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Ric Sinclair, Forest & Wood Products Australia
I chose this topic because often, people in the farm and agricultural sector, their only exposure to
forest and wood products is actually in the agricultural shows. We have this wonderful international
support. Wood chopping is often profiled. And we've actually had some true international leaders in
this sport, like the Foster family out of Tasmania. But I'd like to show you a little video to show you
one part of the modern forest sector.
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So that's one part of the forest and wood products sector, which is the construction sector. If you
went to the pulp and paper sectors, to some of the other wood panels, you'd see the same level of
technology that's occurring. The Australian wood products and forest sector is around $24 billion in
turnover, and employs directly about 70,000 people. That's not excluding the people in the
downstream processing, such as in the fabrication area.
And it's a sector that has actually gone through significant change over the last 10 years. We're
talking about innovation. We're talking about a range of decision making. And we often want to
jump to innovation as being disruption. The reality is that if you actually look at that, continuous
improvement is part of innovation. And it's probably where much of the innovation actually occurs.
I also would like to point out the one area in the middle, which we often don't think about
innovation, which is fashion. Fashion is hugely-- obviously, the woollen and cotton industry are
highly exposed to this, but so is the forest and wood product sector. And one of the key things that I
always, when I think about innovation, is that innovation is being driven by being unhappy with the
current situation. If you're happy which where you are, then you ain't going to innovate.
And this is from the gardener-hype cycle. And it's one of my personal expressions is about where
expectation can lead to disappointment. So every year, the gardener maps onto this curve.
And this is the wonderful area here called "trough of disillusionment." So every of these
technologies get hyped right up, then collect back down. And after time, they will go through the
slope of enlightenment into the plateau of productivity.
So for anyone we're in the big, dire decision before. I'm not sure where they put that on the curve,
but it goes through all the time.
So we'll often keep saying that companies have to invest and invest in innovation. Well, they don't
have to. They can go bankrupt. They don't actually have to change their ways. If they're happy
where they are, they're happy with declining profitability, then that's fine.
But investing in innovation is about creating opportunities, whether that's about revenue or whether
that's about reducing costs. And it's also about reducing risks-- risks in market, risks in biophysical,
social, and political. But I also take the other point that government should invest in innovation,
because they're actually creating things around economic growth, social well-being, changes in
society, biophysical again, market failure and regulatory failure. And it's important that, as we're
going through our whole discussion about the innovation system, that we realise that governments
have a key role to play here in providing this framework type of innovation.
Now, I play to the buyer here. This is one of the things that's great. Research is turning money into
knowledge. Innovation is turning knowledge into money.
And we often forget-- we often want to talk about research-- when actually, innovation can come
from many places. Innovation can come from the person sitting on the tractor, from sitting in the
office, or operating in the sawmill. And it's about capturing all those sources of ideas, putting them
into knowledge, and creating innovation out of that.
You're all probably aware of the Horizon one, two, and three. And this is a simple model, which is
based on products. And just if you want to think about it, products can be services in this instance.
But it's about the knowledge of your market. Is it an existing market you know? Is it an existing
market we do not serve? Is a new market versus knowledge and technology?
And the continuous improvement area-- most people in [INAUDIBLE] is investing around 70% to
80% of activity in this area. In this new generation products or adjacent growth, it's only 10% to
20%. In those areas of disruption, the one's that are really exciting that we want to talk about, that's
not a big area for us. And it's well less than 5%, probably 1% to 2%.
There was some discussion about the Rumsfeld business this morning. And it's always important
when we're trying to understand how to make decisions in innovation in relation to future, we've got
to realise there's a whole science or approach around scenario planning. And thus, by understanding
the things that we do know, these are the trends.
Then there's the impact of foreseeable disruptions. These are the things that we know we don't
know. And then this is the thing that Donald Rumsfeld got caned for, but it's actually quite correct-there is the thing about surprises, disruptions-- the things we don't know we don't know.
In the forest and wood product sector, there's a number of known trends. And we don't know exactly
when they'll arrive, but we know that they're real and they [INAUDIBLE]. Australian's housing
stock continues to grow. There's growth in multi-residential construction. This focus on building
systems and pre-fabrication rather than on site, increased use of engineered products-- these are hard
and fast and there is no doubt that's going to occur.
Unforeseeable disruptions-- this probably exists across every sector of the economy. I think you
could probably create your own list, but things that are specific for the forest and wood product
sector-- restrictions on foreign ownership is a possibility. Green support for the wood products
industry-- this would have been a totally ridiculous idea 10, 15 years ago. FWPA-- we have a
partnership with Planet Arc. And it's actually showing that sustainable and focused environmental
groups see wood products as part of the solution and not the problem.
But the critical thing about research is, how do we actually know the things we don't know? How do
we get-- and this is that little cartoon-- we just get all the information we can, and we'll work out
what we'll do with it later. And that's a little bit what Big Dad is trying to do at the moment. It's
about trying to get the decisions out of there.
For those-- and most of you are unfamiliar with the forest and wood products sector-- this is a little
schematic to try to understand the change that we've gone through over the last 20 years. So if you
take the situation-- and this is occurs everywhere in the world-- there would not be a forest sector
anywhere in the world if it wasn't for government intervention. In most cases, all the forests would
have been cleared for agriculture and grazing, and we wouldn't have a forest sector.
