Guest blog by Carmel Quin
Western Australia is a prosperous State in a diverse and wealthy country. Our growth challenge is not one that we experience today – but one that looms large on the horizon.
Much of the State’s wealth comes from the export of non-renewable commodities – natural resources that will not last forever. If we want to maintain our standard of living in the future, it is vital that new drivers of growth are developed.
The question I, and many others, have sought to understand is – what might these new growth opportunities be and how can we best support them? Further, how can we prompt meaningful and sustained action to address a problem before its impacts are felt?
As a participant in the Leading Economic Growth (Online) program I am frequently reminded that, the growth challenge that I have identified in Western Australia is very different to others experienced around the world. Hearing from people that are living through and trying to understand a variety of economic growth challenges, I recognise that skilled, connected and passionate people are fundamental to leading change.
Below I have outlined some of my key learnings from ten weeks focused on the issues of acquiring new know-how, solving complex problems and diagnosing barriers to growth.
- Economic complexity underpins growth: A foundational concept in the course has been that technology in the form of know-how or working knowledge is the strongest determinant of economic growth over the long-term. It is the variety of expertise within a society determines its growth. When different people know how to do different things, these capabilities can be added together to make innovative and increasingly complex products. In comparison to an economy with highly concentrated know-how, say in agriculture or mining, an economy with people and firms that each specialise in a variety of different know-how will be able to work together to produce a much more diverse and complex set of goods and services.
- A new direction needs a compelling problem: Focusing the efforts of stakeholders around an explicit goal (or a series of goals) is critical to making progress towards sustainable economic growth. In order to do this, the way that we communicate the problem must attract attention and mobilise action. Put simply – the problem needs to matter to others – particularly to those that can authorise change. A good problem, supported by evidence, will draw people to it. In an environment with competing issues and limited resources, it is important to understand our problem and not to jump to an expedient ‘solution’.
- Moving from low bandwidth to high bandwidth: The model of a ‘high bandwidth’ organisation describes how we can improve the way we go about seeking, holding and using information. In seeking to identify and address barriers to growth, information, or more accurately, intelligence, is critical. This may be around constraints to innovation, missing public goods or barriers to enhanced productivity. An organisation that undertakes in depth engagement with a variety of local stakeholders before taking action is far more likely to focus on the things that can make a real difference. An organisation that develops a system whereby engagement and learning are continual and groups are empowered to respond to barriers is a powerful tool in enhancing economic growth. This model shows clearly the inherent power in asking questions and taking action.
- We all need to lead: It is natural that leadership should form part of my key learnings from this course (it’s in the title). The aspect that I find myself focused on is – who leads in relation to growth? There can be no single leader for such a broad concept with complex implementation. Who then is responsible for convening and motivating groups to identify new ways of working to address persistent problems or to capitalise on emerging opportunities? Leading Economic Growth puts forward a concept of ‘multi-agent leadership’ – the right people doing the right things at the right time. Within this model of leadership, there are many different types of leaders. One type of leader is one who authorises (a more traditional view of leadership) as well as those who make connections, identify problems, implementers and people who generate ideas. Such a model empowers all of us to take an active role in leading growth.
Further to the learnings above, I have been able to reflect and develop some new insights about my particular growth challenge.
The prospect of seeking to catalyse some new or innovative action around the growth challenge facing WA is somewhat overwhelming. This is due to not only the complex nature of any economic growth issue but also the somewhat delayed nature of the challenge making seeking change more difficult. A strong motivator to act is a desire to contribute to the identification and realisation of new growth opportunities in regional WA.
The need to consider local capabilities (know-how) which varies between different regions and centres means that there can be no ‘one size fits all’ approach to economic diversification in WA. A ‘top-down’ approach with a singular solution – or even a limited number of major initiatives – will not have the necessary regard for local situations and opportunities. A highly targeted approach to growth interventions, while a useful component, may not lead to inclusive growth with far reaching benefits.
It is challenging to see how the current embedded knowledge in the economy can be leveraged (combined and added to) to develop new and tradeable products and services to support future growth. The State’s working knowledge reflects a lack of capabilities in the production of complex goods and services for export. Other knowhow is related to ubiquitous goods and services that serve the State’s population.
This suggests there is a need for the State to take a strategic approach to the identification of sector growth opportunities through ‘Strategic Bets’. This situation requires ‘long jumps’ to be coordinated and planned to allow for capability and industry development in export products that hold strategic merit and feasibility. The approach to economic growth taken in WA will need to be explicit, targeted and active. Growth and diversification opportunities will not come to fruition on their own as based on existing knowhow it is difficult to move in to new products.
Another area on which I have reflected is the potential binding constraints to growth that may be present in the State’s economy. Binding constraints to growth are typically in low supply but high demand and if they could be addressed, they would result in growth. A further consideration is that firms that are less intensive in the constraint are able to thrive, while firms that are intensive in the constraint may be observed trying to overcome it.
A binding constraint in terms of my growth challenge may be the lack of knowhow in complex products and services. I consider that if the State were able to accumulate knowhow in complex products through skilled individuals – those skilled people could drive the production of more complex and higher value goods and services that could contribute to growth.
Data also suggests that Foreign Direct Investment in non-mining sectors is in relatively low supply. Major international investment in Australia in non-mining firms has not made its way into the State in the same way as international mining investment. This suggests that the overall business environment is conducive to diverse international investment but there may be barriers when it comes to establishing in WA.
In terms of how I will use what I have learned in this course, I have developed a deeper understanding of key theories and concepts supported by practical skills and options for preliminary and next steps. The practical Problem Driven Iterative Adaptation toolkit is an action-oriented framework that represents a clear methodology to build our capabilities while seeking to solve complex problems. This approach may lead us towards the innovation ecosystem, infrastructure needs, availability of skilled labour, presence of complex know-how or the mix of foreign direct investment. What will be important is that we are informed by local intelligence on real problems are – instead of being focused on a solution determined in advance. A logical, sequential process that delivers incremental outcomes will help to build support for future action that can contribute to real change. I look forward to being part of it.
This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 65 Participants successfully completed this 10-week online course in May 2021. These are their learning journey stories.