Sunday, October 23, 2016

Necessity is the Mother of Innovation

It’s rather gratifying to see so many people embrace the ethos of Innovation. Last year’s National Innovation and Science Agenda (NISA), followed by this year’s Defence Industry Policy Statement (DIPS), has prodded Australia to examine its relationship with the whole concept of innovation. As companies, research establishments and individuals start to consider the term’s implications for them, we’re starting to see a flood of magazine articles, books, on-line courses and all sorts of helpful advice on how to ‘do’ innovation.

This might be a good moment at which to examine our understanding of what Innovation is and isn’t, and how it actually happens. There are probably company leaders out there who think innovation is all about boffins in lab-coats, or bratty Gen Y-ers doing unlikely stuff with smart phone apps. They probably think bean bags are important. Some of them probably think that you can make your company innovative simply by opening an ‘Innovation Department’ and saying nice things about innovation in the annual report.

This is all symptomatic of a wider misunderstanding of how innovation works. There’s an instinctive grasp in the community at large that individuals and organisations will benefit from being more innovative, but some discomfort about the word itself, its implications for the future, and the psychological and organisational challenge that it represents. In fact, the process that we call ‘innovation’ has been around since the Stone Age and people have been innovating busily without realising (or even needing to know) that’s what they were doing. This post is intended to help simplify things a wee bit for modern folk who worry that innovation is a black art.

There are three things that individuals and organisations need to know about innovation. The first is this: innovation doesn’t happen in a vacuum. Simply telling people to go away and innovate, or to huddle together in collaborative groups and innovate, is pointless. Innovation begins with a customer, an end user, who has a problem that your innovation can help him or her address.

That customer could be internal – your production engineers might be looking for a way to produce, say, industrial chemicals quicker or cheaper, or at higher levels of purity. Or it might be an external customer: a health service provider looking for a new way of doing ultrasound scans, a laboratory looking for some kind of sensor that will enable it to measure the results of new, ground-breaking research, or an Army looking for a lighter, more accurate rifle.

If you’re not trying to address an end-user’s problems then you’re probably just doing curiosity-driven research. And that’s incredibly valuable, but it’s not innovation. Successful innovators need to be outward-looking: they need a good relationship and honest feedback from the end user. There’s nothing new in this for the majority of forward-looking businesses and research centres. That old adage, “necessity is the mother of invention” pre-dates the term innovation, but is still the fundamental truth that drives it.

Secondly, Innovation is about Change. When you innovate you make a change in what you do, or you enable somebody else to make a change in what they do. If you take enough time to understand your customer’s needs, you’ll understand where they want to go, and how your innovation process will help. Simply replacing one widget, or process, with another that achieves exactly the same thing is not innovation. Me-too-ism in the marketplace – copying or emulating somebody who has done something new or different – isn’t innovation either.

Re-fashioning your business in response to major market changes, or making a significant difference to production costs or achievable volume, or achieving strategic self-reliance in a crucial area, can be innovative. Successful innovation is aligned with design thinking: it starts with the customer and seeks to understand where the customer wants to go: what he wants to do, but can’t at present. And sometimes, the customer isn’t aware of all of the possibilities that are open to him – what can you do for him, or help him to do for himself, that he hadn’t even considered? That’s where the innovator’s expertise comes to the fore, and is the basis for the trust between innovator and customer that is so important. 

Thirdly, it is possible to organise your business to be more innovative. There is no single, universal template or set of rules for innovation, but there are some universal principles. An innovative organisation needs four key attributes. The first of these is Self-Awareness: it needs to understand what it’s doing, why and how well it’s doing it, and what it needs to change if it wants to do much more of the same, or something quite different.

It also needs Situational Awareness: it needs to understand everything happening externally that will affect what it’s doing. That could be fluctuations in exchange rates or the prices of raw materials; it could be a change in the behaviour, or the needs, of the customer; it could be the emergence of new players in the market; it could be the sudden emergence of new technologies that disrupt the market. The innovative organisation needs sensitive antennae and good external contacts so that it always has access to critical information and is open to unexpected revelations and challenges. Situational and Self-Awareness inform, and are informed by, each other.

