I’ve got some. But I look to you to tell us what we can do to help you. And that’s the way I would think it would go forward.
Jim Taggart: Thank you, Greg. So, Wayne wants to respond.
Wayne Fallon: Just a thought. It touches on Mike’s point too. The notion of selling the brand – the Western Sydney brand: I think I’ve seen that come up before. It seems to me that it requires an alliance, a strategic alliance, organisations, groups, governments need to be committed to it. At an organisational level, the point you made about the need for a culture of innovation, I think might go throughout the whole problem here. A culture of innovation is actually an innovative idea in itself, I think. So, innovation is more than technology, I think. Innovation can be around business practice. It can be at an organisational level on things like that. But it might also be at a regional level, where the stakeholders, the players in the area, might need to rethink how they connect with each other.
Jim Taggart: There’s an energy…. I was just saying to Michael and to Greg there’s an energy here. And I think people’s minds are doing some thinking and it’s really great to see. Paul I’m going to go to you, if I can. You’re in the area of innovation and all that is serviced, to provide benefits. Tell us about that story.
Paul Van Bergen: OK. So I was talking to Michael Mourad just before. He was saying: Why is it so complicated? The reality is that there a a plethora of various government initiatives across all levels of government. We identified 400 grants. And we’ve just sort of kept track of things. There are now 800 grant programs around the country.
Jim Taggart: Sorry Michael. So, someone could come to KPMG – and I’m not batting for you, but I am in a roundabout way – you’re saying that you’ve got – you’ve got that type of information for our business people?
Paul Van Bergen: Yep.
Michael Walls: Just in manufacturing?
Paul Van Bergen: Across the whole spectrum. So – and a lot of them are in manufacturing. And a lot of them are around employment creation. With the previous government, there were a lot around clean technologies. There are still some clean technology grants assistance programs. Some of them are around things like hiring Apprentices. Some of them are around export and development, etc. So there’s a range of programs. And in fact, what we do is – the first thing we do is we actually – amazing listening, I think was a good skill that Michael had – we actually listened to our clients about what they’re doing about what they want to do. And then we go back and say: OK. What grants might apply to that? So, for example, one of our clients – they had 100 employees back in June 2011. They had to close one division in a particular sector. But, in another area, they were actually hiring people. So, even though their net employment went down, we were able to actually get a $5,000 per employee payroll tax rebate on the people that they’d hired using a new business line.
Jim Taggart: So to put that into context, if Holroyd at the organisational level and Cumberland Chamber wanted to encourage dialogue around incentives and grants, you could facilitate that?
Paul Van Bergen: Absolutely. So the other area – and it partly reflects our size – but, because we’re interfacing with government – so, for example, I interface with NSW Trade and Investment on a regular basis – we can also go to the government about grants or assistance programs that they’ve announced but not implemented and actually have a conversation with them about how they might set the terms of reference to actually suit – and this would be, not so much on an individual enterprise level, but where for example say in Wetherill Park, the Cumberland Business Chamber gets together and says: Look, we need to get more Apprentices, and Holroyd Council says: Hey, we need jobs for people, and you know, the TAFEs and the Universities say: OK. Well we’ve got people who can educate people. Let them actually get together. You can actually sort of put the case that actually says: Well, look, let’s get a consortium together and actually structure how the grants programmes might work.
Michael Walls: That’s good.
Paul Van Bergen: So we’re actually creating demand by actually talking to the government and saying: Look, if you want something that actually meets your policy objectives, we’re here to help. And we’ve actually got people that have sort of got policy.
Michael Walls: Have you had success in those areas?
Paul Van Bergen: Yeah. So, we’ve got people who have a policy background who come from advising defence, and government, and education, who can put those arguments in the right framework, so that it actually works for everybody.
Michael Walls: From a PR point of view, there’s a huge information gap there. I mean 800 available prospective available funding sources, and the people that could possibly get that. I mean, there’s just a void there.
Michael Mourad: I’d love to see the Cumberland host a joint event and actually invite our database to actually learn about what’s available – because, I think as you said, if you put it out there, you see what feedback you get. It may actually – there may be an initiative that already exists, or you know, it might be a new initiative to pursue.
Jim Taggart: And just to come back, Will, how do you fit into that?
