Tim Harcourt | The Airport Economist

When I went to the University of Adelaide, I received a stroke of luck. Under the Colombo plan, which enabled south-east Asian students get scholarships to Australian universities, the grand old man of Singapore,Lee Kuan Yew, sent a number of very bright Singaporean students, who were meant to go to Oxford to study nuclear physics, to Adelaide to do economics with me. As a result, through having very smart classmates, I got good grades in mathematical economics and econometrics, I helped them with their honours essays, and we had noodles every night.

Of course, we know how well students from south-east Asia and the rest of the region do at university and how much life and vitality they have added to our campuses. But we have a new wave of overseas students from a new frontier, South America, with Brazil at the forefront.

This is one reason I was recently recruited to the University of NSW to teach international business strategy in the Australian School of Business. As part of the MBA programs, I will develop an international business strategy course for South America. This follows on from the book on Brazil and Australia I am co-authoring with Mark Thirlwell from the Lowy Institute and a distinguished Brazilian economist and past adviser to the government in Brasilia, Fernando Carvalho, from the Federal University of Rio de Janeiro. The book will focus on Brazilian-Australian economic opportunity and will be published to take advantage of Brazil’s “double header” hosting of the FIFA World Cup and the Olympics in Rio.

So why all the interest in Brazil and South America from Australian universities in general?

Firstly, the numbers are growing. Brazil’s growing middle-class are hungry for education. For Australia, Latin America now makes up just over 5 per cent of total enrolments, with Brazil ahead of the pack with just over 16,000 enrolments (followed by Colombia at 10,000, Peru at 2200, Chile 1700 and Mexico 1500).

Secondly, South America is coming of age economically, and Brazil is leading the pack. In 2002, on my first trip to Brazil, times were tough. Neighbouring Argentina was in the midst of economic crisis, and Brazil was concerned about contagion. It was also facing a presidential election, with the perennial candidate, Lula (Luiz Inacio Lula de Silva) from the Workers’ Party, running for the fourth time.

Lula won in 2002, was re-elected in 2006 and left office at the end of 2010 with a huge 80 per cent-plus approval rating, which is an amazing result for a democratically elected politician at the end of their term anywhere. Even his successor, Dilma Rouseff, has an equally healthy approval rate of 73 per cent.

Education is a key reason for Lula’s success in Brazil. The success of the macroeconomic and fiscal performance of his administration has been accompanied by a commitment to improving social conditions and human capital – mainly through education. According to Carvalho, there has been “a once in a generation increase in education participation – particularly among the lower classes. Around 32 million people have been added to the middle-class, and education is a key reason”.

To be fair, Carvalho adds, these education measures were part of an expansion of social programs, essentially an extension of the comunidade solidaria started by Lula’s predecessor, President Fernando Cardoso. Carvalho says: “Lula extended the program and made it effective. He also bypassed local and state government and made more use of community organisations and churches for delivery. This policy effectively has doubled the income of the very poor and at the same time has expanded the Brazilian middle-class, adding to the power of Brazilian consumers at the same time. As a result, education retention levels are higher, and the overall standard of living of the average Brazilian has increased.”

Thirdly, education is a key foundation for building stronger economic ties between Brazil and Australia. People ties matter as today’s students are tomorrow’s political, business and community leaders and will be important as Australia forges stronger relationships with Brazil and South America. For example, in Singapore, many of my classmates from the University of Adelaide are now cabinet ministers (even the new President of Singapore, Tony Tan, went to Adelaide), and this pattern has been extensive across south-east Asia as trade and investment ties have followed business and political relationships built at university. Hopefully, we will see similar patterns with South America as more Brazilians and their neighbours study in Australia or participate in MBA courses across Asia, Australia and South America. But there’s work to be done at the Australian end. For as Brazil plays a stronger role in the world economy, and the 2014-2016 World Cup-Olympics double approaches, we will have to do more than just woo the girl from Ipanema; we’ll have to woo the hearts and minds of a globally very strong and popular Brazil.

I am sure many Australian students will now get the positive experience of studying with many students from South America, just as I did from south-east Asia. And with all due respect, there is better dancing in Rio than there is in Singapore but I am sure the intellectual and social benefits will be on par.