The innovator needs what I call Professional Mastery. Any organisation, whether it be a sports team, a government department, a shop or a fighter squadron operates in a more or less specialised domain; the leader, and staff, must collectively be experts in whatever it is they’re doing. Their ability to become, and then remain, experts – and their understanding of what that means - is informed, and informs in turn, both Self-Awareness and Situational Awareness.

And then he needs what I call Business Mastery, or the ability to organise oneself so that the organisation as a whole flourishes and all of these attributes enjoy the attention and resources they need, at the time they most need them. One of the most important aspects of Business Mastery is a leader and key lieutenants who are committed to the idea of innovation and willing to embrace the internal changes that are necessary to begin the innovation process, and the others that inevitably follow as the process takes its course. The right leaders will make sure the right combinations of skills and personalities are assembled for new projects and ongoing operations, and that investments are made in the right skills and capabilities. And that the resources necessary for those investments are available. Business Mastery informs, and is informed by, each of the other three key attributes.

If that all sounds a bit simplistic, don’t dismiss it lightly: it may look simple, but achieving it is not easy. Applying these principles to your own organisation requires judgement and effort, and a proper understanding of your business and how it works; and it will probably take time to embed the cultural changes necessary to embody these principles. The open literature is full of tools to help innovators understand how to apply them to their own circumstances.


And that’s innovation in a nutshell: no bean bags, no boffins and no management-speak. You just need to be very good at what you're doing, and aware of the context in which you're doing it. Not easy, perhaps, but there’s nothing in all this that’s new to the genuine innovator. Real innovators have been following these simple, universal principles for millennia.

Friday, October 21, 2016

In defence of a free press (Je suis Bill!)

The topic of freedom of speech is back on the front page, in a big way. People are up in arms about a cartoon by the brilliant Bill Leak in The Australian. The cartoon itself has been discussed ad nauseam, and I’m proud to say “Je Suis Bill!”

But I’d like to make a more general point. After years of comment and name-calling, and inquiries in both Australia and the UK into the activities of the media, I think it's time I added my voice to those raised in defence of a free press.

A free press is a necessary condition for a healthy democracy. A truly free press is one that is not controlled by or subservient to a government or to a vested interest. That means a self-supporting press, one that survives financially because ordinary individuals are prepared to pay to read, watch or listen to whatever the media outlet in question publishes or broadcasts.

That truly free press probably doesn’t exist anywhere, but the idea that it should is important: this ideal shapes the business model that sustains the quality press which in turn comes closest (usually) to delivering the reportage and analysis (and the cartoons – let’s not forget the cartoons!) that keep our democracy healthy.

What does a free press actually do that makes it so important? It speaks truth to power. It challenges authority and convention and unfounded assertions. It deals in facts. It promotes transparency. It shines a light on people, on groups, on laws. It exposes wrongdoing. It holds leaders, and would-be leaders, to account. Sometimes, and often through the medium of an editorial cartoon, it simply holds up a mirror so that people can see themselves for what they are. And why is this so important? Because it ensures that the voters in a democracy can make an informed choice about whom to support and when, or if, to withdraw their support from a government or a group or a cause.

At its most fundamental, a free press is a force for peace. Why? Because it exposes and therefore challenges the basis upon which leaders and governments make decisions that lead to conflict. Consider the past century – can anybody think of a conflict that has broken out since the end of World War 1 between two nations that have a genuinely free press? Nor can I, offhand.

There are countless examples of conflicts between two nations distinguished by an imbalance of press freedom. In such cases it’s usually the leaders in the less-free country that are granted the freedom to create the conditions for war. Civil war can also erupt in countries where civilised discourse between communities isn’t moderated by an objective and free press. And don’t be fooled by the idea that war is a consensual activity between two (or more) nation states.

