Tuesday, 27 March 2007

Hear it from the BOSS - Creativity + Innovation = Profit (Melbourne)

Transcript

This is an edited transcript of the Hear it From the BOSS forum in Melbourne on March 27, 2007.

The panelists were Nik Karalis, one of Australia’s most prominent designers, the global design director of Woods Bagot; Harold Mitchell AO, head of Mitchell & Partners; Simon Moore, managing director of the Carlyle Group; Ann Sherry, the chief executive officer of Westpac New Zealand and Mark Bouris, chairman of Wizard Home Loans. ABC's Geraldine Doogue moderated the event.

GERALDINE DOOGUE: This is what we’re going to look at tonight -what is the difference between a good idea and a good idea that becomes an excellent result, and try to see whether it does conform to anything approaching a formula?

I’m not sure what the answer will be but I do hope that you enjoy it as much as I think we’re going to and I think BOSS is to be absolutely applauded for thinking through this idea and wrestling with what would be a value added contribution at this particular time in our lives in Australia.

MARK BOURIS:  I’ll look at the scepticism side of the fence, innovation and creativity are good in themselves but I think only account – in terms of success anyway or profit, however you want to measure profit – I think they probably only account for 5% of the whole program.  I really think 95% of it comes down to execution.

There’s plenty of people with good ideas – I see them all the time – they’re always coming into our office, putting up all sorts of propositions for financial services, innovations and at the end of the day, the reason most of those don’t ever succeed is because – one of the obvious ones is they don’t have capital, but nine times out of ten it’s because they just don’t execute them properly.

So I’m sceptical in terms of the headline here – creativity and innovation equals profit.  I think creativity and innovation plus a hell of a lot of execution and application equals profit.

I might give an example of that.  Back in – as you probably know, or may know, Wizard Home Loans sort of entered the market in about 1996.  We were struggling to build our footprint in the market in Australia because Aussie Home Loans and RAMS pretty much had the place under control in terms of new entrants.  They certainly had the biggest names and had more money than we had, and we had to do something innovative in order just to push forward in terms of our brand image.

In 2000, just after Packer invested in our organization – and by the way, I was constantly getting asked by Kerry, you know, when are we going to get a better recognition for our brand, better awareness than everybody else – and that’s not a very comfortable position to be in.

But in 2000, I seem to recall in the third quarter of the year 2000, was the only time in recorded history that there was a negative growth in mortgages in the Australian market – the only time. 

Of course, that was off the back of six rate rises in that period – similar to the period we’re in now – there were six rate rises in 2000.  We had the Olympics in Sydney – which was our biggest market in the third quarter of 2000.  We had GST introduced in June 2000, so everything was lined up against us and because of the rate rise period, most people just didn’t want to borrow on the sixth rate rise.

Normally cycles in Australia are five and six rate rises or five or six rate reductions. 

By the end of 2000 we were looking at – the wholesale market in Australia started to drop the cost of funds to us, to lenders and of course, none of the lenders were passing on the cost of fund reduction to the borrowers.

The convention in this country is to pass on the reduction of interest rates when the Reserve Bank changes rates and equally, when the Reserve Bank puts interest rates up, to pass on that new cost to borrowers.

Come January, we were looking at the first Reserve Bank meeting was to be held in the first week of February, 2001.  It was an election year and the cost of funds was showing about 50 bases points less than what it was three or four months ago. 

In other words, it was indicating to us that the Reserve Bank when they met in the beginning of February, that the rates were going to be dropped.

What we did, which was considered fairly innovative at the time, was to consider dropping our rates before the Reserve Bank made the announcement on the Wednesday.

That was the idea. That was the innovation.  If we could have pulled this off, and we got some publicity about it, we were going to build our brand for being innovative and also for taking a punt, which is a good thing for an upstart organization like we were.

Of course, the downside of making a mistake was that I was going to have across my whole book of mortgages, a cost of funds and a lending rate which is way below everybody else in the market place, which would have been unsustainable – in fact, we would have gone broke, and that’s not something I wanted to go and tell my partner, Kerry Packer, at the time.  In fact, I didn’t even ask his permission to do it.

We decided to do it.  We were able to line up a newspaper in Sydney.  We gave them exclusivity on the whole thing and they ran the article on the Sunday saying Wizard Leads by Magic Rate or something like that and the most important part of it for us though was to get all my business partners – excluding the Packers – all my business partners in terms of the funding, on side as to how it all worked.

