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Newsroom

Glynn Phillips - ADM Congress 2017

Glynn Phillips - Chief Executive
I would like to address this conference’s topic by outlining what I believe needs to happen if Australia’s defence industry is to play the role that it both can, and should, in helping ensure we grow the capability of our Defence Force.
I would firstly like to acknowledge the Australian Defence Magazine, ADM for the work they do in helping create a bridge between Defence and industry. In particular it is worth acknowledging Katherine Ziesing the magazine’s editor and the conference’s chair today, who has for many years tirelessly worked with Australian industry to cover the role we play, our views, and the contribution we make to helping protect the nation.
 
Today’s conference’s theme is “Innovation in one Defence” and while it is sometimes bemoaned that the concept of “innovation” is over-used and at risk of being redundant, it is absolutely critical to maintaining the Australian Defence Force’s capability edge.
 
Today, I would like to address this conference’s topic by outlining what I believe needs to happen if Australia’s defence industry is to play the role that it both can, and should, in helping ensure we grow the capability of our Defence Force.
 
May I say from the outset, that the opportunity for Australian industry to play a leading role is one that can and should be grasped. But this opportunity won’t fall into the laps of either small, medium sized or large defence companies and contractors.
 
It is up to industry to take the lead and do the hard work to ensure that Australia can not only increase its ability to service its own defence needs, but to play a bigger role in servicing the defence needs of other countries.
 
Thankfully, we’re not starting from scratch. Australian industry has been working with our Defence Force for 100 years. We have grown our footprint, we have expanded our contribution to the economy, and we have continued to invest in and grow the skills of this nation’s workforce.
 
So, in addressing this today’s topic of Innovation, I want to talk about 3 things:
 
First, I will talk about disruptive technology, its relevance to innovation and how we can use technology to deliver increased capability for the nation.
 
My second topic, is about sovereign industry capabilities, what they are and how we can create them.
 
And finally, I will discuss the importance of talent and its relationship to our capability agenda.
 
 

Disruptive technology

 
So, let me begin with Disruptive Technology and its relevance to Defence and our economy.
 
Australia as we know is a prosperous nation – now entering its 26th year of uninterrupted growth – set to take the record for the longest period of economic growth of any major advanced economy, with 3 per cent growth forecast for next year.
 
But the challenge of securing sustained growth, greater prosperity and a fairer society has not gone away. In some senses the challenge is harder. As a nation we have already picked the low hanging fruit that delivered the productivity gains of the 80s and 90s.
 
And, while further productivity gains will take more resolve, getting more output from the same or fewer inputs is not always easy.
 
This not about people working harder for longer.
 
This will be about all of us in this room doing things differently.
 
And, it is critical that we do things differently. The status quo is not an option when it comes to defence and security.
 
Australia and the region is today facing greater security complexity and uncertainty than it has for many decades, and the threats facing the nation are constantly and rapidly evolving.
 
In this climate, technology has a clear role to play in creating opportunities for economic growth as well as ensuring that we maintain a capability edge in Defence and Security.
 
The speed of change can sometimes be unsettling and there are understandably public concerns about the impact of new technology as we enter the fourth industrial revolution.
 
We can learn from history here – there has been a pattern of disruption as far back as 250 years. The appearance of railways and modern farming were both important evolutions that changed economies and society. For their time these disruptive technologies were unsettling for society and for individuals. It changed for many how they live and work.
 
Understandably people tend to stick with what they know; embracing disruptive technology can seem like a step to far. In reality, you have to disrupt yourself, because if you don’t, chances are, someone will do it to you. A new market entrant, a cyber-attack, or in the case of defence – a new technology that changes the way wars are fought.
 
Over the past 100 years the Defence industry globally has been characterised by an aggressive pursuit of advanced defence technology. Sometimes we observe incremental innovations, and at others a small edge in performance is all that is required to create a strategic edge for a nation’s defence force.
 
