Is this the old niche markets theory? How many niche markets do you suppose there are in the world? If you find one how long before it gets taken over by cheaper manufacturing countries?

"...imports that can be cost effectively produced locally" - you're dreamin'. See my comment below.

Import replacement sounds good, but it is dumb. What you gotta do is make a product or service that someone wants to buy. If you make a product that Australians buy or Australian companies buy, it is a no brainer that your product will sell overseas.

Australian companies don't buy Australian products because they are Australian, they buy them because they are good. Conversely, if the Australian product is junk or overpriced, they won't buy it.

So, it is simple. The moment a major Australian company buys your product, go INSTANTLY to their opposition and sell them the same product. Most likely, they will buy it. Now, once you have sold it to 2 Australian companies, display your products at a targeted tradeshow, preferably in Germany and China.

Australian companies have a very good reputation overseas, BHP, BHP, AMCOR, VISY. Once potential customers know these companies are buying your product, they will buy.

Watch the following traps:

- Don't become obsessed with "International Standards", unless you are in medical equipment. Remember the CE sticker now means China Export more than it's original. Make sure your product has a safety test and a manual, then SHIP IT.

- Don't go to Austrade. They are great once you get going. If you go too early, you get sucked into endless meetings and business plans and waffle. Once you are exporting, go to Austrade to apply for the Export Market Development Grant. It is fantastic.

- Don't listen to anyone who wants to be your agent. Be wary. First sell direct to the customer, they will possibly suggest an agent. We sell most of our industrial products direct worldwide.

- Don't listen to the customer tell you that you need local support. Fudge, squirm, promise, edge, but don't do it immediately. Remember, they will screw you down on price, then expect instant local support. They can't have it unless they are prepared to pay for it. Most of the time, they won't.

- Don't listen to "Professionals" tell you that you need logistics plans, manufacturing plans, quality systems etc. They are all crap. We have never, ever, ever lost an order because we don't have a formal quality system. Sometimes customers ask, we say NO WAY. All we do is have a rock solid performance specification, and we guarantee, in blood, that the system won't be shipped until it meets the agreed specification. Remember the Collins Class submarine. The software quality manual was a foot thick, the software was total garbage.

- Don't let professional engineers tell you that you have to specify 'black boxes' to achieve an 'outcome'. Design your own black boxes. Don't use Billy Gates software, I love the guy, but his software will kill your business. Write your own operating system from scratch. Design your own microprocessor systems from the chip up. Don't listen to nutbags who say you cannot. If they can't, get someone who will.

And stop thinking of Australia. Just think 'World Market" for everything you do.

Thank you

Gerard Dean

I agree with Gary's first two paragraphs, not because of any intrinsic genetic meme but because they have too. A population, hungry for success because they have to, if not, they don't eat. It makes the populous at large "driven". Most of them are at most one generation removed from near absolute poverty, not the relative poverty we have come to use as the definition in the West but genuine poverty. We have mostly lost that memory from our societies.

I don't agree with Gary's last sentence. What sense keeping an inept business that you have to pay a fortune in subsidies to maintain, it will only get worse and they will need more and more help as they become more and more uncompetitive. That aside, central planning incompetence will see it fail long term. You will end up with too many resources drifting in, chasing all the subsidies and other industries suffering because they can't compete, much like the Dutch Disease we suffer now but paid for by other nations. One tiny example, look to Italy, their cheap canned tomatoes make Aussie produces suffer but that sort of nonsense is bankrupting their country, subsidies their taxpayers fund. I also consider myself a citizen of the World so I don't want to see someone else suffer (by punishing their competitive competence) so I can protect the lifestyle of the uncompetitive.

I would prefer to ask why we need to, examine those reasons and make the changes. I would suspect when looked at holistically that most changes needed would be regulatory; in terms of the complete balls up that IR policy has become, the nonsense of our tax system and the absolute nonsense that is our legal system as places to start. Free Trade Agreements are oxymoronic, they are anything but. The ones I have read are nothing but a morass of bureaucracy trying for some sort of nonsense one-up-man ship. I remember reading a quip when the first FTA was being drafted with the USA and a bureaucrat advised if Government was serious about free trade, it would take two people with a pen, a day to cross things out of the current trade agreement.

I think the Western lifestyle model of consumerism and welfare (corporate and personal) is dying, we have been able to exploit our eastern brown brothers (to paraphrase Kipling) and use debt to sustain it for a time but we have lost our way, didn't use that to boost education, productivity, infrastructure and health and technology, we spent so much on recurrent expenditure entitlement has become part of the fabric of society.

I do think we have problems much greater that need addressing though, issues like loss of manufacturing are simply the consequences of how our societies have developed. ie symptoms if you like. Broken democracies, useless justice systems, ridiculous IR systems etc, all of these need to be changed or we will forever be running about putting out the spot fires of incompetence that result as we circle the drain... and make no mistake we are circling: EU, UK and the USA with their monumental Gov't debt and Aus with it's monumental private debt .

