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Growing the entrepreneurial spirit, in Australia and worldwide

Tech and Innovation

Posted on March 28, 2019

3 min read

I’m sure I won’t have a hard time convincing you of the value of entrepreneurialism. This spirit is what drives people to open a new business, to innovate and invent new technology, and invest in those willing to try.

But while we might agree on the incredibly high value of this spirit, we might disagree on the current state of things in Australia and what, if anything, we should do about it.

One of the measures of the future health of our business environment is the quantity and quality of new businesses started each year. On this front, Australia is performing well. When it comes to the rate of technology innovation, though, Australia is not performing nearly as well as it could. According to the 2018 Global Innovation Index, we rank 20th in the world – not a bad result, but we are not as successful as we could be.

What is really interesting is that this report shows we rank 11th in the world when looking at the inputs for innovation – such as the average number of years young people receive formal education, easy access to credit, and a high level of government services being available online – but we rank 31st when looking at outputs like the value of our patents, creation of new goods and services, and our foreign investment outflow.

Clearly something is not working the way it should.

Where were you when the dot-com bubble burst?

It’s almost 20 years since that rise and fall of many companies and the entrepreneurs behind them. While a very small number of people who invested heavily in tech stocks managed to get through that period with their finances intact, the most common outcome was lots of money burned.

Twenty years later the NASDAQ has climbed to all-time highs and is now at over 7,500. Sure the bubble burst, but many technology firms in the US have grown and many new ones have been established. In fact, many of the most successful entrepreneurs of our time were made better by the experience.

For example, Jeff Bezos opened an online bookstore in 1994. It was a disruptive move to take on a saturated market. His often-repeated mantra about being obsessed with providing the best possible customer experience, irrespective of what Amazon was selling and where it was selling it, enabled him to ride out the dot-com bust and build a company that, in 2018, had more than US$232 billion in revenue.

In Australia, the dot com boom gave rise to some serious success stories. REA Group listed on the ASX in December 1999 at $1.11 per share. Today you’d be paying close to $80 per share. Carsales.com was founded in 1997. It listed on the ASX twelve years later and today has a market cap of over $3 billion. And other businesses like Wotif, Lastminute.com, Seek and others have achieved sustainable long-term growth. However, their success has had nowhere near the impact on the Australian economy as technology companies have had in the US.

Entrepreneurs are an essential part of our economic ecosystem.

What lessons did Australia learn from the dot-com boom and bust?

The Australian business community is a conservative one. A relatively small market with abundant natural resources, high barriers to entry, and a huge pool of investors (through superannuation) looking for steady returns incentivises solid, but modest business strategies.

America’s four most valuable companies are Apple, Amazon, Google and Microsoft. Their average age? 35 years. Australia’s four most valuable companies are BHP, CBA, CSL and Westpac. Their average age? 135 years.

While there are a lot of reasons for our conservative business culture, there is no doubt that seeing high-profile failures in the dot-com era took a toll on Aussie entrepreneurs and scared off some established businesses and investors from supporting new ideas, new products and services and new companies.

One of the biggest risks our business community faces is that of complacency. If we do not foster an entrepreneurial spirit and support those who are willing to take on the risks involved, we may miss out on the benefits that only come through a healthy innovation cycle.

Entrepreneurs are an essential part of our economic ecosystem. The products and services they create, the capital that they channel into productive use, and the culture of healthy risk taking help balance the more conservative end of the business spectrum and drive the development of our economy.

Fostering an entrepreneurial spirit

Successful companies, big and small, are those that channel an entrepreneurial spirit to innovate over the long term. Those who do innovate successfully create value. Those who don’t innovate risk fading away.

Fostering an entrepreneurial spirit is a challenge that should be front-of-mind for business leaders, educators, and politicians. We must forge a greater culture of entrepreneurialism in Australia.

The United States is, rightly or wrongly, seen as the home of entrepreneurialism. There is a very long history of innovators and entrepreneurs and they occupy an important place in the national mythology.

In Australia, we have a different history, but we also have many similarities. We have a history of world-leading innovators like Dr Howard Florey, who received a Nobel Prize for his work developing penicillin; Dr Graeme Clark, inventor of the bionic ear; and the CSIRO’s pioneering work on developing Wi-Fi.

We have an excellent tertiary education sector (though we should be realistic that it does not produce as many highly-qualified professionals as it should). And we have more than $2.7 trillion of superannuation, some of which is looking for high returns on investment and is willing to back risks to achieve this.

Australia has the right ingredients for a strong entrepreneurial culture. But frustratingly, we are often better at exporting our entrepreneurialism than fostering it here. Many of our brightest talents continue to take their ideas and their new companies to the US, Israel and Europe rather than growing them here.

How can we nurture entrepreneurialism?

So what steps can we take to nurture the culture of entrepreneurialism? No individual, business or government is going to have all the answers. We each understand a piece of the puzzle, but making it all fit together is difficult.

Large and old companies can innovate and play a role in developing that entrepreneurial mindset too – Telstra is an interesting example. We are one of the largest and one of the oldest companies in Australia. However, constant technological change has forced us to continually act like an entrepreneur in many parts of our business.

More than ever before, we know that we need to be bold and take risks to succeed. You can see this in a range of actions we’re taking:

  • 5G is a big bet but we believe it will enable new business models – some we know, some we don’t
  • Our Enterprise Network Application and Services business moves us from a traditional telco providing infrastructure to a services company offering high-value products like cyber security
  • Telstra Health is an entrepreneurial business within a bigger, business using core technologies that all have their roots in connecting people/practitioners/data
  • Through our start-up accelerator muru-D, and our venture capital fund Telstra Ventures, we directly invest our capital in great new ideas

Based on my experiences, here are five questions I believe we must be asking:

One – in tertiary education, how can we arm people with a better mix of technical skills and business skills to create entrepreneurs? Our engineers need to learn how to develop ideas into products, and products into businesses, and how to collaborate with others across academic disciplines to create a better business eco-system. Universities must be centres of leaning, but also places where inspiration and creativity across disciplines can yield unanticipated results.

Two – do our policymakers understand the risk and reward incentives involved in starting a new business? We need regulators who understand that supporting new businesses can help change the market and benefit consumers.

Three – if the policy and regulator settings are in place, are investors open to new ideas and opportunities? Early stage funding is critical for any new business looking to expand, but entrepreneurs need support and investment at all stages. How do we define a clear pathway towards sustainable growth, beyond the first couple of years, for the entrepreneurs leading these businesses?

Four – how can we encourage customers, including very large businesses like ours, to work with new suppliers, try new solutions and support new businesses even if this involves slightly higher risks or slightly higher short-term costs?

Five – above all these others, the most critical element is mindset. How can we encourage people to dream really, really big about businesses that have technology at their core? I believe the DNA for all of this is truly embodied in the Australian psyche. I grew up with people talking about “having a go” with entrepreneurs who were applauded for taking risks in more traditional industries.

Making progress on these critical elements I’ve mentioned needs to be a joint effort. From our school rooms to board rooms, we need to champion a culture of entrepreneurialism.

We need to fuel this spirit. Australia needs a cultural re-set when it comes to entrepreneurialism. We have tremendous assets in our people, in the education system and have the financial wherewithal as a nation – there is no limit to what the future can bring if we focus on fostering and encouraging our entrepreneurial spirit.

 

Tags: 5g, innovation, IoT,