John Pollaers is the chairman of the Australian Advanced Manufacturing Council (AAMC). He has recently been appointed to chair the Federal Government’s Industry and Skills Committee. By William Poole.
AMT: Firstly, what is the AAMC and why was it set up?
John Pollaers: The AAMC is essentially CEOs of advanced manufacturing businesses or multi-national corporations with operations in Australia. We started our effort back in 2013, but really formalised ourselves about 12 months ago.
Our focus is firstly on shifting the understanding of what advanced manufacturing is. That’s about education, and consistency of understanding – that it’s not just a sector but a series of capabilities applicable to all industry sectors. That’s why it’s so important.
Second is to look at the ecosystem and identify where the gaps are, who’s accountable, and encourage them to step into that accountability and deal with the issues. We’re not about creating lots of new things, we’re not about new money; there’s plenty of money in the system. It’s about making sure the gaps get addressed.
The last one is to understand where the policy settings, if adjusted, would support that ecosystem. We don’t start with the premise that we need to wait for Government. Our starting position is that industry can do this for themselves. There’s 2500 successful advanced manufacturers in this country who are growing, who are participating in global supply chains, who haven’t relied on government support. If we get behind those companies, and show other companies how to transition into that way of working, we’ll get a faster return on investment, we’ll get job immediate growth, and importantly we’ll be setting Australia up for a long-term growth sector.
AMT: A number of your members are Primes and OEMs. How do we create opportunities for smaller manufacturers in their supply chains?
JP: There are a couple of overarching gaps in the system. One is that a small-to-medium enterprises (SME) don’t necessarily have the capacity to focus on research & development or commercialisation , or the time to engage with research institutions. How do you facilitate that? When you look at the way that the US and UK and Germany are approaching this issue, it’s by encouraging intermediate technology organisations to come together to develop capabilities, solve problems, and then bring those capabilities into the businesses.
In many instances, those capabilities could come out of working closely with multinational corporations. So the second gap is how we get SMEs to tap into the global supply chains of those multinationals. A lot of our focus is about bringing attention to opportunities for SMEs to work with larger businesses and leverage those relationships internationally.
AMT: What activities is the AAMC engaging in to achieve your goals?
JP: We’ve spent a lot of time advocating for – and I think we can take some credit for – the recognition of “advanced manufacturing” as one of the five focus areas under the Government’s Industry Innovation and Competitiveness Agenda. That’s meant educating key stakeholders in Government and focussing on developing relationships and understandings. Firstly, it is education, understanding what it is and what the opportunity is. Secondly, it’s about talking to businesses around their role, how they can work with each other, and how they can connect with research on the commercialisation front, so they aren’t waiting for Government. And then it’s working on the policy levers, to say: “Where are the opportunities to learn from international approaches, and address the skills gap, address IP retention issues, address funding issues?”
AMT: There seems to be a strong ethos of not waiting, of bypassing Government.
JP: Yes. If industry steps up and works together and is clear on what it’s trying to accomplish, what we’re doing is defining the role Government can play. There’s often been an assumption in the manufacturing policy debate that manufacturers wait for Government to solve the problem. That’s not the way we think. It’s CEOs who believe industry can step up, industry will make those investment decisions. If we’re clear on what we need, the role of Government becomes clearer. But it’s a more proactive approach on our part.
AMT: And what role should Government take?
JP: Government is critical in building collaboration between research and business, in facilitating commercialisation of our world-class research, and in supporting technology acceleration. We’re strongly behind the establishment of the Industry Growth Centres to help drive exactly that – to give us a strong coordinated national effort – and the CEOs of the AAMC will do all we can to ensure the Centres succeed in the long term, beyond political cycles, as industry-driven catalysts. The Cooperative Research Centres programme is also aligning its efforts with the Growth Centres and with industry needs – and this is very welcome.
There’s also an important role in market access facilitation. The new paradigm for manufacturing is not fully integrated production, but supplying into global supply chains. So helping Australian companies access the global supply chains of major multinationals is an example of what could be done. It’s about finding out what the world needs and wants, and providing it, at the high-value end of the supply chain.
The submarine project is a case in point. We’re arguing we use that project to inject Australian companies into the supply chains of major contractors – and in that way build Australian high-value capabilities at a globally competitive level. Make that a criteria. Then you’re not just part of producing, say, ten submarines – you’re part of producing 300. One example is Marand Precision Engineering’s role in the Joint Strike Fighter project. Once you’re in and you prove you’re internationally competitive, you continue to provide. That’s the way for many of these advanced Australian companies.
AMT: So it’s not just giving them a job, it’s helping them become the “go-to guy” for that job.
JP: Right. If your starting position is that we can be globally competitive, we already have 2500 companies proving that, you come at it with a different mindset than if you’re constantly saying: “Why weren’t we able to do the last big project?” It’s a different way into the opportunity.
AMT: So how, for example, does a component manufacturer who’s spent a long time supplying Holden make the transition?
JP: Marand is a good example. It was a component supplier to Ford, it decided to invest in equipment and start to transition into supplying into mining, and then into defence. It’s really about standing back, looking at your core capabilities, identifying where – with some investment – you could create products for these global supply chains, and making sure you get into those tender processes. The companies doing that are succeeding. There’s plenty of opportunity. There’s no reason why Australian component manufacturers can’t be supplying into automotive supply chains outside Australia.