So Australia is exactly that same situation. Back in the pre-1990 times, there was a lot of
organisations-- very large organisations in the sector-- that had a very strong focus on producing
public goods. They were universities. They were state agencies. They were government
commonwealth agencies.
And there was a much more fragmented private sector-- often, small regional companies, a very few
national-size companies. And I've highlighted in orange there a schematic. Don't take this to the
bank, but the type of companies that were foreignly owned. So it was very much an Australian
organisation.
If you look at the sector now, we are largely dominated by international large companies, with very
few public good organisations left. Now, that plays a very key role in innovation and research into
the sector. Where a lot of the research for the sector was actually provided by government agencies.
In the glory days pre '90s, the sector actually had the luxury of having two divisions of CSRO
focused on it. Now, we have less than 30 scientists. So there's been a significant, dramatic change in
the sector.
But just in terms of where the sector ranks its own priorities, this is based on an industry outlook
survey we did in 2014. Innovation, new investment and productivity where the three top issues that
were identified. So if you put that in context of those private international organisations,
collaboration is actually quite a challenge. If you don't have the glue of publicly focused
organisation, public good focused organisations, trying to hold that together, that makes it a lot
challenge.
But collaboration is not always the solution. Collaboration is a tool. It's not a goal in itself.
And collaboration, to be successful, requires you to give up something. You have to give up time,
you have to give up money, or you have to give up power. And Richard pointed out that where we
sit on the innovation collaboration scale, and often Australians are not very good at giving up these
things.
We actually like to compete, because competition is actually easier, and it's more fun. And this is
one the roles of FWPA and for all the RDCs, is that we're actually hardwired for collaboration. Our
whole focus is around collaboration.
Like all the RDCs, we try to measure our impact. And we do that through benefit-cost analyses.
Benefit-cost analyses-- it's not a hard science. It's about trying to understand what would've
happened if you hadn't done it-- the counterfactual. And that's actually trying to imagine a future
that never actually occurred.
So when you try to do a benefit-cost analysis, it is really just a true economist trying to imagine,
trying to create. It's about trying to create a language or persuasion tool. People in the space know
that we're doing good things, but people in the central agencies-- if any are here-- want, actually,
hard numbers. So we go through this exercise of creating benefit-cost analyses.
And every year, we do a random survey of our portfolio of research or activities. And we do that
measurement. Last year, we actually did a measurement on our generic marketing activity, which
actually demonstrated a return of seven to one, which we thought was pretty good.
So our focus is very much around new markets and new technologies, and trying to make forest and
wood products the preferred product in the Australian market. What we have done, and was actually
announced two or three weeks ago, is we've secured a major change in the building code. It's
actually the biggest change or market opportunity in the forest and wood products sector for about
30 or 40 years, which is to allow for timber buildings to go up to eight stories as a [INAUDIBLE]
satisfy solution. Currently, this is a market that we haven't been able to access because of the cost of
doing the fire engineering.
So we've worked with a range of professional groups-- Australian Institute of Architects, Engineers
Australia, quantity surveyors and fire engineers to develop the tools or rules or specifications that
allow timber to go up this high. This actually brings us in line with North America and Europe. And
this will actually take effect on the 1st of May of this year. So we're hopeful if you're living in the
middle suburbs or the major capital cities that you're going to start to see a lot more timber-based
buildings.
So in terms of our activities going back to the Horizon one, two, and three type area, the area in the
blue-- we do lots of boring stuff. But it's really important. It's all about continuous improvement. It's
stuff that's in the mills, in the forest growers, giving them tools to actually improve.
In the area of the Horizon Two, the eight-story timber building is certainly one that's based heavily
on our research activities. Genetic modification-- that's gone, obviously, quite successfully in the
cotton industry and a range of other agricultural sectors. There's very little activity internationally in
the forest sector around genetic modification. And I think that's going to be one of the next areas of
activity.
Biorefineries or using wood waste to actually create precursor chemicals is certainly an area. And
there's a recent investment in Tasmania for a small pilot plant in this space. New technology-- we've
got our research projects with Queensland Universities around 3D printing with wood fibre. We see
that is an interesting opportunity space.
Powder-coated wood, for those who know the technology-- you can't run electricity along wood. So
how do you actually do a powder coating? We've worked CSIRO to create a chemical that will
allow electrical current to go down the wood, to allow wood to be powder coated. This is to provide
lower maintenance, guaranteed life, external uses.
And then in the top corner, which is quite a disruptive technology, is around nano-crystalline
cellulose. It's a technology that's actually been around for 15 to 20 years. But it's actually creating a
lot of excitement in Japan. Industry there has committed $100 million to trying to find potential
market applications for this technology.
So there is a range of activities globally. And because we're quite a relatively small organisation, we
try to be very networked and bring technologies to Australia where possible. So innovation in my
mind-- complacency is the enemy. And what we need to do, and just in this cartoon, instead of
risking anything new, let's play it safe and continue our slow decline into obsolescence. Hopefully,
that won't happen to us. Thank you.
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