SMEs can be significant players in the fourth industrial revolution — but we need to fix our education system first

There is a growing awareness of the need for economic change in Australia. It was happening before COVID-19, but this tragic global pandemic has thrown it into stark relief.

It’s an awareness not restricted to business and political elites. Quite the contrary, with surveys showing it’s the ‘average Australian’ heading the charge. 

This thirst for change is divorced from the traditional economic reform issues around industrial relations and tax. Instead, its focus is on Australia’s significant overseas supply chain risk, especially an overdependency on China, the critical need to develop sovereign capabilities in certain industries, and ensuring we extract more value from our natural resources.

Integral to all these issues is a realisation that Australian manufacturing needs revitalising. Urgently.

Not the old manufacturing sector, hamstrung by uncompetitive wages, low productivity, poor industrial relations, small domestic market, and lack of capital and innovation, but the emerging fourth industrial revolution (Industry 4.0) embracing the new digital, biological, and physical technologies.

Industry 4.0 differs from its predecessors, demanding well-educated, skilled, and cooperative workforces; a sharp focus on research and new technologies; and government, business, and academia collaborating. It also encompasses green, advanced technologies where Australia has competitive advantages.

Potentially, all these factors are well within Australia’s ambit.

It’s also an enormous window of opportunity for the SME sector, with commercial viability not requiring deep pockets of capital. Being nimble, innovative, cooperative, all underpinned by a ‘good idea’, can lay the foundations for SME success in Industry 4.0.

But the opportunity to reinvigorate manufacturing will come to naught if we don’t get the fundamentals right, of which having a well-educated workforce must be a priority.

It means tertiary education must be re-engineered. The consequence of having international students as our universities’ lifeblood has fostered a culture of profit over education, reflected in the lack of insight about how to nurture the next generation of Australians able to meet our future workforce needs. 

It’s accepted wisdom in manufacturing that graduates enter the workforce lacking practical skills. Tragically, there is a disconnect between industry requirements and what universities teach, with companies often left with the responsibility of training these graduates to a level of competence needed to perform their roles. 

What’s urgently needed is a thorough review of the future skill requirements for industry that’s not just another university marketing exercise for STEM (science, technology, engineering, and mathematics).

In having this review it’s critical that SMEs have a strong voice at the table. Many of them will employ these graduates, and they know, better than anyone, what skill sets they require.

Anyone who has been involved with universities at a commercial level will know just how divorced they are from business realities.

The neglected TAFE system must be integral to any review, with its traditional focus on a more practical education system critical to providing the trained workforce that manufacturing and technology so desperately need.

Our mining industry has largely achieved the right balance between tertiary and vocational education to deliver a globally competitive industry. But most other sectors of the economy, including manufacturing, have failed to do so.

What must be avoided, at all costs, is allowing vocational education to come under the wing of the universities. The Dawkins ‘educational revolution’ (John Dawkins was education minister in the Hawke Labor government) of the late-1980s, which amalgamated universities and colleges of advanced education, failed to bring the educational diversity its author desired, a point he has publicly conceded.

To my mind, it caused the serious downplaying of practical technical education, so allowing universities to take over the TAFE system would simply magnify the error. Instead, vocational education must be in the hand of skilled tradespeople attuned to the needs of SMEs.  

There is another factor at play.

Typically, quality graduates (especially in STEM) gravitate towards the multinationals where salaries and career opportunities seem more attractive. The result is to limit the talent pool for SMEs, despite the fact they comprise 98.5% of Australian businesses. This is a trend that must be reversed, and must be part of any review.

If Australia can get its educational system better attuned to the needs of industry, then we can diversify our economy away from our current reliance on commodity exports and service industries.

By doing so we will create sustainable resource value chains for future generations that will go hand-in-glove with highly-skilled, well-paid jobs, and enhanced economic security.

Australians intuitively understand this. It’s time government, business and academia did too.

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