Positioning Australia for a new way of working
- December
- 11
12:26 am Live Window
I am here today as the CEO of a large company but I am also here as an Australian and the father of 10-year-old twins. And in the decade since my twins were born, Australia’s workplace has changed dramatically. Back in 1996, work in Australia had much clearer boundaries: there was a time to do it - maybe 9.00 to 5.00, a place to do it - almost always in the office, and a way to do it - typically the way it had always been done. Today, it is very different. Today, our work travels with us. We take it home, it goes with us on the plane, and it can find us on weekends when we’re watching our kids play soccer.
But there are great things about this new, flexible, mobile way of working. We don’t have to go to the office, often we can work hours that suit us. It’s exciting because we can work with people from anywhere in the world - and when we go home the work doesn’t have to stop because our colleagues in London or Delhi can pick it up for us.
And I wonder what will be next for our kids. What will the workforce look like in another 10 years time, when my children join it? Given how fast things are changing, I can’t imagine what work will be like for my kids - how or where they might work - or even what sort of jobs they might do. But I do know some of the forces that will shape their world. Firstly, the Globally Integrated Enterprise; secondly an Open Business Environment and the third the glue that bring it all together - Australian Expertise.
The thoughts I’m going to share with you today are not just mine - but they have real meaning for Australia - they come from an international conversation about innovation that IBM conducts with some of the world’s most interesting thinkers. This innovation outlook goes beyond technology and, importantly, comes from outside IBM. And not just from other large companies, but from the public sector, academia and community groups. These people have very different and wide ranging interests, so the conversation uncovers ideas that transcend business and go beyond borders and cultures.
These ideas have far-reaching implications for governments, for enterprises and for individuals. Today, I want to share with you one of their most provocative ideas. The idea that the 20th Century organisation may literally be history - and I want to look at both the threat and the opportunity that this presents for our Australian economy.
When I joined IBM in 1986, it was the classic 20th century organisation: a multinational. Multi-nationals emerged to gain access to local markets and resources, setting up “mini” versions of themselves in literally hundreds of countries, and for decades it was a very successful model. But, in the years after I joined IBM, what once looked like efficiency was starting to look redundant. Why? Because multinationals simply replicated - they duplicated their business in every country - so, for example, in time there were over 150 mini-IBMs around the world.
Every country operation not only had its own sales force, but its own, often different, supply chain and procurement, finance and Human Resources. Everywhere I worked, in Japan, in the UK and of course in Australia, each country organisation built its own processes with often unique manufacturing, development and research capabilities.
Now, it didn’t take a rocket scientist to figure out all that duplication was inefficient. We were getting the message loud and clear that we were on the wrong path. And so many companies, including IBM, started to do things differently. If functions didn’t have to be duplicated - we started grouping them together … If there was something we weren’t particularly good at, we partnered with another company that was good at it. And so we created new models for our organisations - models that didn’t cost as much to run and allowed us to focus on the things we were good at: our core competencies.
And these models worked: at IBM replacing multiple supply chains with just one saves us an extraordinary $7.5 billion a year. And for a while we thought this was the end game: a streamlined organisation that focused on its strengths and outsourced the rest to other people. But the startling insight from our innovation discussion is that this isn’t the end game - it’s simply the end of trying to duplicate ‘new’ versions of the same institution.
In fact, our innovation dialogue suggests what we’re seeing is just the beginning - the beginning of a new type of organisation - a highly responsive, globally resourced enterprise. But an enterprise that doesn’t even think of itself as an organisation - instead as a network. A network not of technology - a network of people.
Of course, people are connected by technology - but that’s not the point. The point is a community of people can now work together in a very powerful way without the command and control organisation of a traditional enterprise.
What am I talking about? I’m talking about eBay - millions of people, who are not eBay employees, coming together and working together to provide an extremely successful service. Last year, eBay was the primary sales channel for over 17,000 Australian businesses and a source of income for over 50,000 Australians.
