Digital Disruption: What do Governments need to do?

Digital Disruption: What do Governments need to do? AIIA response to the Productivity Commission White Paper September 2016 Ground Suite B 7-11 Barry...
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Digital Disruption: What do Governments need to do? AIIA response to the Productivity Commission White Paper September 2016

Ground Suite B 7-11 Barry Drive Turner ACT 2612 GPO Box 573 Canberra ACT 2601 T 61 2 6281 9400 E [email protected] W www.aiia.comau 1 of 8

20 October 2016

DIGITAL DISRUPTION: WHAT DO GOVERNMENTS NEED TO DO?

About AIIA The Australian Information Industry Association (AIIA) is Australia’s peak representative body and advocacy group for those in the digital ecosystem. AIIA is a not-for-profit organisation that has, since 1978, pursued activities to stimulate and grow the digital ecosystem, to create a favourable business environment and drive Australia’s social and economic prosperity. AIIA does this by: providing a strong voice on policy priorities and a sense of community through events and education; enabling a dynamic network of collaboration and inspiration; and curating compelling content and relevant information. AIIA’s members range from start-ups and the incubators that house them, to small and mediumsized businesses including many ‘scale-ups’ and large Australian and global organisations. We represent global brands including Apple, Adobe, EMC, Deloitte, Gartner, Google, HP, IBM, Infosys, Intel, Lenovo, Microsoft and Oracle; international companies including Optus and Telstra; national companies including Ajilon, Data#3, SMS Management and Technology and Technology One. While AIIA’s members represent around two-thirds of the technology revenues in Australia, more than 90% of our members are SMEs. Our national board represents the diversity of the digital economy; more detailed information is available on our web site.

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Digital Disruption: What do Governments need to do? The PC white paper discusses important issues for government to consider in order to leverage the benefits of technology. While the paper is a good starting point, it lacks a clear road map on how government might proceed. AIIA highlights what we consider the core findings and puts forward industry’s recommendations on how Government might action these findings. AIIA welcomes close collaboration between Industry and Government, and is happy to work together on next steps in order to achieve the higher order economic outcomes of digital disruption.

Finding 3.3 re STEM graduates, lack of employment outcomes and the need to do more Increasing the share of STEM graduates is unlikely to resolve the low rates of adoption of digital technologies by firms. Given the relatively high underemployment of STEM graduates and apparent underutilisation of STEM skills, the current approaches are not delivering the problem solving skills needed for technology rich work environments. Beyond delivering a high competency in literacy and numeracy at the school level, initiatives could include reviewing teaching methods, increasing flexibility of university degrees and improving information on employment outcomes for students to help inform student choice.

AIIA strongly advocates for the development and maturity of Australia’s digital talent and skills base. While it is true that STEM graduates, particularly those in science, are underemployed this is only part of the picture and takes a short term approach to education policy. The goal should be to address the transition phase towards a new and more innovative economy, rather than focussing on the jobs available now for those graduating now. STEM education is important not as an end in itself, but as a means to develop the foundations to support innovation and jobs of the future: skills that promote inquiry, critical and analytical thinking, enable interpretation of data, learn from hands-on experimentation, identify connections between different disciplines, persist in problem solving (even at the risk of failure), work collaboratively and strengthen research skills. This is important because we know that 45% of the jobs that we know of today will disappear in the next 15 years. 75% of the jobs replacing these will require STEM skills PWC A Smart Move, 2016. We know that all graduates will not be able to obtain employment in their own specific discipline, but rather will be employed across the economy in a range of occupations. This is not unusual or undesirable. For example, only 5.2% of economics bachelors graduates work in ‘economist occupations’. As with STEM graduates, economists work right across the economy. Graduates need to better understand the opportunities for employment, rather than have the false belief that there are enough specific jobs for all of them, regardless of their ability, their academic results, and their skills. Moreover, not all graduates with a particular degree want to work in an industry directly related to their degree. The nature of work is changing. Digital disruption and the casualization of the workforce means the skills Australians need to participate in the workforce have changed. In an ever growing technology based economy, there is a strong need for as many people as possible in the workforce and the community to have STEM skills.

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To action finding 3.3 AIIA recommends: 1. Shifting the focus from ad hoc competition based STEM activities to investment in coordinated initiatives such as STEMNET in the UK which builds STEM capability through:  role models and mentors for students and teachers;  local STEM clubs; and  A STEM advisory network to support the STEM curriculum in schools. 2. Improving ICT university graduate outcomes by:  incentivising better university teaching of industry practices in ICT by raising the recognition of teaching (relative to that of research) through changes to university funding models and publishing employment rates of graduates;  development of best practice guidelines for the effective operation of Industry Advisory Boards in universities; and  establishing a national level Industry Advisory Board to support improved information sharing and bench-marking across individual university advisory boards.