All it takes to start a war, or even a brawl, is a single aggressor without the impulse control that comes from sobriety, maturity or wise counsel. At the national level you don’t get wise counsel unless you have a wise and mature leadership that is conditioned to listen. The voices that the leaders listen to must be informed ones: that’s the role and responsibility of a free press.

So how do you support a free press? Actually, as I suggested earlier, you probably can’t. A society needs to accept a flawed business model if that is the price of an independent media. What this amounts to, in practice, is either a state-owned media, with all the potential dangers that involves, or a broadcasting or publishing house that makes its money from a combination of paid subscriptions or cover sales and paid advertising.

‘Vested Interests’, I hear you say. Yes, potentially. But the potential for interference by advertisers and proprietors is no greater or more sinister than if a press agency or media organisation is owned and funded – and controlled – directly by the state. Several national news agencies around the globe are acknowledged to be mouthpieces for the regime that funds them, and they are de facto (and sometimes de jure) propaganda organisations.

That said, public broadcasting financed by the state has a proud record of courageous, independent reporting in Australia and in countries like New Zealand, Canada and the United Kingdom. The editorial independence of state broadcasters such as the ABC and BBC is defended ferociously by supporters both within and outside these organisations and at their best they perform a vital role. During World War 2 (and for many years after) the BBC was the gold standard for accurate and impartial reporting of global events.

The overwhelming majority of media organisations, however, enjoy no state support. They are perforce commercial entities, surviving on what they can sell. They sell two things: something that certain people want to read (or watch, or listen to); and access to those readers.

News-gathering agencies such as Reuters and Associated Press make their money purely from selling news and analysis to publishing and broadcasting outlets or financial institutions. Their ‘product’ is accurate, impartial and swift reporting of critical events. They are in some cases the only source of the news on certain topics that is published or broadcast by newspapers and radio and TV stations. Their reputation is their brand and this guarantees their income.

At the other end of the scale, so to speak, are the ‘uber-tabloids’: newspapers, magazines and TV channels that deal principally with gossip. They serve a diet of salacious and sensationalist celebrity gossip and spurious revelations.

Occupying different parts of the spectrum in between are the newspapers, magazines and broadcasters that deal with national and global affairs, business and sport in a more measured and critical way.

Elsewhere, you find the specialists: publishers and broadcasters who focus on more narrowly defined interests such as aviation, cars, pets, cooking, gardening and the like. The pornographers are in there as well.

What they all have in common is an editorial ‘product’ shaped to suit a carefully defined audience, and in most cases a business model that delivers that audience to advertisers. They make their money from a combination of sales direct to the audience, and advertising. If it ain’t interesting, readers won’t buy it or watch it. So advertisers won't advertise in it. If there ain’t a quid in it publishers won’t print it. So it’s fair to say that publishers and broadcasters reflect the interests of their audience.

This in turn means that those salacious tabloid newspapers, celebrity gossip magazines and reality TV shows exist only because there’s a market for them. Think about that: if you deplore these publications and programs, then you also deplore their audience, your fellow-citizens.

Of course, the tabloids and gossip magazines have overstepped the mark frequently. (Oddly enough, the citizens who deplore them for doing so are often the same readers who avidly consume the resulting headlines – the irony appears lost on them.) Is this reason enough to shut down or control whole segments of the media? No. This is the regrettable price we as a society need to pay for the privilege of a free press.

Shutting down or controlling the tabloids (or the gossip mags, or cheap and nasty reality TV shows) would be the same as banning or controlling cheap cask wine, in the belief that only good wine should be sold and drunk, and only by people who know how to enjoy it properly. Power then resides in the hands of those who make subjective judgements on what is, or is not, good wine, or good journalism. Quis custodiet, and all that?

This also means that the so-called ‘quality’ press – which includes broadsheets like the Wall Street Journal and Financial Times, as well as quality tabloids and ‘serious’ programs produced by both state and commercial broadcasters - survive because of ongoing demand for accurate, thoughtful analysis and a modicum of activism, based upon facts and, more subjectively, values.