Another example of this new type of collaboration is the open source community that came together to develop Linux. Linux was developed by a global community, a community of companies and individuals. There was a time when IBM would never have collaborated externally on software development like this. With us contributing only a fraction of its full cost, global collaboration has given us an extraordinary product. To be frank about this, the network came up with innovations IBM alone wouldn’t have considered.
These are just two examples of the way networks are rewriting how business happens - how people make a living - how industries and economies are changing. And this brings us back to our kids because it is being accelerated by generational change.
I don’t know if you’ve tried to hire or work with Generation Y, but they see things differently to our generation. This new generation of workers: technically-enabled, mobile, flexible no longer identify with their employer in traditional ways. For many of these people, their primary identification is with their network of peers. They are engineers, or scientists or journalists first, and employees second.
Many of them are beginning to figure out - that like the open source community - they might not need to be part of a traditional company to be successful. Of course, this is the way our journalist friends have been operating for years. You’re often mobile, able to work from anywhere. Your value is derived from a network - a network of sources and contacts. And, having a close friend as a journalist, I know he never let respect for authority get in the way of a good story.
Now with blogs, anyone can try to be a journalist - some with more success than others. When bloggers get together you get new communities like MySpace and You Tube - networks of individuals creating extraordinary value.
So, the barriers to individuals working together are really starting to come down. And I believe this will lead to massive changes in both business and society. Because this isn’t just about the internet knocking down geographic barriers - that’s old news. This is about the next generation of technology that works with the internet. Technology like real-time translation.
Already, translation software is allowing, for example, emergency doctors to talk to patients in their own language. You talk, and your conversation is instantly translated. It is saving lives, you can imagine how useful that is in a disaster situation or in an intensive care ward.
And you can build a translation service into any device - which has some cool applications - for example, in Japan, you can use your PDA to translate a menu into English. These real-time translation technologies will soon be embedded into your mobile phone, your laptop and your car. They will be in every part of business and society, truly removing language barriers in the global economy.
Now, as a business leader, I find the implications of that astounding. Because while we talk about the world being flat, the reality is that language and cultural differences have kept some unnecessary boundaries alive. Technologies like this, which lower the barriers to communication, will further the rise of collaborative communities - where the creative energy of thousands, even millions of people is coordinated by a network - not by a single organisation.
You can see this sort of power at work on IBM’s global grid, which allows people to donate their idle personal computer time for scientific research. If you join the grid, your PC becomes part of a global supercomputer - a computer that is currently working on finding cures for AIDS and cancer.
Notice how, in these collaborative networks, the motivating force doesn’t have to be money. People participate for many reasons - some very worthy - like finding a cure for cancer - some simply for fun - like MySpace. Notice also, that unlike a traditional corporate hierarchy, where central management decides what to do - there is instead a distributed intelligence. In fact in a network, leadership is derived from a common, unifying set of ideas or rules.
Sometimes those rules are the rules of an online game. Last year 100,000 people in China earned their living playing online games and then selling their characters for hundreds of dollars. In an online game, tens of thousands of people - who have no previous relationship - come together for a common purpose, play by the same rules - and then disband.
And that’s exactly what happens when a globally integrated company pulls together a project team - people from all over the world come and work together very effectively to achieve a business goal - and when the project is over they disband and form different teams.
The very nature of work is changing.
Talented people can work on global projects from anywhere - and are therefore becoming less dependent on the bricks and mortar of an organisation. In the future, they will work from home or drop into a local ‘hotdesked’ office and, as a result, traditional organisations will become more and more virtual.
It’s already happening. At IBM in Australia, we have over 10,000 employees and almost all of them - including me - work from home at least one day a week. So, individuals will have more flexibility over how and where they work.