Finding 4.3 re innovation Governments contribute to promoting innovation across the economy by delivering a low cost operating environment for innovative activities. This could include:   

removing disincentives for universities to work collaboratively with business and encouraging the sharing of knowledge ensuring transparent policy objectives and predictability in those areas most affected by developments in technologies improving the functioning of cities to attract and retain highly skilled workers and innovative firms.

While AIIA strongly supports all the above initiatives, the finding misses a critical pillar: accelerating business adoption and integration of digital technology. AIIA considers this foundational to promoting innovation across the economy. Despite bipartisan commitment to innovation Australian businesses continue to lag globally. Going digital provides an opportunity to create new business models, reinvent core processes, improve efficiency, drive productivity and get closer to the customer, but in reality there is wide variation in how aggressive and effective businesses are in pursuing these opportunities. We know this is an issue because:     

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Less than 50% of Australian businesses have a website; 56% place orders online; only 33% receive orders online ABS, Business Use of ICT Australia's ranking in business usage of ICTs is 24th (down from 3rd just over 10 years ago) and dropped from 23rd to 27th place (2013-14 to 2015-16) for capacity to innovate. 2015 World Economic Forum Network Readiness Index Australia is a STALL OUT nation: a nation with high digital evolution but weak momentum. March Harvard Business Review. Business are not leveraging the transformative opportunity of technology . . . they lack awareness of what is available to them, the value of ICT as an area of investment for their business and are relatively immature in their adoption of ICT. AIIA research 94% of digital opinion leaders are concerned that senior managers in Australian businesses lack the understanding of what a great digital experience is. EY Sweeney. Digital Australia: State of the Nation 2015-16

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To action the missing pillar on finding 4.3 re accelerating business adoption and integration of digital technology AIIA recommends: 1. Encouraging SMEs subject to the Government’s recently announced tax cuts to use this opportunity to invest in development of their digital capability. 2. Developing a Digital Maturity Index to enable businesses assess the progress of their digital maturity and identify gaps and opportunities for improvement. 3. Leveraging the ABS’ Business Characteristics Survey to identify the types of businesses and industry sectors lagging in digital capability and using this data to inform policy responses. 4. Requiring Industry Growth Centres to incorporate education and coaching on the digital transformation of business in their sector growth programs. 5. Expanding the Business Management element of the Entrepreneurs Programme to businesses operating outside existing Growth Centre categories.

AIIA strongly supports better university and industry collaboration. Earlier this year, the Office of the Chief Scientist, Australian Information Industry Association, Australian Council of Deans of ICT, and the Australian Council of Deans of Engineering convened a national forum to chart the future for Australian ICT education. More than 90 leaders from business, government and universities came together to discuss the needs of the future economy, and the implications for degree programs today. A post-forum survey was conducted with participants to identify key areas of focus and prioritisation for efforts moving forward. These are outlined in the break out box below.

To action findings 4.3 on university and business collaboration: 1. Develop a reciprocal exchange program between university academics and industry. 2. Embed industry practices in IT and engineering courses wherever possible 3. Raise the profile and recognition of teaching (relative to that of research) through changes to existing university funding models to reward good teaching as much as research, including reward for a focus on graduate employment rates of graduates e.g. through the publication of graduate destination data for each university. 4. University and industry work together to define graduate attributes that are important. 5. Academia and industry work together to implement for credit work integrated learning at the national scale in ICT. This will align with the National Strategy on Work integrated Learning. 6. Examine new education models which deliver the right graduate skills e.g. higher level apprenticeships.

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Finding 4.5 re privacy and security (P&S) Digital technologies allow for more pervasive collection of data on individuals and firms and can be a medium for harassment and security breaches. This may change what is needed in order to:   

protect individuals privacy prevent the unlawful use of information maintain the integrity of digital networks.

The case for government action in these areas relies on ensuring that the likely benefits of any restrictions outweigh the costs of restrictions to the community.

AIIA advocates for robust and resilient privacy and security frameworks that protect individuals, businesses/organisations and governments in a connected digital economy. To ensure Australia’s global competitiveness these frameworks must support innovation and not impose unnecessary or costly burdens on business or individuals. This is a difficult balancing act for Government. We put forward some key policy tenants to help address the tensions. Specially: • •

• •

We support the concept of privacy and security by design and policies and practices that are effective in, and can respond to, rapid technological change and the accompanying adeptness of cyber threats. AIIA recognises that an effective and innovative digital economy depends on the responsible and protected collection, use and storage of data. While supportive of the current privacy principles, we advocate updating and implementing privacy safeguards that both protect individuals and organisations while preserving the robust and free flow use of information. Key to building Australia’s cyber resilience is a mature information-sharing framework to mitigate wider damage of cyber-attacks and contribute to a deeper knowledge base to detect, prevent and minimise the risk of future attacks. AIIA does not support protectionist privacy and security approaches.