So whilst it was a good idea, the execution of it was the main piece and if the execution had of been done incorrectly – in other words if we had picked the market wrong, we would have been losing money for as many months as it took for the Reserve Bank to actually go and reduce the rates.

As it turned out the Reserve Bank went and reduced its rate on the first week in February and in fact reduced it five more times that year, and it ended up becoming a bumper year for us because it gave us such a big momentum for the start of the year.

I remember getting a phone call from a politician and they said to me Parliament was about to meet and we got quite a lot of accolades for mooting against the Reserve Bank and beating the whole market.

The politicians rang up and said look, that was great what you did but how quickly are you going to pass onto your borrowers the change in your rate?  Traditionally that gets passed on in five to six weeks and I didn’t know what to say, and I said, ten days, and he said – because I knew he was looking for ten days – he said, I’m about to go into Parliament, I’m going to talk about this in Parliament and I’m going to give you a great run on this if you do it.

I said, okay, ten days.  Didn’t check with anybody.  He came back about twenty minutes later – I won’t say who the politician was – he’s still in Parliament – he came back about fifteen minutes later, he said, look, I’ve called Westpac, Westpac said they’re going to do it in nine days and I thought:  Oh man, what’s happening here? 

So, I said seven and interestingly enough we went seven and Westpac I think matched us, but interestingly enough the whole market matched us after that and now today the norm is not passing on rate reductions in six weeks – in those days used to pass on rate rises in about ten days and rate reductions in about six weeks – now all the lenders pass on rate reductions on a new convention based on what was considered a fairly innovative move at the time.

But once again, it comes down to the execution and it comes down to actually having the balls to do it.  So, that’s my experience.

GERALDINE DOOGUE:  That’s a great story.  It’s about risk – well, I suppose that’s about some sort of risk management.  It’s about you being a lone entrepreneur at that point, isn’t it?

MARK BOURIS:  Yes, I’d probably have difficulty doing it today – money is our owner and Ann would sort of attest to that.  You come out of a big organizations, the management risk is a much different proposal and I was the chairman of the business, I could just do it – but, of course, I was accountable for it personally, so I couldn’t spread it amongst anybody else and I was a shareholder, I owned 50% of the business, so it was going to affect me the most.

But you’re right, in a big, big organization we would struggle with that concept today.

GERALDINE DOOGUE:  You might just quickly tell the story, the other big idea you didn’t get right about the ad campaign that you borrowed.  You went away, you got a very good idea – it didn’t work.

MARK BOURIS:  I was in America watching television – as you tend to do over there – see who’s advertising, how they’re advertising and we watched this ad from Washington – Mutual who used to be called Wamu over there – anyway they were a very conservative lending organization – one of the biggest in the top three or so, and they had a very quirky advertising campaign which I thought would be a good idea to bring back to Australia and of course then, our ads, I was in the ads, so we needed to do something fresh.

So I came back and we put on this thing called Project Refresh in January 2003, take me out of the ads and put what we called the mortgage beast in the ad.  I don’t know if anyone remembers seeing it, a little blob thing, like a turd with no eyes – that’s how some people described it – and I was a bit sort of reticent about it but the advertising agency was pushing it and pushing it and so I went along with it, and it certainly got cut through, it was very recognisable, and I got a phone call from a radio announcer in Sydney from 2GB at the time and he said – I don’t know if you remember the original ad, but in the original ad this little thing goes into a family, there’s spooky music being played and he’s sort of creeping up on the family, they’re having dinner and they’ve got kids, and he goes up and scares everybody and he stands there and turns and does a pee in the corner.

This particular journalist friend rang up and he said, look, I’m going to hammer you over this but I’m going to give you a chance, if you agree prior to getting on air to take that piece of the ad out of prime time television advertising I’ll make out you’re not quite so bad and at least you’re being quite a nice bloke about it, which I did, I agreed with him and took it out.

We ran that ad for about a year and we did get a lot of cut through and I went with that innovation but it was bad execution at the end of the day.

We did a whole lot of focus groups towards the end of the year on it and basically people (a) didn’t understand what the mortgage beast was, (b) they didn’t know – they didn’t like this thing.  They didn’t know it had anything to do with lending.

So in other words, it was a great idea, got great cut through but on its execution it was a dud and we pulled the ads as it turned out.