Will Hird: Well, with the R&D tax concession, which is one of the bigger elements that’s offered by the government in terms of assistance for research and development at this stage – they do have a lot of other grants aside from that - but the beauty of the R&D tax concession – correct me if I’m wrong, but is it’s a self-assessment type. So, you automatically qualify as long as you’re doing what’s not – dictated as R&D. But we – I guess like Paul – like to get in with businesses very early on in their R&D kind of exploration. I mean we come at it at a very different aspect. Complementing them in looking at options to actually protect that R&D, or the innovation that comes from that, and the way in which they can achieve competitive advantage for that business. And that comes from trying to get some market exclusivity, which again is directly linked to higher revenues. You get innovation, higher revenues – market exclusivity is that extra part. And it involves technology protection. It involves brand protection as well, from a trademark perspective. And these are again tools that I think businesses can use just at a very early stage. And just to give you a kind of a lesser scaled one, another client that I worked with called Acoustica, they do really – building materials with acoustic properties, which is great ‘cause (inaudible) environment with high density housing. So – they do flooring and walls. One of the biggest problem with the previous acoustic property materials was they were mostly vinyl products – the petroleum industry. This guy has a gentleman who’s about 75, perhaps 80, who used to work at ICI, I think in Eastern Europe somewhere. And he experiments in this guy’s shed in Blacktown. And he comes up with some amazing different products. And we’re now using one of his in a production line, which is a material that replaces vinyl, essentially, in this product. And they use a gelatine, which is an animal product in this. But when it burns, you don’t any toxic fumes, you get far less environmental degradation.
Michael Walls: And it started off in a shed in Blacktown?
Will Hird: This guy – I mean, I go out and visit him in his shed.
Paul Van Bergen: I think one of the things that comes out of what you just said is a lot of people will claim the R&D on stuff they’re getting patents for. But, if you think about all of the things that you need to do to get that product so that you get your first sale – and the hypothesis is, you’ll be able to develop the sale of the product. All of the stuff you do to actually get to that sale is either a core R&D activity or a supporting R&D activity – so you can get an R&D tax benefit. And if companies are looking at setting up collaborative joint ventures as a start-up – so, you might get say three or four companies together and do something really innovative – Australia’s the best place in the world to have a start-up in terms of the R&D system, because you can get a 45% refundable credit on your R&D. So, you spend $1 million on R&D – you can get a cheque back from the tax office of $450,000. So, that makes your dollar go a lot further.
Michael Walls: Now, are you finding a lot of your clients don’t know that, Paul? Are you the education process?
Paul Van Bergen: Thankfully, yes.
Will Hird: I’m finding a lot of my clients don’t know it. And I can’t recommend going and seeing places like KPMG to find out about this, because even structuring your R&D program to maximise the benefit of it yields a huge amount of cost savings across the business – and, but, just getting that initial advice working – because it’s all about what you can properly structure and document in your R&D to make sure that you maximise that, as far as I understand it.
Paul Van Bergen: And then the other side of it is having that conversation at the start of such a project to sell, what are people going to get out of it. Is this start-up actually going to exploit the technology itself, or is it going to make money out of royalties from sponsors etc? And thinking about those sort of innovations do I need in my particular industry cluster – so, for example, with pallets it might be that the supplier, the people who supply you with the wood might do a little bit of R&D around whatever they do. Then there’s your customer. OK. Well, look, if you can do this, then that will make us more efficient, etc. So, you might across the supply chain, actually have a think about: Hey, listen, are you aware of in business that actually can be a game changer, etc. You can throw in a 45% refundable credit. And there are, you know, Macquarie Bank and there about three or four reputable micro-financiers who will actually lend you money against your tax refund, as you spend the money.
Michael Walls: So, just when you mentioned start-ups: all this information is important, though, in how you structure your business at the start?
Paul Van Bergen: Yep
Mike Ribot: It’s a question for you, Paul? Government statistics would say that most – across the board, Australian companies invest – I think it’s 1% to 2% of their turnover in R&D.
Paul Van Bergen: Yeah.
Mike Ribot: Now, we’re doing some stuff with the Department of Health and AG, the Department of Industry and Innovation, to try and change some legislation. So, we looked at our spend over the last 10 years. And it’s been 15% of our turnover on average over the last 10 years. And that leads me to think that, from what you’re saying today, is that possibly there’s a lot of companies out there that are investing in R&D, but the government isn’t simply catching that because they’re not actually going along and claiming what is rightfully theirs in terms of a rebate against that R&D.