But what will this mean for business? What happens when a business turns into a network? When it doesn’t matter where work gets done or who carries it out? What happens is a company like Bharti Airtel - an Indian telco that actually doesn’t own any of its infrastructure - giving it extraordinary flexibility and cost advantage. This type of opportunity and pressure will force companies to focus on the ways they can be truly different.
We’ve already seen that our local industries will not win by depending on low labour costs. Instead, they will win by clearly understanding how they add customer value, how they assemble a network of suppliers from around the world to help them deliver that value. Sometimes this will be about lowering cost, but Australia’s opportunity is about value underpinned by innovation, creativity, thought leadership and integrity.
Now, I mention integrity because, in an open global economy, trust is incredibly important. The global economy won’t work without the knowledge that partners and suppliers will deliver on their promises. I also believe global integration will not just make the world flatter and smaller - importantly, it will make it more equal. Because although large global companies like IBM are benefiting - we’re also witnessing the rise of a new breed of small, dynamic and highly specialised businesses that are using global integration to compete against corporate giants.
Already there are firms with just a few dozen employees doing hundreds of millions of dollars in business. There’s a consumer electronics company in California - Apex Digital - that generates more than $1 billion in revenue with less than 100 employees. In fact, the innovation discussions actually suggested that, in addition to companies like IBM, the future might consist of a billion one-person enterprises operating globally.
Now you can see this shift as a threat - which it absolutely is to a traditional, inflexible organisation - or you can see it as an opportunity. Because you don’t have to be based in California to be globally integrated - you can be based in Canberra, Kalgoorlie, or Coolangatta.
There’s nothing to stop Australian companies resourcing their operations from anywhere in the world and adopting more flexible business models. But, to do that, they need to do more than outsource. Outsourcing is about costs. Global integration is about creating greater value.
So this goes beyond core and non-core functions - and it requires a completely different approach to management. Because all of a sudden you’re trying to manage a complex and ever changing network of individuals - many of them not your direct reports or even employees of your company. In that situation, command and control doesn’t work. You need individuals to self-regulate - to be responsive and efficient.
How do you get a network of individuals to act together, as one? Just like a collaborative community: you give them a common purpose. This was another insight from our innovation discussion - the idea that if an organisation has to flex with a global market, the only things that will remain constant are a vision and a common set of values. This vision is what we believe will provide the necessary glue between individuals and organisations. These values will regulate their actions.
How do you find that vision and those values? You ask the network. At IBM in 2003, over 300,000 of my colleagues participated in a 72 hour ‘ValuesJam’ to establish what we stood for. Values not invented in the boardroom or by consultants, but by the whole network of employees.
We use the three values that came out of this process to do what we call ‘lowering the centre of gravity’ - pushing decision-making out to the edges of the company - relying on our people to make the right decision for the organisation.
All of what I’ve outlined today represents huge change. But it has substantial advantages: becoming globally integrated makes companies more competitive by giving them access to skills, knowledge, insight and innovation from around the world. And of course, when companies benefit - so do economies.
Because these companies will have the flexibility and responsiveness to capture value within the globally integrated economy - not just their local market.
Today, for the first time in human history, everything is connected. There are over a trillion devices connected to the Web, hundreds of millions of businesses and a billion people. But we are just beginning. Imagine the impact and potential when the next five billion people also connect. Because when everything is connected, work moves - it flows to the places where it will be best done - that is, most efficiently and with the highest quality - like water naturally finding its own level. And our challenge is: how are we going to respond?
The question business and government must consider is: How do we get work to flow to Australia?
Australia has already made great strides in opening up its economy. But we have to do more. We also need to invest in infrastructure that enables a fluid and mobile workforce. Understandably, water and transport continue to dominating our infrastructure debate. But Information and Communications Technology is vital infrastructure too - it’s our knowledge infrastructure - and the trouble is, it’s very hard to see when it’s not there.
You know there’s a water shortage when restrictions mean you can’t water your garden. You know there’s a problem with transport, when you sit in traffic jams. But the fact that Australia’s ICT infrastructure isn’t as competitive as we need it to be - doesn’t exactly hit you in the face.