As to innovation, innovation comes from small business and entrepreneurship not from big business which for the most part is stifling http://www.bloomberg.com/news/2012-07-11/what-the-u-s-can-learn-from-australia-s-coal-mines.html the "Dangerous Dynamic" section. Our entire IR system is about ensuring we effectively punish small business

In no way do I blame the Politicians, I do blame the Voters.

PS I currently live in Cambodia (a Visa is easy to get), to see first hand how Asia is moving forward, something you can't do from afar or as a tourist.

You are often very wrong Doctor, but, and I say this seriously, not this time.

Manufacturing, innovation, R&D and exporting are very close to my heart. I founded a company 22 years ago that now exports over 90% of production of high technology test systems to major companies in the US, Europe, Asia and the Middle East. We stupidly spend over 20% of turnover on R&D per year (audited by KPMG) which we believe is an Australian record. ( Our accountant spits it every tax return)

I agree with you that the report is a case of deja vu all over again. Having said that, the ideas are valid, it is just that it will be tough in the coming years due to the following reasons.

- The Chinese Manufacturing Tsunami. 3 out of 4 tool making Australian toolmaking companies have disappeared or are on the ropes. Most press tools and injection moulds are now made in China, as well as the output from these tools.

Having said that, we export to China. They are tough customers who want the best price, but they are desperate for 'brand names". Many Chinese manufacturers have been burnt by fellow Chinese companies making knockoffs of western manufacturing machines, including ours. Now they want the product and the support and spare parts and service. To reach the price, we now source 70% of our machined components direct from China.

It is ironic that we use the low cost Chinese components to reduce the sell price of our products to compete in China, including against Chinese companies who sell knockoffs of our products. Our engineers are often in China and they say that wages for technical people and engineers are rising 25% per year. If we can hold for another few years, they will be paid like us and things will settle - maybe.

- Globalisation of ideas. Almost all of the automotive design engineer jobs in Australian car making have moved from designing the Commodore and Falcon to being parts of global design teams. Holden engineers design the majority of General Motors sports cars because they are low volume.

The globalisation of ideas blurrs the concept of "Australian Made" and also the concept of R&D. It has become a very touchy subject with the taxation R&D scheme.

- Picking Winners. Good old Barry Jones once said, and I paraphrase; we picked software development and gene technology as the winners and lo and behold, our biggest high technology export was high speed catamarans made by Incat in Tasmania. We had know idea they were world leaders.

In closing, you suggest that we learn from niche global manufacturers. I guess the main thing other companies can learn from my business is the mission statement pinned to the wall. It says:

TOTAL WAR

Thanks

Gerard Dean

You are also right about John Button

Gerard

Er, ok,, thanks Gerard Dean. I don't think I'm wrong about climate change being a problem either. Although it would be nice if I was - alas the evidence says otherwise along with substantial agreement from the rest of the science community.

Watch this space with respect to this manufacturing report I suppose. In the meantime I wish your company every success.

I worked fpr a while with Invetech which became Vision Systems and we were very much integrated into the world-wide value chain of R&D for medical instrumentation, along with VESDA (smoke detection for high value facilities like data centres and specialised security establishments) which was a world wide market, as well as several other innovations. Owned overseas now alas.

I'm familiar with the Incat story too. Alas these examples, including your own business, get very little air play either in the publics mind or in the minds of the mandarins and policy boffins on this topic (with some notable exceptions) - and would appear to not even able to be comprehended by most pollies (Button the notable exception)

You might enjoy this though

http://www.ted.com/talks/kathryn_schulz_on_being_wrong.html

salutory for all

Mark, if you don't mind first names,

I am sure we will revert to form on posts. Why not slide over to the rubbish written by Freya Mathews about media reporting of the environment. I am in full, obsessive "JetA1 Fuel Mode"

Seriously, Invetech. They were an awesome company, and you are correct, overseas owned now. I don't blame them too much because I have had some very close calls in the 22 years and an overseas buyout was on the cards. The prospective US buyer did due diligence and halved the offer on the table, so we told them to take a walk. After that we got a lot better.

One problem we found was if a company relies on government work for say the Defence Department. A policy change can destroy your business. I hasten to say the government has every right to change policy and spending priorities, it is just dangerous. Hence our obsession with export. We effectively ignore the Australian market.

Now, you mention Invetech. I am wondering if you ever came across Pat Van Donkellaar, who was a fantastic design technician.

Oh, there is another Aussie success story I am talking to, Motec in Melbourne. They make programmable ignition, fuel injection controllers and export over 90% as well. It can be done.

Still, till we cross swords next time.

Gerard Dean

Mark

You did slide on over to Freya Mathews contribution.

Thanks

Gerard Dean