Tim Harcourt is the JW Nevile in Economics at the Australian School of Business, UNSW and author of The Airport Economist: www.timharcourt.com

This article first appeared in the Australian Financial Review, 16th April 2012.

Professor Chris Styles

If you can’t measure it, you can’t manage it.

Therefore, managers need a formal, cascading set of KPIs (key performance indicators), KPTs (key performance targets), and annual performance reviews to keep staff accountable. It’s hard to argue with that. And with quarterly reporting, the need to meet market expectations, and bonuses up for grabs, it’s no surprise that this is management’s default mode of operation.

But what motivates our top talent? How do we get the most of out of our high performers? What gets them out of bed every day and late to bed every night? Making budget? Meeting KPIs? And do we really want to “manage” them?

I’m not so sure.

Curiosity, experimentation, achieving the unachievable, and pushing boundaries tend to be the things that turn top talent on. Sure, they have to make their numbers: if we don’t have cash flow today, there is no tomorrow. But that’s not what really drives them.

The traditional corporate mindset drives the need to find answers – tackling the known knowns, and solving the known unknowns, to coin a phrase. But the real challenge – and the challenge top performers love – is to go beyond this. What are the interesting and challenging questions? What don’t we know? How do we discover what we don’t know?

Managers have learnt over the past decade that the world is far less linear and predictable than it ever was – if that ever was the case. Perhaps the true skill of the leader is not to know the right answers, but rather to know the right questions to ask, before creating the organisational environment conducive to experimentation and finding pathways through these challenging questions.

This means getting things wrong is OK. Failing often but failing fast is the catch-cry. Knowing what doesn’t work means at least we know something. If we know it before the competition, we have an advantage.

For many organisations, this requires a change in mindset. A tight style of management through KPTs is comforting and probably an element of that is necessary. But perhaps it is not always conducive to real innovation.

One interesting example is what is happening at AMP. Senior management has recognised that there is a significant level of staff passion for making changes at AMP. They have introduced an innovation program, where one component of it is based on the “wisdom of the crowd” – its staff. This means that everybody can post an idea on a platform that is visible and accessible to all employees. Employees who do not have their own idea can collaborate with their colleagues’ ideas and earn points together, which they then redeem for something tangible. AMP acknowledges every idea that is implemented by recording a short video of the idea owner and announcing it through the organisation. They believe that peer recognition is very important for people who dedicate their time to advocating change.

In addition, AMP has recently established an Innovation Board, but in quite an unusual way. Senior leaders have invited all staff to apply for nine seats on the board and have asked them to submit one page or short video to demonstrate how they are going to make difference at AMP. Two key objectives are set for them: a) to shape an innovation program which will help to reinvent AMP and b) embed a creatively restless culture in everyday activities across AMP. After accomplishing a set of agreed activities, the board members will get funding for their personal leadership development with the leading innovation institutions.

By establishing the Innovation Board, AMP has created innovation ambassadors, who have significant influence among their peers and the capacity to stimulate the crowd to collaborate on making changes for AMP. These ambassadors are the key to exploring the unknown.

Letting go, knowing you won’t know, and creating the conditions in which the unknown unknowns can be explored, is perhaps a big part of the answer.

Professor Chris Styles is Deputy Dean and Director Australian Graduate School of Management (AGSM).

Professor Chris Styles

Today is a big day.

Yes, it’s the day that the Allan Border Medal for Australia’s premier cricketer will be awarded. Allan Border, or ‘AB’, is known for a lot of things, including a number of cricketing records.  But perhaps the biggest thing he is known for is being the reluctant captain that took over in a time of crisis in the mid 1980s.

For those of us around at the time, the tearful resignation of the then captain, Kim Hughes, that lead to AB’s appointment, will be remembered as a pivotal point in Australian cricket.  The turnaround that followed took time, but it was pronounced and long lasting.  

Given the captain of the Australian cricket team is supposedly the second most important job in the country, perhaps there are some lessons to be learned by the current Labor Government.

