Australia is no exception. Subject to the same kind of volatility that has rocked stock markets around the world, the Australian Securities Exchange 200 index has lost 40 per cent of its value since October of last year. Enterprise investment and consumer spending continue to weaken.
No one can predict what impact the current economic situation will have. But no matter what happens during the coming months, I remain optimistic about long-term prospects in Australia and across the globe.
The trends that have made the last decade so dynamic for businesses around the world haven’t changed. Technology is still improving. Productivity continues to rise. The shift to a global knowledge-based economy is still underway. New business opportunities continue to emerge.
And I continue to believe that the key to unlocking these opportunities is investment in innovation. Even in uncertain economic times, investing in new ideas is essential to creating sustainable growth.
But what does it mean to invest in innovation? Fundamentally, innovation is about transforming new ideas into products and services that drive profit. This process is built on the experience and insight of people.
This means the foundation for innovation is investment in people – investment that expands access to the educational opportunities and information technology tools that unlock the power of innovation.
Australia is a great place to see the impact that these investments can have. Australia, which is ranked tenth in the world in maths and science achievement among eighth graders, has produce a generation of young people with the skills and knowledge needed to advance innovation. Meanwhile, the percentage of households with broadband access nearly tripled between 2005 and 2007 and the percentage of homes with computers has climbed past 70 per cent.
Trends like these provide the foundation for an innovation-based economy. According to the Economic Intelligence Unit, Australia ranks fourth in the world in e-readiness, a measure of the nations’ ability to use information technology for economic and social benefit. And while Australia ranks 52 in population, its IT market is the twelfth largest in the world.
This emphasis on innovation and information technology is one of the reasons that entrepreneurship and small businesses – which are the basis for sustainable economic growth and opportunity – are flourishing. Today, there are nearly 2 million small businesses in Australia, a jump of more than 37 per cent in the last five years.
There is a danger, of course, that as the global economy slows, companies will shift their focus to controlling expenses and nations will reduce their spending on education and research.
But I believe that companies and countries that continue to pursue innovation position themselves to better weather difficult economic times. And they create the conditions for more rapid growth when the economic climate improves.
There is another reason why this is a particularly important time to invest in innovation. We’re in the midst of a period when key technology trends – the increasing power and mobility of devices; the emergence of cloud computing; improvements in display technology and interfaces that use touch and gestures – are converging in ways that will revolutionise the role that computing plays in our lives.
Together, these trends will open the door to new experiences that connect us to each other and the things we value at work and home much more easily. Equally important, these trends will help us address global issues such as education, healthcare, and climate change.
Countries and companies that play a role in creating these new experiences and addressing these issues will have an important advantage.
With the right investments, businesses in Australia can play a significant role in developing the next generation of technology innovations. For this to happen, the private and public sectors must continue to work together to invest in education and technology access and infrastructure so that the conditions for innovation are in place.
And, if the current economic problems deepen, the government will also have to show the courage to continue to invest for the long term, even as it takes steps to address short-term uncertainty.
Steve Ballmer CEO of Microsoft