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Shooting for the sky: R&D paying off for Australian manufacturers

Andrew Stevens is a former Managing Director of IBM Australia and New Zealand. Last week he was interviewed on the occasion of his appointment to Chair of Innovation and Science Australia by Fran Kelly on ABC Radio National’s Breakfast program – and Sutton Tools got a mention…

The conversation hinged on the concern that Australia is falling behind on research and innovation. With a federal election looming, much of the political debate so far has been over bread and butter issues — wages, the cost of electricity and unclogging our growing cities. That’s in stark contrast to the focus of former Prime Minister Malcolm Turnbull in the lead-up to the 2016 poll, a campaign promising an ‘ideas boom’ fuelled by innovation and technological disruption.

Fran asked Andrew whether he believed that Australian businesses are aiming for the sky. “Are we aiming to be developing new inventions, new breakthrough research or are we just aiming to increase profits?”

He thinks it quite mixed. “I spent five years as Chair of the Advanced Manufacturing Growth Centre and our mission was the competitiveness of the manufacturing sector… There are two very distinct camps in that group and I think it applies across the whole economy.”

“There’s a group of businesses that are succeeding – about three to four thousand – of them and they are all … shooting for the sky and their whole way of competing is about differentiation based on the value delivered by their product. When we spoke to their overseas buyers in their procurement departments, who they sell their products to, they all said one thing. ‘We buy from this company because it is the best in the world; their products are the best in the world.’”

Andrew said he loves quoting Sutton Tools. “Sutton Tools is a great example. Their drill bits stay in specification longer than anyone else’s in the world, so they have a much lower tooling cost. It’s about precision and they understand it. It’s a family owned business … very very successful in its class and a substantial of the world-wide market share. That is a model in manufacturing.”

Andrew went on, “At the other end, [talking mindset] we have a lot of companies still playing the game that worked in the 1970s which is trying to lead on cost. If you are trying to compete on a cost leadership strategy, then your innovation heads you towards a cost reduction orientation rather than product development and shooting for the sky.”

“So cost reduction rather than excellence?” Fran asked. “Yes, exactly.”

To hear the full interview with Andrew Stevens, visit the ABC Radio National website. For more about Sutton Tools’ drive into international markets, read a speech delivered at the Victorian Manufacturing Showcase during our centenary year or a 2018.