 

 GERALDINE DOOGUE:  Did that do anything to your ego, did you think, Oh God, what a failure I made there?  Where does ego come in?  This business of recognition of the limits of your ability, about innovation or creativity?

 MARK BOURIS:  It didn’t bother my ego. What bothered my ego is if we weren’t making any money.  The most – no it didn’t bother my ego at all Geraldine.  The most important thing for us was to get it right.  We spent another twelve months in researching what the right answer was for it and we went onto another campaign.

I suppose funnily enough at that point there was a lot more people to blame too.  With an organization much bigger, we could spread the blame around a little bit.

GERALDINE DOOGUE: Thank you for that little bit of candour there.  We can wrestle with that a little bit more.

Ann I’d also love to hear – because I mean you do straddle the private and the public sector as well.  You've been very involved in a whole lot of ventures around Australia. 

You've really had a chance, it seems to me, to look at this issue.  So I’d invite you to talk however you wish, but do you think it’s true that innovation plus creativity equals profit, or not?

ANN SHERRY:  I do, although I don’t disagree with Mark’s point about execution, and I guess because I come from a bigger organization, there’s a lot of the execution – that’s our staffing point, and our challenge, in a way, is the opposite, because we’ve been in business for 190 years and we often defend our position against upstart newcomers who are madly trying to innovate their way round us and change the rules of the game and do things to sort of unsettle us.

So I guess for us innovation and creativity is as much about staying ahead of the game and not getting trounced by all the new kids on the block who come in cheaper and come in faster, and come in with less infrastructure, etc.

I guess a couple of just quickly, examples that illustrate that – I’ll use New Zealand examples because they’re more current for me at the moment.

When I went to New Zealand, the graduate market is quite a big segment of the market in New Zealand and we just weren’t there.  We had no presence at all and we were looking to get some growth in the business that was being hammered by a whole lot of new entrants that were bringing our mortgage spreads down.

We were trying to work out how do you work out what to do with a graduate market?  We had a whole lot of men in suits largely sitting in product teams thinking product.  So what we decided to do was pull all our grads together in a room – because we hire forty smart graduates a year.  They were fresh out of university, they were the market, and we started to work with them to create an idea.

They came back with the idea pretty quickly, so the creativity came, and then we said to them, okay, now you’ve got to make it work, which was a slightly bigger challenge actually, because they thought their idea was really clever until they tried to make it work, and in fact we ended up with a slightly different idea, and we got them to go to campus to make it work.

So there’s something I think about making the connection between the idea and actually getting it to work--

GERALDINE DOOGUE:  Follow through.

ANN SHERRY: -which probably was the thing that made this thing successful.  It was completely off the wall.  We would have never come up with it in our regular banking product context. 

They dressed themselves up as Westies.  They re-badged us Westiepac and that was partly because a lot of the – most of the kids in Auckland come from the west of Auckland and they dressed themselves up in – they all looked a bit like Warwick Capper actually – which has a particularly Australian context, but bogans look like bogans everywhere – and went onto campus dressed in these silly outfits literally to get the cut through and to create a bit of attention and music and a whole lot of stuff that went with it.  In fact, I think we signed up in the first year about 1800 more grads than we had the previous year and the following year, etc.

So the idea and the execution of forcing them to follow it through did give us a completely different cut through in the market.  That gave us brand presence, new customers, internal capacity to think differently.

So I think the challenge in big old organizations is how do you keep generating new ideas?  How do you re-make yourself so that you’re contemporary?

It’s not just about product, because we’re very product-centric.  We often pump out new product, whereas really what we needed to do was come up with not just a product but a different way of facing a new market, and I think some of that is also about how you think about people in your organization increasingly as well.

So the other bit of creativity and innovation that I’ve spent a lot of time focussing on over the years, is how do you engage people so that you capture some of that 30,000 people, lots of great ideas - big organizations often crush that, don’t unleash it and trying to find ways of doing that differently, while managing risk, while managing all the things that we have to manage day to day.

So it’s finding that balance that I think gives you the end result, which is a better bottom line.

GERALDINE DOOGUE:  What is a creativity killer?

ANN SHERRY:  Committees are creativity killers and our organizations are often replete with committees that do nothing other than kill ideas.

I think sometimes bureaucracy is a creativity killer as well, you know, having to get five people to agree to an idea, and I think sometimes also history is a creativity killer as well.