Disruptive technology remains central to the defence industry today. In Australia, in every State and Territory, our scientists and engineers continue to find scientific and technological solutions to help meet Australia’s defence and national security challenges.
 
And there are many examples today that will likely impact all of us in this room and in the years ahead.
 
Artificial intelligence is just one example. Intelligent systems can help our armed forces to do their job more effectively, keep them out of harms way, and enable them to make better decisions, faster. In the future we see unmanned vehicles complementing and supporting rather than replacing manned platforms, the two working together in partnership.
 
Our defence capability edge is based on the nation’s ability to deploy, operate and sustain technologically superior capabilities. Whether it’s a new market entrant or a new threat posed, we in the defence industry are comfortable with the notion of disruptive technology.
 
My view is that technological innovation in Defence should continue to be this country’s priority.
If we don’t prioritise it, Australia risks becoming a nation that is lagging in capability – behind the nations, groups or individuals that pose a security threat.
 
And we will be exposed to higher costs by having to import technology.
 
In fact, if we don’t prioritise technological innovation we lose the opportunity for Australian businesses, and the economy to benefit, and for the nation to transition to one less reliant on the resources industry.
 
This is not just about inventing new technologies, it is also about innovation. It is about doing things better, in how we design, manufacture, support and upgrade assets and services to continuously ensure the ADFs platforms and services are available, reliable and cost-effective.
 
Technologies and innovations such as augmented reality are providing opportunities to revolutionise how we design products, manufacture them and conduct training.
 
At BAE Systems Australia, staying ahead of the curve on new technology is vitally important, and over the past five years we have invested 260 million dollars in Australia on research and development, over four times more per employee than the rest of the Australian economy.
 
 

Sovereign Industrial Capability

 
Of course we are not the only one investing in technology for Defence in Australia. As we all know, the Australian government has committed to spending $195bn on defence over the next 10 years, a significant portion of which will upgrade and advance new technology.
 
As we have heard repeatedly today, the Government has also recognised Industry as a Fundamental Input into Capability. This is a critically important change.
 
It signals that Defence over time will trend towards acquiring capability rather than the supply of material or equipment.
 
In theory this results in a change in the traditional boundary between Defence and Industry as Industry take on more responsibility to deliver capability outcomes.
 
This change can require Industry to take on new scope, manage new risks and bring in new skills to ensure that those capability outcomes are achieved for the end user.
 
This allows me to turn to my second topic today, the one of Sovereign Industrial Capabilities.
 
There are those unique capabilities that are so important to Australian Defence missions that they must be developed or supported by Australian industry because overseas sources do not provide the required security or assurances we as a nation need.
 
It would be easy if we could simply put together a list of technologies and get on with the job. But in reality this is an ever-changing list based on both the evolving needs of Defence, the ability of Australian industry, and in many cases requires some predictive skills to assess what is needed 20 or 30 years ahead – and all in an era of disruptive technology!
 
Making decisions as to what Sovereign Industrial capabilities are, and then determining a pathway for investment is certainly no mean feat, but the rewards for getting it right are beyond measure.
 
With the planned procurements that Australia is today embarking on, now is the time to get this right – and industry must work together with Defence to ensure we do.
 
Now, we know that more money is spent in the sustainment of platforms than in acquisition. And we also know that major platform acquisition periods are measured in years, whereas platform sustainment runs over decades and technological generations.
 
It makes sense then, that in making the decisions around which capabilities we invest in during acquisition, that we also ensure that there is a focus on growing our sovereign sustainment capability. If we don’t and if we are instead singularly focused on acquisition, we will not deliver the desired platform sustainment outcomes the nation needs.
 
Succinctly, growing the capability of an SME within the Sovereign Industries Capability framework must have a focus on the full life-cycle.
 
Given the vast capability requirements that Defence requires, it is clear that no one company can do this alone. Even with help from Defence and Government more broadly, many Australian SME’s are simply not large enough to move up the capability ladder on their own.
 