Paul Van Bergen: Yeah.
Mike Ribot: So, it’s almost incumbent upon us to try and ensure that all of those companies – any size company that is doing R&D – actually realises that it’s worthwhile putting their hand up, and them being captured – because, I think internationally we put these statistics out there and we’re seen as a dumb country because, oh, there’s only 1% to 2%. But, that’s probably the big companies. I think the little companies are investing a lot of time and energy and money. And I know, having filled out these forms, my time invested in R&D – you know, you write it down and there it is – that is actually available for a tax credit. And I don’t think most people in small to medium enterprises are capturing it because they’re busy. But it’s money that they’re entitled to. And I think it’ll help with our creating that quality brand: Here’s Australia. We are investing 5%, 6%, 7% in reality. How do we get it – how do you get it across?
Jim Taggart: Well, let me just ask – I think it’s about 90% - whether again it’s 85% or 82% - of small business employ less than four people in Australia. So, if we look at the Cumberland Chamber, many of those are not sole traders, but employ one or two or three people. They’re the big end of town, of course. What you’re doing in R&D – is that relevant to these guys?
Paul Van Bergen: Yeah. I guess if you’ve got two employees, you’re probably not going to be spending a lot of money on R&D. And they’re the R&D incentive, for example, and grants is basically: how much do you spend – and then there’s a percentage of that that can flow back. But what we’re finding is, you might get a company with, say, ten employees. But it’s a virtual company. So, those ten employees are working in the core business. And then, they outsource to service providers. So, they might outsource – you know, they’ll outsource their transport to Australia Post or Toll or Linfox. They’ll outsource – they might even outsource the design. So, they might actually do the CAD work here and then outsource the fabrication etc to somebody else. But, all of those costs of getting the prototypes etc can be claimable. So, I’ve got a client that has five employees that had a $3 million R&D fund and we got them a half a million dollar refund. They were very happy with that half a million dollars.
Jim Taggart: See, that’s important. I was trying to bring relevance to you, Michael – if you know what I mean – in a sense, with regards to that as a project within your organisation.
Michael Mourad: I do outsource design and I do give a lot of free prototype design samples and testing on my customers. A lot of my customers would have robotics and automatic machinery. So, yeah, I do a fair bit of that. I mean I wouldn’t say it would be a huge cost. But, if there’s something I can tap into, of course I’ll be happy to explore that.
Jim Taggart: Michael used a very good term in the “information gaps”.
Michael Mourad: Yeah.
Jim Taggart: It’s about those gaps. And how many times do we all – all of us say: Gee, if I knew that, I would have done that. It’s a common cry, no matter whether it’s with our own children or whatever: If you’d told me that... David, I’m going to allow you to finish, if I can, about your reflections and thoughts on this morning. Again, I’m always trying to finish right on time because people want to grab each other here, now, in a minute as well.
David Pring: Thanks everyone for coming along today. In terms of kicking off and thinking about manufacturing, manufacturing is certainly changing to meet those global pressures. And we kicked off talking about how companies/organisations need to collaborate more. And then a couple of hours on, we’ve actually come up with two or three things that we can collaborate on around the table, to benefit the entire region. Across government, across Chambers, across University and TAFE and we came up with examples of manufacturers finding those niche spaces where they can compete. The idea of competing on quality. Mike’s approach of then making sure that, from a market perspective, we’re looking at the largest market possible – not just the one that’s in front of our face. There’s more people in the middle class in India than total population of the US. And, you know, you look for China and then the growing markets, etc. And I think there’s lots of advantages that we do have in Western Sydney, the very diverse workforce, the wide range of educational bodies. And as Will said, the innovation and technology that can be generated and go off to global markets is phenomenal. The fact that the technology in my car is,and a number of cars around the table, coming out of Western Sydney – is quite remarkable. And I think as we find ways to talk and to collaborate outside of our existing organisations, we’ll find ways of assisting companies and assisting each other. So, I’m pretty excited by today.
Jim Taggart: Thank you. Well, on behalf of Access and to you KPMG, to you David and Paul, thank you very much for sponsoring this morning. Thank you everyone for coming. Like you, I’ve really enjoyed today.
