CONTEXT Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. 1 - Tom Goodwin, SVP Strategy & Innovation, Havas Media For Regional Queensland to grow a vibrant startup ecosystem it is essential to create an environment that is conducive to creating and retaining startups on local soil. Twenty to thirty years ago, almost all tech startups were created in startup ecosystems like Silicon Valley. Today, technology entrepreneurship is a global phenomenon, with startups rapidly emerging all around the world in both major cities and regional centres. 2 The democratisation of entrepreneurship has created plentiful opportunity for any region with the right characteristics to create its own sustainable tech ecosystem. Technology is no longer a vertical industry, as its been understood by everyone for four decades. Technology is now a horizontal, enabling force throughout the whole economy. 3 - John Battelle ECONOMIC GROWTH There is no question that software is eating the world, as Marc Andreessen famously wrote. 4 Software is now core to producing just about every good or service we consume. It’s embedded in almost every commercial process, and it’s shifting the balance of power in a range of industries. Information era businesses have become the dominant source of economic growth, significantly automating or altering much of the industrial and service businesses of the previous economic era. In the USA, three technology companies (Apple, Facebook & Google) contribute $1.3T to GDP – higher than the value of the entire ASX. As the saying goes: “The future is already here, it’s just not evenly distributed.” 5 By providing a baseline of data this report aims to play a role in the creation of more diversified, competitive and healthy regional economic bases that includes technology entrepreneurs. At least in the United States, net job growth comes from startup companies, especially the kind that explode from a few employees to several thousand. In technology, those winners have a way of producing more winners. The process reaches critical mass in the web of intertwined companies, resources, advantages, ideas, talent, opportunity, and serendipity that defines a technology cluster. 6 Antonio Regalado, MIT ECONOMIC IMPACT OF TECH The economic contribution of the internet and digital technologies can be difficult to estimate, particularly given the changes generated by digital disruption within Australian businesses across a variety of industries. In Deloitte’s report The Connected Continent II: How digital technology is transforming the Australian economy (2015), the digital economy in Australia was estimated to have contributed $78.8 billion to GDP in 2013–14, representing 5.1% of total Australian GDP. 7 In our previous report we estimated that the economic impact of digital technology on Queensland’s economy in 2025 would be in the order of $96 billion per annum or roughly 24% of the state’s projected $396 billion economy. According to IBIS World’s white-paper, A Snapshot of Australia’s Digital Future to 2050, 15 different industry sub-sectors face extinction due to factors such as size, international competitiveness, the potential for displacement, and technology. 8 For example, within Australia, Uber has created thousands of low-paying jobs for drivers, whilst capturing 10% of the taxi market. In the USA, Uber has created over 300,000 jobs for drivers, plus thousands more high-value jobs, and a company worth $USD 50 billion which will in time spawn hundreds of new startup founders and investors. Netflix officially launched its Australian service in March 2015, and is seen as the leader in the streaming category, with an estimated 40% market share. Curiously, Netflix is building its presence in Australia with no local employees and is paying no tax. REGIONAL GROWTH Looking back over Regional Queensland’s past, the vast majority of regional growth strategies have focused on attracting established companies looking to expand or open new premises. While it is certainly important for regions to attract established businesses, those deals typically create a small finite number of jobs. What isn’t evident in most regional growth strategies is the organic growth of an entrepreneurial tech cluster. However, sowing the seeds of entrepreneurship can lead to a more rapid and sustainable job growth strategy for the region. For example, in Queensland it is estimated that approximately 88% of the 90,000 jobs in agriculture are regionally based. These jobs and the economic contribution they provide are the backbone of many rural and regional communities in Queensland. One in seven Queenslanders are either partially or entirely supported by the Agriculture sector. AGTECH Globally, agriculture is in the middle of a digital revolution. The benefits of converging the digital and physical worlds are too valuable to ignore for Regional Queensland. Its proximity to the rapidly expanding Asian middle class offers a startling opportunity for the region to develop a local industry around the emerging global AgTech market. CLUSTERS A regional technology cluster represents a geographic concentration of interconnected companies and institutions in a particular field. Vibrant industry clusters and ecosystems are critical for increasing the productivity of companies, driving innovation, stimulating new business creation and breeding scalable highgrowth companies. The factors that contribute to a flourishing technology ecosystem have been well defined by researchers, policy makers and entrepreneurs: An entrepreneurial culture with a large number of active participants; mentoring from experienced entrepreneurs; a supportive regulatory environment; a culture of collaboration and networking; a steady flow of local university talent; visible successes and role models; risk tolerance; easy access to capital; government policy with a long-term focus; and access to good technical skills. 9 Many of these factors are cultural, rather than structural, and in many ways a strong culture comes prior to structural changes (e.g. greater access to capital or supportive regulation). According to PwC’s The Startup Economy: “Culture is the key to accelerating the growth of a tech community. In the 1970s the tech communities of Silicon Valley and the area around MIT... were similar in size. But by the 1990s Silicon Valley was dominant. The accepted explanation for the difference in growth rates is the open and collaborative culture of the Valley. This same culture is what is driving growth in both Boulder Colorado and Israel.” 10 While it hasn’t yet been proven if a thriving ecosystem improves the success rates of each startup individually, it does act as a giant factory, producing large numbers of startups. Produce enough startups and in principle, many of them are likely to be successful. Several of them even wildly successful. 11 Clusters also directly support new business formation. Porter argues that working in a cluster allows individuals to more easily identify gaps in the current market offerings, enables efficient access to talent, institutions, partners, etc., and a home-grown exit market (i.e. established members of the cluster are the likely acquirer). 12 Regional tech clusters can impact the trajectory of growth in the region and: • Slow and even reverse migration of tech talent out of the region/state; • Grow successful local tech companies to become primary job creators; • Recycle the wealth that is created by reinvesting in the region, versus transferring wealth to major cities; and • Help local successful entrepreneurial and technical talent stay local. 8
THIS <strong>REPORT</strong> ESTIMATES THE POTENTIAL ECONOMIC IMPACT OF DISRUPTIVE DIGITAL TECHNOLOGIES ON REGIONAL QUEENSLAND’S ECONOMY IN 2025 COULD BE OVER ~$34 BILLION PER ANNUM, APPROXIMATELY 25% OF GROSS REGIONAL PRODUCT.
Change language