GERALDINE DOOGUE:  History?

ANN SHERRY:  Yes, history.  Sometimes people do what has always been done.  You know, that becomes a pattern of organizations and kills new ideas and kills creativity as well.

GERALDINE DOOGUE:  Can you be creative at work and not in your private life?  What’s your experience been, and I’ll ask everybody that in a moment, whether the creative person is there throughout their existence or whether they can compartmentalise it?

ANN SHERRY:  I guess I have a view that you’ve got to be true to self whether you’re at work or not and that it’s really hard to segment, and I see this a lot – I think it’s been one of the scourges of perhaps men of my age in particular who behave differently at work than they do privately, you know, you get a real disconnect.

I think you’ve got to have connection for it to work.  I think that’s true for us individually, you’ve got to have connection for it to work, otherwise you’re trying to be something you’re not.

The best example I’ve had, one of my former colleagues who used to drive into work in a bright yellow Saab, roof off, sort of sleeves rolled up, smoking, doing all the things that were bad, got into the car park, put the roof on, rolled his sleeves down, put on a suit and turned into the dullest person in the universe.

And I used to look at him and I started leaving him notes on the windscreen saying, don’t leave your personality in the car.  It took him a while to work out who was stalking him in the car park, but in fact, you know, there was another side to him we just didn’t see at work, that was much more in tune with what was happening in the outside world, but somehow he’d been trained if you’re a banker you’re boring and I think that’s one of the reasons the small players have nibbled away at us so hard, because we turned that into a mantra rather than constantly re-inventing ourselves.

GERALDINE DOOGUE:  Harold Mitchell, do you want everybody at your firm to be creative or would that be a nightmare?

HAROLD MITCHELL:  No, I’m sorry to disagree with you Geraldine and the 600 new little bosses out there tonight, but I’ve found that the biggest driver – apart from the creativity and innovation which is part of what my life has always been, but I was just thinking before that I agreed with what Mark has been saying to some extent about execution, but the biggest thing that I’ve every seen – and remember that I’ve worked for more than thirty years, nearly forty with some of Australia’s greatest creative people – which is what advertising agencies have always been.

In fact, the first job I had was as an office boy in an advertising agency and the one before me was Phillip Adams.  He denies that he was every an office boy, and before him, Fred Skepsi.

I had a wonderful gifted time of dealing with creative people.  I used to drive Peter Cary to work because his wife had the car, and the reason that I can no longer Peter’s books, because he was so boring – I know every story because he tried them out on me along the way to work.

But the point I would make, is I expect ad people to be creative, not all of them, in their own way, both at work and elsewhere but the biggest thing that I’ve found, having that background of some of the most creative people of all and what they’ve done, the greatest success that I’ve ever had with all of that I’d have to say is perseverance.

If you think of two things that I can draw on of recent times, which would be in the mind of the people out there tonight, consider the story of Google.  Google as a word in only nine years old and it’s changed much of the world. 

If you read the book the Long Tail where they say the 80:20 rule, it’s all over, there is a new economic order.  We’ll see whether that is the case.

But the Google story is incredible because there were two geeks who wanted to put the world onto the web and they, in the garage, worked away at it and they were ready to go under.

They had taken the story to two of the major internet companies, who said, no, no, that’ll never work.  They were down to nothing and there was an angel in Stanford who gave them $100,000, back into the garage, and out of it came a most incredible business.

They had persevered, and if there’s one thing that I’ve learnt in what I’ve done over a long period of time, dealing with creativity and innovation – which is part of all of it – all of it I’d have to tell you stands for nothing if you don’t persevere.

I started our business in 1976.  It’s the biggest of its type in the country.  It beats every international company that comes here and tries to beat it, and the first thing I had happen was the big media owners – as you’d expect – tried to put us out of business.

I had $2000 in the bank, a mortgage, two kids under four and they were trying to crush us, and I just persevered and never stopped. 

It was a little like the Google story – a little more humble I’d have to say – but if I hadn’t persevered, I wouldn’t have gotten anywhere.

In 2000 someone came to us with an idea, very innovative, very creative and it’s the story of the internet, which is now just incredible in the world that I’m in and I suspect the world that you’re in.  It takes so much of everybody’s life and again, the question of perseverance and how all of this ties together.