So we haven’t had that same sense of urgency. But we should - because ICT infrastructure allows global work to flow to people in our cities and into regional and rural Australia.
For example, it allows the 600 people employed by IBM’s Software Centre in Ballarat to be part of our global delivery network. And this isn’t just about allowing rural Australia to participate in the globally economy. If an increasingly mobile workforce doesn’t have to commute - if they can work from home or from a local office - imagine the cut to our fuel emissions, how it might improve our local communities, and the impact it could have on families.
Of course, Australia wants to attract the work everyone else wants - we want to move further up, not down, the value chain. So that leaves us with two areas to compete: an open business environment and Australian expertise. We already have an open and transparent business environment and a strong rule of law - but we’re not the only country with those advantages.
Which leaves us with Australian expertise - and perhaps my most important point, which is this: The country that produces the best equipped talent pool to work in the global economy will receive the cream of the world’s work. Australia is not there yet - but we shouldn’t be overly critical of ourselves, because no one else is either. However, the window of opportunity to be that country is closing fast.
Flexible organisations will require flexible people. People who don’t just have technical skills, but also have business understanding and the ability to adapt and operate in different cultures. And, although our education system has historically served Australia very well, I’m deeply concerned that it’s not going to meet the rapidly changing needs of our future.
Because Australia’s education system doesn’t always support that fusion of skills. Our education disciplines - while very high quality - still too often exist in silos - so we produce terrific engineers - but we don’t produce engineers who understand how to manage projects in India.
And that’s what I don’t understand - because Australians should have the edge in this. Australians are a global people - there are more nationalities in Australia than in the US - we are a migrant nation with open, flexible, questioning, creative and highly mobile people.
We already have a first hand knowledge of other cultures and other languages - and yet I fear our education system isn’t designed to leverage that. Why don’t more schools have Mandarin or Hindi on their curriculum? My son is learning German in Year 5! Which is fine, but shouldn’t he also be learning a language relevant to the region in which we live?
And that’s just the tip of the iceberg. If we’re still favouring European languages, we’re a long way away from teaching the modern skills Australians are going to need in a globally integrated economy. We need our entire education system - from kindergarten through to post-graduate - to prepare our workforce with qualifications that fuse technical skills with industry knowledge and cultural awareness. And that means transforming how we build our pipeline of future talent. It means having more universities working with thought leaders in the business world.
For example, IBM has an undergraduate program with the University of Ballarat, where students work at IBM and IBM experts teach at the university. Now, you can look at that and say: “yes, but what difference does it make?” The difference it makes is that Centre in Ballarat employs over 600 people in regional Australia and it could have been located anywhere in Asia Pacific. It was located in Ballarat because we had a partnership with the university that ensured a pipeline of talent to staff that centre.
Over the last few years, skills and university partnerships have been major factors in all the global centres that IBM has chosen to locate in Australia. For example, Queensland was chosen as the best location for our Business Transformation Outsourcing Centre because of its unique blend of Asian language and technical skills. That Centre is creating 1,000 new jobs. And these are high value, high paying jobs. There’s nothing we can do to stop low value work moving out of Australia. However, it is our job - in business and in government - to make sure high value work flows in to replace it.
It is my opinion that Australia is in a terrific position to do this, however we have a responsibility to seize the opportunity. Because in our life time, economic power and prosperity in the world is moving south - towards us into the Asia Pacific region. And also because we have an amazing, high quality workforce.
We excel at problem solving, working cross culturally and creatively. In every corner of the world there are Australians using these skills in very senior positions - as a nation we punch above our weight. We need to leverage this sort of talent. We need to give our workforce the skills of the future. We need to create companies for them to work in - globally integrated businesses that can compete on the world stage.
-Glen Boreham is CEO and managing director of IBM Australia and New Zealand. This is an extract from his speech to the National Press Club on March 7.
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