Many of these SME’s provide niche technologies that give the defence force a capability edge, but to deliver their potential they typically need to be integrated as an element of a larger system.
 
My point is that this nation’s industrial focus must broaden. Together, OEMs and supply chain partners must work together as a collective.
 
A collective that is connected from acquisition through to sustainment, and whose capabilities will require planned, long-term investment. A nimble system that can draw upon both domestic and international expertise to help deliver a stronger Australian capability.
 
This will require commitment from government and industry to strengthen national capabilities and the industrial base, from large companies to smaller ones.
 
It will require a greater focus on increasing exports of Australia's unique capabilities.
 
And it will require continued investment in education and training to develop the next generation of skilled technicians, engineers, scientists and technologists.
 
 

Talent

 
This brings me to my final topic today. Talent.
 
With the pipeline of work ahead of us, it is becoming increasingly obvious that we must continue to invest in the skills and education needed to deliver on the Defence plans in front of us.
 
We potentially need anywhere between four and five thousand employees over the next five years – many of these will be scientists and engineers – those with the dedicated training and experience the industry needs. Many will be blue collar jobs as well – those highly skilled technicians who ultimately make up the bulk of our workforce.
 
To achieve this, I believe there are two key responsibilities that industry must commit to.
 
The first is to ensure our work and collaboration with academia is such that we are able to attract and develop talent into defence careers.
 
Companies like BAE Systems are doing this today. We recently launched our Joint Open Innovation Network, a collaboration with universities where we are aligning talent and research and development to meet Defence’s strategic needs.
 
Bringing industry and academia together to engage on current and future defence challenges and allowing the incubation of new technology innovations and ideas – must be part of the solution.
 
Secondly, the challenge with low-cost manufacturing from foreign producers is shining a limelight on our manufacturing industry. Our success in manufacturing must come from doing things smarter.
 
We must continue to grow our experience and ability to deliver advanced manufacturing.
 
We want Australia to be known as having leading-edge technical knowledge and expertise, and a reputation of creating products, systems, platforms and technologies that deliver economic growth domestically, and careers for our people.
 
For Australia to develop and maintain a technologically advanced and agile defence industry it must be populated by people with advanced education, training and experience. Having the right levels of training and skills in Australia’s defence industry is essential for the efficient delivery and sustainment of increasingly complex defence capability.
 
Defence often has unique requirements and limited demand and this means achieving economies of scale can be difficult. Our market is quite simply, small.
 
Yet, this should not deter us. There is no reason why we can’t deliver on the vision the Minister for Defence Industry outlined last year. There is no reason why we can’t double or triple our defence exports, and in doing so create a larger market for Australian industry, and deliver a more sustainable, more productive industry.
 
Export markets promote innovation, skills, technology development and employment.
 
And they help build our relationship with allies through partner country capability and interoperability. We must seek to seize Australia’s piece of the action.
 
If we do this, it will be a positive story for the Defence Industry. Not one dominated by which State wins which contract.
 
If we do this, it will be a positive story for Australia, where we are supplying a greater proportion of the world’s defence needs.
 
 

Conclusion

 
Finally, I would like to express my strong confidence in Australian industry. Together we have an opportunity to utilise new technology to deliver increased capability, and to do so in a way that benefits the entire nation.
 
The nation will require more from industry if it is to live up to the potential that the Defence White Paper asks of it.
 
It will require growing the capability of Australian industry, from large companies to smaller ones. It will require a refocus on delivering platforms and systems for the export market, not just the local one. And it will require increasing the strength of our academic sector to deliver the innovation our Defence Forces need.
 
Well thought through advances in science and technology are generally a good thing and should be embraced by companies and individuals alike.
 
We, business, have a responsibility to ensure we are educating society on this point. It will be through highly-skilled people, new technologies, virtual engineering models and new manufacturing techniques, that we can transform the defence industry into a leader for Australia.
 
We as industry leaders, need to ensure that the potential for our industry is promoted and heard. And importantly, that we are doing all we can to support society through this transformation.
 
Thank you