The ‘quality’ media faces the highest bar in terms of credibility – their ‘product’ is that very editorial quality that pursues and publishes facts and arguments unflinchingly and impartially, and it’s not cheap. Those ‘quality’ outlets that survive and thrive fill a vital role.

In a healthy democracy with a vigorous press, however, leaders, demagogues and ideas can be held to account by all parts of the media, by a tabloid newspaper as much as by a high-falutin’ broadsheet. By their very nature, editors and journalists tend to be nosy parkers with an ‘everyman’ sense of right and wrong. They’re not driven by money, on the whole, which is why publishers can afford to employ them. They fill what would otherwise be a multitude of information and ethical vacuums.

At the end of the day, even the readers of ‘Cabbage Growers’ Weekly’ want honest, accurate reporting and useful information. It’s that market discipline, and the basic integrity of most journalists, that keeps the independent media honest – if they lose readers, they lose advertisers and then they lose money.

What’s important here is that the media serving those societies that value a free press is independent. It can speak truth to power, or not, as it wishes. It may pander to its audience’s basest instincts or most abstruse interests, or it may shine a light on wrongdoing or official incompetence. It has the freedom to do all of those things, and we as a representative democracy, as a community of voters, are the better for it. To regulate the media, to control freedom of speech, is to punish society and weaken democracy.


Gregor Ferguson was a journalist and editor for over 30 years in the UK and Australia. He wrote for newspapers and magazines and edited specialist trade journals for much of his career.

Saturday, April 23, 2016

Will it REALLY cost 30% more to build submarines and surface warships in Australia?

Will it really cost 30% extra to build submarines and surface warships in Australia, compared with importing them from an overseas constructor? If the people making this claim are basing their projections on the Air Warfare Destroyer (AWD) project, then you can see their point. But you need to treat a scary claim like this with care: they’re making a general extrapolation from a very particular example.

The AWD project was hamstrung by a couple of things: first, it had been nearly a decade since the Australian shipbuilding industry had constructed a modern major warship. The technical, supervisory and management skills necessary to do so had all atrophied and needed to be re-learnt. Secondly, the shipyards needed new investment so they could handle new fabrication and assembly processes. Both of these cost money. Rebuilding industry skills and capacity, once they have been allowed to wither and die, is expensive. And that cost is being amortised over a one-off project to build three destroyers. No wonder it’s expensive, and no wonder critics point to the cost and argue that Australia can’t, and shouldn’t try to, build warships in-country.

There’s another technical issue that affected the AWD program as well, but I’ll get to that later.

Thanks to the previous Labor government’s indefensible time-wasting, we’ve almost re-created the market conditions that cruelled the AWD project. But if we’re planning to revive those skills and that infrastructure to build the RAN’s new fleet, then those conditions should apply only at the start of this new project.

Our next major purchases are not trivial: Australia plans to build 12 Offshore Patrol Vessels (OPV); 9 new Anti-Submarine Warfare (ASW) Frigates; and 12 new Submarines. We’ll also be building 21 new Pacific Patrol Boats – not demanding in technical terms, but requiring good management along with good design and construction skills. Importantly, they’ll deliver cash flow and profit to their builder, Austal, and help solidify the naval construction sector’s skills and capacity base.

Given the recent(-ish) history of Australian naval construction, and the level of scrutiny that the whole Submarine/Frigate/OPV enterprise will attract, I’m inclined to accept the publicly stated estimates of parent designers and constructors who understand how to design a new vessel and transfer technology and skills to an overseas partner. 

There are precedents for success, even here in Australia: the ANZAC Frigate program delivered 10 ships on time, on budget and with extremely high levels of Australia and New Zealand Industry Participation (ANZIP). Even allowing for Australia-specific design modifications (some of them a first for the baseline MEKO200 platform) and fluctuations in the dollar exchange rate, the out-turn cost of building these ships was not so different from what we’d have had to pay if we had simply bought them off the shelf from Blohm+Voss in Germany.