In 2000 people came to me and said, here’s a very good idea, and in fact in 2000 with the dot.com boom – which probably many of you would have been involved with – there was a bust. 

There was a bust for a very simple reason, because no-one tried to work out how to put all of those three words together to make a profit. 

They were fascinated with what they were doing and how they were doing it, but they never said, how are we going to make money?  Incredible – the whole of the internet – how are we going to make money?

All the big media groups that I deal with, they produced this incredible wonderful product and they gave it away. 

Any wonder that by 2005 when Rupert Murdoch said to his editors he was wrong in 2000, we’re now going to make money out of the internet and the model now is advertising, so it takes off – but back to absolute perseverance.

In 2000 I launched a company, its value went through the roof.  All the good things happened and then a year later it was crushed and it was all over. 

I kept at it and persevered and persevered – as some of you might now know – that business is worth some $300 or $400 million and we own half of it.

If I hadn’t persevered with all of that, despite the creativity and the innovation and all of it – and decided that it had to make profit, I would never have done that.

The other thing is, if you persevere – just one little story from the other part of my life in the arts – I was chairman of the National Gallery in Canberra for some five or six years and the great story of the gallery of course is Blue Poles.

Blue Poles was purchased in 1972 by Gough Whitlam.  Some of you might remember – others might have read of it – there was an outrage, and in fact Gough was in real serious trouble because how dare you spend $A1.2 million - $US2 million – that’s what it meant at the time – on this picture, and because the gallery wasn’t built at the time, it travelled the country.

Remember what I said about perseverance – Gough, he ducked his head – not easy to do at 6 foot 6, but he got there and the country kept on with it, the gallery was built, it went in there and I got a call about three years ago, my last year or so at the gallery, from a great Australian representing a very, very wealthy American – without saying who it was and he offered – Blue Poles, remember, $1.2 million – he offered to buy Blue Poles for $US100 million and replace it with a smaller, not as good, not as elegant, Jackson Pollack in its place.

I naturally said no, but I rang Gough.  He loved the story about perseverance.  So here it was thirty years later – he’s now in his late eighties and Gough, marvellous to the moment, I was right yet again.

So with all of that, if you don’t persevere – it might take thirty five years – you’ll get there.

GERALDINE DOOGUE:  I’m going to come back to you Harold about that.  I mean, Nik Karalis, your firm lives and dies on constant creativity I would have thought – Woods Bagot.

NIK KARALIS:  That’s right Geraldine, I feel the odd one out tonight.  I have to innovate every day of my life. I don’t create one point or moment in time and make a lot of money out of it like my good friends here.  So for me, innovation is survival.

As an architect and a good mathematician, I actually studied this equation before I came here tonight.

I think it does need some digestion.  What is creativity? What does it actually mean?  Because a lot of people use both creativity and innovation as kind of marketing, but this equation for me is not marketing.

Let’s say you create a firm and you’re going to make a lot of money.  For me creativity is a result of study and research.  At our company we invest a lot of time without any way of finding any profit in that, and it’s pure – what I call theoretical study and research.  Innovation is the act of introducing something new.

So for us, it’s putting together the pure theoretical study and research and applying it to a specific problem.

If you put those two together, inevitably it leads to productivity.

It’s not a straight equation.  I can give you an example on a major project we’re doing in Dubai, there is a major CBD, we’re designing something the size of Melbourne.  It will have the tallest tower as part of it - I can’t divulge much detail. Prior to us winning the job we came across as just boring old Australians and we would just do the commodity and documentation work and the Americans – who happened to be the master planners and the designers for the tower – were going to tell us what to do.

When we go to Dubai and we saw the project, we realised that this was the wrong thing to do in a city that is actually choking itself.

If anyone has been to Dubai you can see that there is no urbanity, there is no street life, it’s just a Disneyland of tall buildings along one section of each road.

Our slow approach was right – I got back to my colleagues – how are we going to shift our position from just being the commodity and the documenters, the boring old Australians and knock these Americans off the shelf.

The first thing we realised was that what the Americans were doing was designing without context. There was no Islamic, no Arabic references, no references to the city.

There was no linking back to the Sheik’s requirement of what his vision was.

Our strategy was that we would introduce four or five different leaders of our business from different parts of our organization – workplace, lifestyle, and education and merge them – inundate the client on the first day with this additional expertise, additional wisdom and of course, the Americans went to workshop with us and they were very reluctant with it.