What you’ve got to do is get outside Australia: you’ve got to go and have the meetings and make the introductions. Doors can be opened, but you’ve got to go and meet people, attend events like the Hannover Fair, and get yourself connected. Having travelled and looked at this across different markets, my observation is that our willingness to invest and go and sell ourselves is the important difference. Our skills and capabilities are world-class. What we’ve got to do is understand the opportunity better, build salesmanship and get connected.
AMT: You were recently in Germany and the UK. What can we learn from overseas?
JP: Again, what differentiates those 2500 companies in Australia is exactly what I observed over there: the commitment to invest in technology; the commitment to build skills and capabilities in your people – because it’s not just about expensive equipment, it’s the people who use it to solve problems; the commitment to understanding needs and opportunities within global supply chains, rather than just the domestic market. And it’s the commitment to investing in innovation. Most successful companies are investing in high-performance management techniques, in relationships with research institutes, in commercialisation. By and large that means reinvestment of 5%-10% of revenue into R&D – in some cases even higher.
It’s something you build over time, but it’s a commitment to bringing new thinking into your business and then going out and selling yourselves into global supply chains. Then our market proximity issue goes away, because we’re talking about high-value engineering, where the cost of shipping isn’t the thing that makes the difference. We’re competing against higher-cost labour markets, so it’s all about the added value.
So I think it’s a mindset issue. We’re proving already we can do it.
AMT: Tell us about how you got involved with the AAMC.
JP: During the global financial crisis (GFC), we appeared to become very inwardly-focussed. The only thing I ever read about was the success of the mining and financial services industries. And the research we were doing, particularly at Fosters, where I was working at the time, was telling us people broadly felt confident about Australia’s future, but didn’t feel confident about their own futures. That suggested there were a couple of different economies running. As I looked into it, I thought it was really bizarre: a high Australian dollar, and nobody really investing in plant and equipment and IP. That’s a confidence issue, and a lost opportunity as it turns out.
And the public debate around manufacturing was so negative, almost like it was always going to result in a hand-out. So we started to say “Where are we succeeding?”, and it became clear there were many examples of success. The public debate was misinformed. So once I left Fosters, I decided to do a review of manufacturing competiveness, joining forces with work the Ai Group was doing and Dow was doing. Once we started looking at it, we recognised that most Australian industries are dependent on the same technologies. Advanced manufacturing isn’t a sector, it’s a series of capabilities. Once that became clear, the argument for why we should invest became clear. So as a group of CEOs we decided the only way to get this solved was if we took time out and focussed on promotion, understanding the ecosystem, and making sure the gaps were closed. That’s how I got involved.
AMT: What might an ordinary day entail?
JP: One part is making sure we take every opportunity to communicate the positives, because there’s a huge education job to be done. Secondly, it’s identifying those areas – within or outside government – with accountability for a piece of the puzzle, a piece of the ecosystem. So I spend time with Austrade talking about supply chain opportunities, or with the Chief Scientist asking why the country’s science plan doesn’t match the opportunities in the five Competiveness Agenda areas, or mentoring universities and the CSIRO on engagement with industry. It’s a very practical role. Rather than creating new things, it’s recognising we’ve actually got everything we need – we’ve just got to make it work more consistently with a clearer sense of the outcome.
AMT: What are the biggest challenges for the sector in this country?
JP: The biggest challenge is self-belief. If people get that we are good and we are capable, and that accessing those markets is not as difficult as it might appear, we would make much faster progress. Self-belief is important.
The lack of a fact base and common understanding is also an issue. Although we’ve got five Competitiveness Agenda items, not all departmental priorities are lined up against them, so we lose opportunities that would come from an aligned interest. I think the lack of commonality of understanding or aligned effort is the second barrier.
As a third, there’s a need for specific interventions from Government around stimulating investment in technology. The way we treat IP in Australia – that we don’t amortise IP for tax purposes – that’s a huge disadvantage. If you want to invest in innovation, you need to be able to write that off to encourage further investment in research. I think there are barriers around making sure that we’re internationally competitive when it comes to attracting and retaining IP.
They’re the specific issues. I’d actually put labour issues some distance behind that. We’d all like more flexibility, we’d all like lower wage structures, but the reality is that manufacturing, though only 9% of GDP, represents a higher percentage of Australian wages because we’re talking about skilled labour and higher added value. Therefore it’s not as big an issue. Advanced manufacturers don’t mind paying because they’re more interested in making sure the right skills are available. Most often they can’t find people with the skills, which is an issue we need to confront when it comes to the Skills Agenda: how do we make sure we’ve got the right people available to feed the opportunities that come our way?
AMT: Where do you see the sector a decade from now?
JP: We’re definitely at a crossroads. If we commit, if we realign our efforts against the five Competiveness Agenda outcomes, if we invest in those capabilities, I see no reason why Australia can’t have a healthy, thriving advanced manufacturing sector in the next ten years. There’s nothing standing in the way, provided we’ve got the courage to follow through.