Delivery of productivity and infrastructure – who’s role is it?

Systems thinking is required

Business and government both have important roles to play in driving productivity growth and enabling infrastructure. But are those roles consistent with the traditional policy and practice handbook? Do current conditions demand a distinctly different approach?

Are our public finances at risk?

“We’ve been leading urban stormwater management practices for years,” said Fred. “We’ve put a lot of public capital into wetlands, and aquifer storage and recovery. More works are planned, but we thought it’d be useful to get someone independent to confirm our investment strategy.” As the local government manager responsible for water infrastructure, Fred was asking “Is our strategy sound? Are our public finances at risk? Could capital allocation be improved? Was it possible to attract other investment?”

At first glance, the strategy to expand investment in stormwater drainage and harvesting seemed sound. It was based on good engineering and a pragmatic prioritisation of works – precisely the sort of sensible plan you’d expect to see. But no-one had noticed the fatal flaws.

Will fatal flaws stall investment?

When standing back, putting the planned works in the wider, systemic context, it became clear that key parameters had been overlooked. What impact would a changing climate and urban form have on water availability and quality? Were consumer demands for reclaimed stormwater likely to change? What would be the influence of stormwater harvesting actions by upstream municipalities? After careful analysis, it seemed the planned investment should be halted.

An unexpected solution attracts new investment

But the story doesn’t end here. The same factors putting Fred’s stormwater harvesting works at risk also affected other water resources, managers and users. Now, only a collaborative, regionally-integrated water management approach made sense. With this new insight, once-competing stakeholders came together to implement a regional water plan, one which attracted $40 million in new external investment. A remarkably different, better and unanticipated result [1].

This case study illustrates what I observe is a common problem – that seemingly obvious, conventional solutions are often flawed and unproductive because of the way they were initially framed. It begs the question: who must have a role in initiating and shaping infrastructure solutions? What sorts of thinking and behaviours should we expect of people governing massive public or private expenditure? And how big is the gap between those desirable “to be” behaviours and our current “as is” condition? How much of our productivity gap is of our own making?

Beyond the litany

If we take a moment to look beyond the litany of Australia’s infrastructure and productivity ills and the bullet lists of solutions, we might ask “Why has our productivity fallen?” Is it real or just an artefact of the data? It seems the answer is yes, and no.

Over the last couple of decades, when productivity growth was slower than its long-term average [2, 3], Australia invested heavily in water and power infrastructure (like desalination plants, poles and wires) and mining facilities. Until there is a meaningful increase in output contributed from these facilities, we will record a drag on productivity.

But analysis reveals this isn’t the only reason for the slowdown in productivity growth. It may be partly due to less new technology adoption. More likely, it’s diminishing effects of economic policy reforms in the 1980s and 1990s, which increased competitive pressure and market flexibility, in turn driving greater innovation and efficiency. Little in the way of new policy reform, and an expanding regulatory burden, have probably increased the drag on productivity growth.

Are we passive, complacent and lazy?

It’s a harsh question, but not unreasonable. The broad-based economic prosperity we have enjoyed has taken the edge off our economic ‘fitness’. During the mining investment boom I certainly heard people say that “anyone with a pulse can get a job.” Businesses grew, hiring people for delivery capacity and management skills. Heads were down, bums up.

As investment slowed, heads lifted and what a different world it had become. Younger workers face market conditions they have never experienced. Even older hands face a level of technological and socio-political complexity that arguably no-one has experienced. Now the same firms, facing stronger competition in more complicated markets and with fewer people, need skills in leadership, complex problem solving, innovation and business development – skills that either don’t exist or need re-honing. Winning or delivering complex projects, growing businesses and raising productivity has taken on a whole new challenging complexion. While people may not be saying it, they’re surely thinking “What do we do?”

Fight or flight

When people face big challenges a fight or flight response is elicited. Evolutionary psychology suggests that, in this situation, “fight” means to retain business as usual, the status quo. “Flight” on the other hand involves regression to a former way of working, expecting or hoping it will enable success again. Only if and when these fight or flight responses fail will people take the evolutionary steps to discover a new, more successful way of working. It can be a profoundly destabilising experience for many people, even exposing their core worldviews and ideologies to challenge.

Engaging with complexity

Many studies and reports (such as [4], [5]) confirm what experience shows – that systems thinking and collaboration are critical competencies required of leaders to navigate and succeed in our contemporary world. It’s the central subject of a new book “The Silo Effect” by Gillian Tett [6].

She observes that while the world is increasingly interlinked as a system, our lives and minds remain fragmented. Large organisations are divided and subdivided into numerous departments which often fail to talk to each other let alone collaborate. These boxes and structures – either in our minds or in the institutions we create – help to keep things tidy and people accountable. But they also create tunnel vision, competition, fragmentation, bottlenecks and stifle innovation [6].

We can break down these silos and barriers using systems thinking and approaches. Innovative organisations – big and small – are doing it and realising great success. But there’s a catch. Evolutionary psychology tells us that in western liberal democracies around 5 per cent of people exhibit systems thinking capabilities [7]. That is, on average only 1 in 20 people (who aren’t necessarily in organisational leadership roles) are naturally equipped to perceive, comprehend and decipher complex situations.

The critical corollaries are:

  • our government and business communities are not strongly equipped with the mindsets and skills to comfortably resolve the complex problems we face; and
  • direct intervention and support is required if we want meaningful, sustainable progress in a timely manner.
Accept it’s not easy

Here’s the challenging bit. If, as leaders, as members of organisations, as citizens, we want to achieve genuine progress, then we also need to accept that most of us are not yet naturally comfortable and equipped to engage in the complex conversations we need to have.

This is a starkly confronting reality that many people will wish to avoid or reject. It threatens ego, identity, and the basis on which many people will have attained their status (i.e. technical experts promoted into positions demanding collaborative humanistic leadership skills, or highly confident business and political leaders who demand they have the “right” answers).

To support our leaders in this difficult transition, we should expect different things of them. Alongside vision and courage we should look for humility rather than superiority, collaboration rather than competition, and powerful questions rather than rhetorical statements.

Collaborate with humility

What Sir Rod Eddington said of Australia’s infrastructure challenge is also true of our productivity challenge: “The problem can’t just be ignored because it’s complicated. We have to deal with the complexities of reality” [1]. The sooner we collectively accept this reality and engage in systems-based thinking, dialogue and behaviours, the sooner we will realise inclusive, productive progress by business and government for society.

It’s a choice that can be daunting. Yet it’s the evolutionary step that recognises and celebrates our individual and collective progress thus far. So let’s get on with it – together.

[1] Fleming N.S., S. Cooper (2013) Insight Trading – Collaborating to transform the infrastructure that shapes society, Sinclair Knight Merz, Sydney
[2] Christopher Kent (2015) Australian economic growth – the how, what and where, Reserve Bank of Australia address to the National RSL Clubs Conference, Hobart, 11 March 2015
[3] Patrick D’Arcy and Linus Gustafsson (2012) Australia’s Productivity Performance and Real Incomes, Bulletin, June Quarter, pp 23-36
[4] PwC (2013) Productivity: an innovative approach and perspective on an age-old topic, PricewaterhouseCoopers, Sydney.
[5] Axon L., E. Friedman, K. Jordan (2015) Leading Now: Critical Capabilities for a Complex World, Harvard Business Publishing, New York.
[6] Gillian Tett (2015) The silo effect, AFR Weekend, 29-30 August 2015
[7] Wilber K. (2001) A theory of everything, Gateway, Dublin.

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Nicholas Fleming

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