The American strategy was, no, this is right for you.  You don’t know what’s right, in the middle east, don’t know what’s right, we know what’s right and the client, surely enough, realised there was another voice, another view, another point of innovation they could use to make the Sheik very proud of this new CBD and sure enough, after about three or four months, we have now got the full commission.  The Americans are dragging their tail, they’re back home and they’re asking why – how did that happen?  How did we lose such an illustrious commission?

It is been the single most project that has formed our business.  So again, there is that ability to persevere but also you need to understand and apply research to problems, and then act it in such a way that the two come together and you can sway any clients.

GERALDINE DOOGUE:  It’s just fascinating though – such a very interesting story.  The starting point of your research must be highly creative?  What’s your angle?  Who kicks it off, because surely that’s the genesis and that has to be refreshed all the time, doesn’t it?

NIK KARALIS:  That’s correct.  Critics will say, well if it’s just purely theoretical, where is it going?  What do our staff research?  What can they do?

It has to be aligned with your business aspirations.  As I said, we have three regions of expertise that we want the creativity to focus on.

Creativity doesn’t have to, for us, achieve results.

GERALDINE DOOGUE:  Can you name them again?

 NIK KARALIS:  They are workplace – which is commercial office towers, lifestyle, hotel, retail, restaurants, hospitality and education – which is universities.  Education is a really interesting one, because I think that’s what’s happening now in business.

Business is no longer an employer, business is a university.  It is part of the journey of the graduates.  Business leaders have to now understand that their job when they employ someone has just begun.  They are a quasi university, and it is contingent to them to provide the same environment that those graduates had at university and that slowly seeps back into your working day every life.

So that’s how we’ve managed to absorb creativity by replicating the university, the knowledge environment in our own workplace.

GERALDINE DOOGUE:  Simon Moore, in the world of private equity, which of course there are a whole lot of things being said about private equity, but I have heard people calling it exceptionally creative.

I presume it’s a very different process to the one that Nik’s just described?

SIMON MOORE:  It is and it isn’t.  We are equally as focussed, as equally as goal driven and we all have our own areas of expertise or what we perceive to be our value adds in the process, so when we sit down to look at investment opportunities and acquisitions, it’s a similar thing where we come with an experienced skill set, where we’re quite disciplined about what we want to do, but creativity and innovation are taking what you see before you already in quite a large organization for the type of private equity that we do and looking at how we can move the organization from how it does business today to how it can do business in the future and hopefully much more profitably.

GERALDINE DOOGUE:  So someone’s got to say, in your team - like as I gather Nicholas Moore did with Qantas – Qantas can be different.  Somebody has got to come with that kernel of a perception that no-one else has had, is that right?

SIMON MOORE:  Either a perception that nobody else has had or a way of doing it or executing it, which gets back to Mark.

A lot of people may wake up one day and say Qantas could be all manner of good things, but it’s a question of actually taking that idea and putting it into implementation as well.

GERALDINE DOOGUE:  What’s bad creativity as far as you’re concerned?  You must have seen some wild and woolly schemes cross your desk.

SIMON MOORE:  We do see some fairly fancy ideas.  I mean, normally the more creativity ideas that are really crazy involve a modicum of truth – because that gives them an air of credibility just to get in front of you, and then normally extrapolation from a reference point which is normally totally devoid from the facts that they’re dealing with, and saying, well X did it this way, why can’t Y do it that way?

I’ll leave the names out of the example but one of the more interesting ideas was brought, to us at least, around a recent proposed privatisation which didn’t go ahead, where one of the participants in the privatisation – potential participants – and they were looking for capital, somebody like us – so you guys, here’s a great idea for you, you should put your money up for this.  We’ve got an idea.  Now you guys have seen Jetstar and you’ve seen Qantas, so we see ourselves as the Jetstar of this particular industry.

We have got a view that we are the Jetstar and we’ll buy Qantas.  At this point, given what this industry was, you were thinking, like, we’re a long way from home here and by the way, in this case Jetstar probably had three planes and Qantas had a couple of hundred and the guy’s like, we’d do this and there was a question of – Qantas in this case was quite fat and so we said how are you going to address the Qantas probably has a lot of costs that you can get rid of, and they said, actually, we’re going to relocate the whole of Qantas to a part of regional Australia, and that sure as hell is going to free up a few positions, and we’re like, yep, that’ll do it.

