Innovation in a Global Knowledge Economy: Challenges for Australian Service Industries

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Innovation in a Global Knowledge
EconomyChallenges for Australian Service
Industries

• Professor Ron Johnston
• Australian Centre for Innovation Ltd
• Risk Management Innovation Looking Outside the
  Square
• Risk Management Institution of Australasia
  Conference
• August 2008

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One Certaintythe long-term trend towards a
knowledge-based economy continues, driven by the
growing globalisation of knowledge (OECD 2005)
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Evolution of the Economy
IndustrialEconomy - Land- Labour- Capital-
Enterprise- Roads, Sea- Rail, Air-
Steam/Electricity- Telecoms
Agricultural Economy - Land- Labour Roads,
Sea -

• Knowledge Economy
• Land- Labour- Capital- Enterprise- Knowledge
  Innovation- Roads, Sea- Rail, Air-
  Steam/Electricity- Telecoms/Comput.- Systems,
  Digital Environments

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Paradoxes of Knowledge

• Using knowledge does not consume it but it does
  get obsolete.

• Transferring knowledge does not lose it but
  market mechanisms allow ownership.

• Knowledge is abundant, but the ability to use it
  is scarce.

• Producing knowledge resists organisation.

• Much of it walks out the door at the end of the
  day.

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Growing Knowledge Intensity of Trade
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Value of Knowledge
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Some Evidence

• Investment in knowledge (RD, education and
  software) as a of GDP in OECD countries is now
  comparable with that for machinery and equipment
  (approx 5)
• Professional and technical workers are over 35
  of employment in Australia
• The number of patents doubled in the past decade,
  to 450,000 pa
• The ICT sector is 10 of business value added
• New knowledge-intensive sectors like
  biotechnology, nanotechnology and environmental
  services are growing rapidly

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OS?FAEach economy needs to enhance the
knowledge intensiveness of industries with
established comparative advantage, and support
the development of unique competitive advantage
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Rules of the Global Knowledge Economy

• Knowledge is being transformed from an
  intellectual pursuit to a commodity in the global
  capitalist system. This leads to inevitable
  pressures for increased efficiency, productivity,
  outcomes and ownership, of knowledge.

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Knowledge Management Arrives
Silly me. I thought knowledge management meant
its not what you know but who you know.
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Innovation is central it is the mechanism
whereby economic value is extracted from
knowledge (OECD)
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The Cutler Definition of Innovation

• innovating and being innovative is creative
  problem solving designed to produce practical
  outcomes. The outcome of this process is the
  introduction of novel solutions to real problems,
  needs or opportunities.

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Three Facets of Innovation
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There is no standard recipe book for innovation
it is a consequence of culture, context,
ingenuity, and risk-taking driven by the pursuit
of identifying and satisfying customer needs in
particular, it is nurtured by creative
communities
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The Central Role of the Service Industries
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The share of knowledge-intensive market services
now accounts for 21 of OECD value added.

• Routine services eg accounting, market research,
  sales, ICT management, trade information
• Compliance services auditing, legal services
• Network services telecommunication, social
  network providers, MICE
• Renewal services RD, strategic management,
  consulting, value chain management

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Australia is well placed (OECD STI Scoreboard
2007)
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Case Study mining technology services

• Gross sales A 8 billion
• Growth rate of 20 pa
• Export sales 20
• 20,000 employees
• Generally small 53 lt 5 26 lt 25 1 gt500
• Majority university-qualified
• BERD 12 of revenue

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Innovation in mining technology
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Major New Service Industries

• Biological/health industry
• - stemcell technologies
• - tissue engineering
• - organ replacement
• Carbon management industry
• - energy
• - transport
• - infrastructure
• - financial services
• - auditing services
• - capture