To action finding 4.5 AIIA puts forward key policy tenets to balance P&S on the one hand and a connected digital economy on the other:      



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Privacy and security by design is a must Risk management and resilience are the key tenets of security policy and practices Privacy and security safeguards must support the free flow and use of information and opportunities for innovation Burdensome and protectionist privacy and security policies will undermine Australia’s global competitiveness Privacy and security laws, policies and practices need to keep pace with evolving technology, cyber practices and increasingly sophisticated cyber-attacks Effective cyber defence is based on cross-disciplinary collaboration and cannot be limited to silo professions. Rather, cyber defence is a human behaviour and culture issue that needs to be understood by all disciplines – including economists, lawyers, social scientists etc. Citizen’s, organisations and governments must be educated to support behaviours that protect their privacy and security online recognising our shared responsibility for privacy and security and the deep cultural aspects associated with change

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Finding 4.9 re government digitisation Governments (particularly at a subnational level) have already made increasing use of digital technologies in on the ground service delivery. Some adoption of technology in regulatory processes is also evident. There remain, however, issues that governments need to confront before the benefits of digital technologies can be more widely realised. 



 

A risk averse culture in the development of policies that are wide reaching within the relevant jurisdiction could be assuaged by measures such as: greater use of policy trials, relying on precedents from other jurisdictions; and drawing on recommendations and advice of independent agencies. Skill sets within the public service need to evolve in tandem with technological change. The capacity of agencies to recruit staff with relevant skills and shed those with inadequate skills could be enhanced by more flexible performance management and termination conditions in agency enterprise agreements. A sharing of data and cooperation between agencies would improve capacities to solve complex problems that do not fit neatly into the competencies of a single agency. Governments need to find ways to: o exploit, in their program delivery and policy making processes, the increased transparency that comes with digital technologies o avoid locking in details of policy responses at early stages without scope for genuine re evaluation 'en route' to the end objective.

AIIA commends the specific actions outlined in finding 4.9 – particularly dot points 1-3. AIIA also strongly supports the need for increased transparency around program delivery. The problem is that despite bipartisan agreement to transform to ‘digital government’, there is limited investment commitment to achieve this and no sense of urgency. There is no coordinated Government Digital Transformation Strategy or roadmap and no visibility of the Digital Transformation Plans that Agencies were required to develop by September 2015. AIIA considers avoiding reactive policy responses at an early stage is equally important. Trials, time, patience and sometimes failures are needed because digital transformation is not as simple as technology implementation. It requires looking at old problems and processes from a new perspective and engaging with customers fundamentally differently. AIIA recently published a Best Practice Government Procurement Guide developed from an industry perspective, which government might find useful in its considerations. Benefits of digital technologies must be more widely realised because we know: • •



of the estimated 811 million transactions at the federal and state levels of government each year, some 40% are still completed using traditional channels. Deloitte the Journey to Government’s Digital Transformation 2015(15) Reducing transactions . . . by 20% over a 10-year period (only a further one in every five transactions), would realise productivity, efficiency and other benefits to government of around $17.9 billion (in real terms). A further $8.7 billion in savings in time, convenience and out-of-pocket costs to citizens would also be realised, and the cost in new ICT and transitional arrangements would be $6.1 billion. Deloitte the Journey to Government’s Digital Transformation 2015 In 2014-15 the Federal government spent some $5.6 billion on ICT Australian Government ICT Trends Report 2014-15 (16)

To action findings 4.9 on strengthening transparency and avoiding reactive policy AIIA recommends: 1. Publishing a Government Digital Transformation Strategy and Roadmap with clear milestones, deliverables, accountabilities and KPIs, and requiring mandating the same of all government agencies. 2. Implementing, as promised in the 2013 election, an Australian Government ICT Advisory Board chaired by an independent external chairman and with access to senior

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private sector ICT expertise to provide advice to Government on digital transformation. 3. With the support of the above Group require individual agency investment in digital projects to be supported by business cases aligned to the Government’s Digital Transformation Roadmap. 4. Consistent with the National Innovation and Science Agenda goal: Government as an Exemplar, reform existing Government ICT procurement policies, processes and culture to: a. deliver against clear business outcomes (as opposed to existing commodity and input based approaches); b. require agencies to engage more proactively with micro and small businesses; c. support and achieve broader policy objectives and specifically those related to Australia’s national focus on innovation and business growth.

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