When AB took over as captain Australian cricket was at a low point.   The team had experienced many deep defeats. A rebel tour of South Africa was about to happen and the mighty West Indies had inflicted wounds that were hard to heal.  But over the next decade Australian cricket experienced a turnaround that set it up for a decade of dominance.  AB’s leadership was a critical component.

Irrespective of who wins the Labor party’s challenge today the focus will be on how the floundering organisation – that is not unlike the Australian cricket team of the 1980s – can begin the road to recovery. What lessons can ABs leadership provide them and others in a similar situation?

There are perhaps three key ingredients to what AB achieved. The first was having a clear goal.  It is well known that AB’s obsession was winning the Ashes. Of all cricket’s conquests, this is the one that meant most to him.  Wining the one-day World Cup in 1987 was nice (and unexpected), but it was a step on the way to the prize that really mattered.  Once he won 4-0 in the six test series in 1989, he did not lose a test against England until he retired. For political parties the goals are clear – election victory.

The second key ingredient was focus.  Everyone in the team knew what was required. Everything else was a distraction. Knowing why you are there and what needs to be achieved provides clear direction for decisions. Players were dropped, and plans were hatched. Everyone knew why. For the Governments its about a clear legislative program and societal outcomes. Ministers who perform stay, those who don’t, don’t.

The third ingredient was discipline.  During the 1989 Ashes tour AB gained the title ‘Captain Grumpy’.  He decided that the team had to shun their English opponents and be totally dedicated to their defeat.  He even put his own close relationship with Ian Botham to one side. No idle chatter, no coming together after games with the opposition, and the level of aggression on the field set the standard for the sledging we see today.  Most would agree that the last 12 months has not been the most disciplined performance of the parliamentary Labor party.  John Howard was a  leader that understood discipline and the results followed.

Once the dust settles after Monday’s leadership battle, the focus will need to be on how to dig the Federal Labor party out of its deep hole.  It’s hard to argue that it will be at a low point and will be in need of organisational renewal and turnaround, a situation not unlike that faced by AB.

The big question is how to move forward. Despite both leaders assurances that they’ll encourage the party to unite around the chosen leader, the destructive comments about both leadership contenders over the last week will make it very difficult for whoever wins Monday’s vote to achieve the turnaround that is needed. Like Australian cricket witnessed in the 1980s, perhaps Monday will bring a tearful end to leadership ambitions and then at some stage perhaps a ‘reluctant captain’ will emerge. Although in politics, there are probably few leaders who are truly reluctant.

Chris Styles is the Deputy Dean and Director of the Australian Graduate School of Management.

Tim Harcourt

For The Airport Economist, it’s been a really frenetic few weeks as far as India and Australia are concerned. In November, I was on a Bollywood film set on the Sydney campus of The University of New South Wales (UNSW). In the film to be released next year, “From Sydney with Love” the story is set partly in Sydney and partly in India and comes as a result of the Filmmaker Prateek Chakravorty’s own love affair with Sydney when he was a student. It’s not unusual to film a Bollywood flick in Australia but it is unusual to have part of the storyline set in Australia. The film is strong on Australian references and even the UNSW’s own Vice Chancellor Professor Fred Hilmer has a walk on part in the film.

After Bollywood Sydney style I was off to Bollywood itself as part of the UNSW’s Australian Graduate School of Management (AGSM) MBA study tour to India and China. UNSW has teamed up with the SP Jain Center of Management in Mumbai and can now teach MBAs across Asia and the Middle East with in-depth courses on doing business in the new India. Everything was covered from the Mumbai Commodities Exchange to insights into Indian advertising, marketing and political economy. And of course there was a visit to a Bollywood film set and to the TV set of Indian master chef.

After Mumbai, it’s now back to Australia and to the Sydney Cricket Ground (SCG) as India aims to recover from its shock loss in Melbourne and to see ‘the little master’ Sachin Tendulkar score his 100^th ton either the second innings in the SCG’s hundredth match of test cricket or later in the series. Adelaide Oval would be a fitting place given Sachin’s connections with Bradman.

So why all this interest in India? Is it just to do with the cricket?

