Australian businesses are currently transitioning to and within the Fourth Industrial Revolution (or Industry 4.0). It is fair to say that substantial progress in embracing Industry 4.0 has so far been confined to leading local and multinational firms. These companies are punching above their weight, doing amazing things with new technology and leading the way for others. The gap between these leaders and the majority of businesses is substantial.

This report assesses progress on digitalisation and changes in the underlying technological landscape; highlights case studies from leading innovators; and sets out key policy priorities for work by government and businesses. It draws on Ai Group’s surveys, interviews and wider data.

This report is structured as:

Business strategy and planning (Chapter 2)

A business’s overall strategy and planning can determine the extent of its digital maturity. Top significant constraints for CEOs in 2019 included lack of customer demand, skill shortages, and competition from imports and online sources. Most popular business growth strategies included improving sales of current products and services to customers, new products to the market, downsizing or reducing operational costs, and increasing online presence or capability. The nature of investment is also changing, with a greater focus on IT and a shift towards increased investment in the services industries. These business challenges and opportunities suggest areas where digitalisation can play a useful role.

Business internet uses (Chapter 3)

There is considerable capacity for businesses to increase the proportion of revenue generated online, as well as boost their online presence. ABS data show innovative active businesses generally tend to make more internet use, while smaller businesses often lag in the take up of online technology. While Ai Group data indicate over 60% of businesses are making use of data storage and/or analysis and online applications, ABS data is less optimistic: nearly 60% of businesses do not use paid cloud computing and generally do not use automated links between their systems, and nearly 70% do not see any value in data analytics and intelligent software systems.

Digital infrastructure and IoT (Chapter 3)

A mix of good access to digital and communications infrastructure – including the National Broadband Network (nbn), non-nbn alternatives, 5G mobile networks and a mix of other Internet of Things (IoT) communications networks – is essential to do business in Industry 4.0.

The nbn is now available to more than 10 million homes and businesses, with less than twelve months of the build remaining. While accelerating uptake of service is expected to entail more frequent complaints, nbn-related complaints to the Telecommunications Industry Ombudsman have been falling as the rollout progresses and belies media perceptions of dissatisfaction with the nbn. However, there is much room for improvement in bringing down complaints, completing the rollout of the nbn, bridging the digital divide for underserved regions, lower barriers to global competitiveness, and communicating the real business benefits of the nbn.

The anticipated rollout of the 5G mobile network over the next year is expected to enhance access for advanced industry digital applications through significant higher data limits and faster data speeds compared to 4G.

Despite positive expectations for adoption of IoT through greater cost efficiency, challenges remain for promoting the business value of IoT. According to ABS data, more than 60% of businesses did not see any value in IoT. IoT was more likely to be valued by larger businesses and in industries such as mining, retail trade, transport, postal, warehousing, information media and telecommunications.

Cyber security and data breaches (Chapter 4)

Cyber security threats continue to be a growing and evolving risk management issue for many businesses. Akin to safety, cyber security is an ongoing risk management consideration for any business. 2018 saw the commencement of a range of significant data privacy legislation including the Australian Notifiable Data Breaches (NDB) Scheme and EU General Data Protection Regulation, as well as controversial Anti-Encryption Act Over 30% of businesses surveyed by Ai Group experienced a cyber security incident, with the most common arising from hacking, phishing, and malware. In contrast, ABS data reported less: over 10% of businesses experienced a cyber security incident, while less than 20% did not know.

Ai Group data found nearly 80% of businesses invested in cyber security measures. ABS data was less optimistic: almost half of businesses did not see any value at all.

Since the NDB Scheme commenced, over 1,000 data breaches were reported, almost 60% due to malicious or criminal attacks and over a third by human error. Despite improvements in cyber security investment, causes for these data breaches point to the need for improved cyber security and data management posture within organisations, where government support might assist.

Public policy priorities (Chapter 5)

In 2015, Ai Group set out key priority areas for private and government action to seize the opportunities of a digitally enabled economy. Those priorities remain relevant for Australian businesses in transition to and within the Fourth Industrial Revolution.

Nevertheless, discussions around take up and engagement in digitalisation are maturing as businesses transition to the Fourth Industrial Revolution. There is also an ongoing conversation in public policy about the role of government, regulators and other institutions in response to these changes, as well as the broader community impacts.

In this report, the authors identify nine public policy priorities for businesses in transition – areas that require private and government attention (in alphabetical order):

  1. Cyber secure, resilient and trusted businesses
  2. Business and technology investment
  3. Innovation ecosystem
  4. Legal and regulatory framework
  5. Standards
  6. Sustainability
  7. Trade
  8. Workforce skills
  9. Workplace relations
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