Much of the cost of the new submarines and ships will be in items that we need to buy from an overseas supplier, such as guided weapons and their launchers and handling systems, sensors, elements of the communications and combat system, and so on. The local cost will be driven by platform construction, assembly and integration. These are the areas where a smart partner can tackle risk and cost. 

If Dr John White from TKMS says that building 12 of his company’s submarines in Australia would cost no more than building them in Kiel, then I’m inclined to believe him, but I’d want to check the fine print and the terms and conditions. The same goes for the French DCNS bid.

Given our history with the AWD project, you’d need to look carefully at the history of high-technology tech-transfer programs; they’re not easy and if you’re doing it for the first time, they’re not quick.

This is what I was referring to earlier when I mentioned a technical issue that had an adverse impact on the AWD project. The Spanish ship designer, Navantia, had never undertaken such a complex technology transfer process before, so fell into many of the traps that lie in wait for young players. The process of fabricating hull and superstructure blocks to drawings that didn’t reflect then-current Spanish shipyard practise was difficult, to say the least. The difficulties were compounded by the design changes necessary to make the Navantia design suitable for RAN service, the shortage of welding and supervisory skill in the Australian yards that fabricated the blocks, and the structure of the AWD Alliance that was supposed to deliver the ships. We all know the result.

Interestingly enough, exactly the same lessons emerged from the development of the Vickers Supermarine Spitfire in England during the mid-late 1930s. There truly is nothing new under the sun in all of this. And remember how successful the Spitfire became.

So – to answer my original question: will it cost 30% extra to build the RAN’s new ships and submarines in Australia? Not if a proficient parent yard in France, or Germany, or Japan is given the freedom do to an efficient and effective job. How much more (if anything at all) might it cost, in that case? It’s hard to say, and the figures need to be calculated correctly if they’re to have any meaning. Furthermore, if the submarine design in question is good enough, and has a sufficiently robust upgrade path, then the broader question becomes: What can the bilateral relationship with that company’s parent government give us, both in the naval construction domain and in a much broader sense? A good submarine backed by the promise of the right bilateral relationship may be more compelling than an outstanding submarine that isn’t sustained by a relationship of similar warmth and intimacy.

One aspect of the indigenous build proposal that hasn’t been canvassed over much is the broader local benefit of doing the work in-country. If we pay, say, AUD$20 billion to have 12 submarines built in Germany, that’s money lost to the economy. If we’re going to spend that sort of money (and the 2016 defence White Paper says we must) then we should aim to get the maximum return on that investment: corporate and personal tax; development of skills, new jobs, new supply chains, new export markets; the creation of knowledge that we can use to maintain and upgrade those ships over their life; the development of a technology base that sustains and enhances other industry sectors.

Consider this: because we built the ANZAC frigates in Australia, with a locally developed combat system based originally on an off-the-shelf product made by Saab (formerly Celsiustech) in Sweden, we were able to design, develop and implement a world-leading upgrade to those ships that embodies major platform modifications designed by BAE Systems, the development by Saab of what is now an all-Australian combat system of considerable performance and the creation of an all-Australian family of new active phased array radars by CEA Technologies. Those radars will now be fitted to the RAN’s nine new ASW Frigates. If they aren’t paired with an advanced derivative of the Saab 9LVMk3E combat system, designed and developed in Adelaide, then I’ll be very surprised. And disappointed.


The benefits of local investment must be taken into account when assessing the cost of a major defence purchase. That’s not meant to be a defence or justification for a 30% premium; it’s a genuine strategic issue. The Government's plans to acquire no less than 33 submarines and surface warships create unprecedentedly good market conditions for industry. If, under these conditions, the shipyards reckon they can build submarines and warships in Australia without incurring such a premium, then let them prove it – and hold them to their word.