Cricket is certainly part of the story with the Indian Premier League (IPL) and the rise of the 2020 game. IPL has been the biggest revolution in the game since Kerry Packer’s World Series Cricket as the centre of gravity of global cricket power has shifted to the subcontinent. Just 25 years ago you couldn’t get Australian cricketers to even tour India (then captain Greg Chappell used to send Kim Hughes in his place to face the music) but now Australian cricketers, past and present, can’t wait to get over there, with Brett Lee singing Hindi songs, Matthew Hayden flogging cook books, Adam Gilchrist promoting Australian education and our GenY cricketers getting paid big bucks in the IPL.

But it’s also to do with economics too. Australian businesses were like our cricketers 25 years ago, when it came to India it was a matter of ‘where the bolly hell are you?’ But India’s economic resurgence has changed the business landscape significantly.

Whilst we’ve seen China grow as an export destination at test match pace, India has moved up our export ranks like an Indian Premier League 20/20 match. Ten years ago, India was not even in our top ten export destinations, now it is in the top 5. In fact, it recently passed the USA, as our 4^th largest export destination, accounting for $18.8 billion or 6.6 per cent of our exports. India now joins China, Japan and Korea as ‘The Big 4’ in Asia who account for just under $140 billion or nearly half of our total exports. There are now over 2,100 Australian businesses exporting goods to India with a rapidly growing services sector to the tune of $4 billion two-way services trade between India and Australia.

Why is it so? It’s partly due to the rapid rise of India’s economy in terms of scale. In fact, according to the Reserve Bank, India’s real GDP has tripled since 1990 (whilst Europe and the USA’s real growth has increased by 50 per cent over that period, and China’s has grown by six times its 1990 level). India’s industrial production has also grown, with Indian car sales, for example, trebling over the past eight years.

But is it all rocks and crops? Certainly coal, gold and other resources have played an important role in India’s rise given the commodity boom over the decade but it’s been happening at the chalk face as well as at the coal face. After some well-publicised attacks in Victoria on Indian students, Australia has diplomatically ramped up its commitment to its education relationship with India. This is not surprising given that India, together with China, accounts for one third of all students in Australia (compared to only 9 per cent a decade ago).  In fact, one reason for the filming of “From Sydney with Love” was Chakravorty’s affection for Australia based on his times here as a student. India’s rising middle class is opening up tourism export opportunities as well.

But India is an investment story as much as a trade story when considering the contribution made Indian investors to Australia’s development. Indian investment in Australia has increased 10 fold over the decade to the tune of over $1 billion, according to KPMG research and has diversified significantly into pharmaceuticals, ICT, healthcare, and consumer good as well as into resources. All the major global Indian brands are in Australia such as TATA Infosys, Wipro and Dr Reddy’s labs along with some major financial institutions such as the State Bank of India, Union Bank and the Punjab National Bank. For their part Australian businesses are also looking more to India as an investment destination. Australia’s corporate presence in India includes many major infrastructure companies such as Linfox, Leightons, Snowy Mountains Engineering Corporation (SMEC) along with household names in Corporate Australia like Macquarie, Woolworths, Qantas and ANZ bank. Also franchisees are finding India to be a lucrative market with Cookie Man, Accor Hospitality and Flight Centre taking advantage of the growth of India’s young consumer orientated middles class.

One reason for Australia’s success in India has been the efforts of Peter Linford, Australia’s dynamic Senior Trade Commissioner in New Delhi. During Linford’s term in New Delhi there has been a ramping up of trade and investment interest between Australia and India with a major expansion of Australian diplomatic and commercial resources under his watch including the expansion of new Austrade offices in Ahmedabad, Chandigarh, Jaipur, Kochi and Pune and offices in Bengaluru, Hyderabad and Kolkata to bring the total number of Australian trade offices in the sub-continent to 11. Linford describes sport particularly cricket “as an important mechanism for developing business interest between Australia and India” and is leading major business efforts at the SCG to introduce senior Indian business representatives to Australia. Linford, who works closely with Steve Waugh and Adam Gilchrist has an excellent track record in turning sporting links into business outcomes and has been described by AFL legend Kevin Sheedy as “the most effective representative of the Australian government he has ever worked with.”

Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business, UNSW and the author of The Airport Economist:  www.timharcourt.com