Then the next step was, well, what’s your background in doing this?  Have you been in the industry long?  No, actually, we’ve been in it for two years and we’ve come out of the hospitality industry and we’re doing this for now, and we’re like, oh, this is going to be really interesting.

At the end of it all, the guy said, what we do have though is we’re structured in a way that we actually haven’t got any capital of our own, so this is all going to be your money.

We’re like, okay, it’s all our money, you’ve got no experience, you’re a scale of organization of X and you’re going to buy a company that’s probably fifty times X and at the same time you’re doing all of that, you’re going to relocate the headquarters and lose every decent member of the staff that you’ve got.

Now that’s probably a pretty dumb idea, but you’ve just taken two hours of my time and it was highly entertaining, so what the heck.

That’s the kind of thing that, you know, it’s a little crazy.

GERALDINE DOOGUE:  I won’t labour this point, but I mean particularly because I’ve seen this happen in the environmental area at the moment – and I don’t know whether you’re referring to that – some weird and wonderful ideas are floating around, one of which will work – it will work. 

I am assuming that that is quite a dilemma at the moment for people like yourselves.

SIMON MOORE:  It is, but we tend to be in a bit more in the tangible end of the private equity, so we do larger ones.  The venture capital guys tend to come at it from two perspectives.  One is that they don’t go and put all their eggs in one basket.  So they may take the view that environmental is interesting and there’s ten guys out there being creative, but ten different ideas as to how the same problem – getting back to the same creativity question.

I know that somebody is going to get it, it’s a huge opportunity.  So whoever gets it right has the opportunity of, arguably say, delivering $100 of value to me, and if I put $5 on every one, then I’ll put $50 into the game, one of them’s going to get it right, so I’m going to get $100 back at the end and I’ll set the field effectively and do it that way.

Then against that judgment, if I’m a good venture capitalist and I’m taking that approach to it, I probably should have the judgment if there’s ten guys pitching an idea, there’s probably four or five of them who are unlikely to succeed, so you can narrow your bets down to here are the five runners that are actually a better chance of winning or really have a chance of doing it.

I think that’s really how people come at big opportunities like that.

The other point I think that we tend to take a lot out of, is that you don’t have to reinvent the wheel, and I think this comes back to what everyone is saying, that there’s great analogies that you can bring to a situation where you don’t have to start off from first principles and completely take the risk of inventing the wheel.

You can, say, borrow from different industries and it’s an awareness of:  here is the problem, and how has that same problem been addressed in different circumstances?

To give a really short example, in our business we do a lot of manufacturing companies, so we buy companies and we try and work out how can we bring down the manufacturing costs.

Certain industries are really good manufacturers.  There are other industries that technology hasn’t caught up because it’s either not been as big a problem for them so they haven’t had to innovate and move into those spaces, but what we’ve tended to do in our industry is rather than say look Simon, he’s got no idea about manufacturing but he knows somebody who does, and what we try and do is relocate people and the skill sets out of the industries who have to be very good at manufacturing to survive and move them into the industries where being good at manufacturing has been a nice to have and it has sort of moved the profit margins up, but you could survive without doing it.

If we can get a great guy out of a must do it to survive environment and put him in an environment where it’s a nice to have, you can really do a great result from investment.

GERALDINE DOOGUE:  Very interesting.  I think we might throw it open to you.  I mean, I can keep rabbiting on, I’ve got loads of questions but if you’d care to put your hands up, we’ll race a microphone to you.  So if anybody wants to ask any questions, and make them as personal as you like, preferably ask a question I suppose as opposed to tell a story – I’ll cut you off at the knees if you go on and on – but I’d really love to hear.  I’ll just keep a watch out.  Right at the back there, if you could just identify yourself please?

QUESTION:  I’ve got a question for Mark there, from where I’m standing here this morning one thing that’s been missing is courage and from hearing what Harold had to say, you can come up with all the creativity and innovation and all the formulas, but someone has got to make a call.

So do you believe that that’s a huge part of the formula that is missing?

MARK BOURIS:  Yes courage, I think I used another phrase which was probably an early ice breaker, I said you have to have the balls to do it, that’s courage basically, and courage is a really important part of it.  I think taking on Harold’s point, courage to persevere.  I mean, perseverance is courage.  When you’re down – and I experienced it in my business in that period, you know, we were burning cash like I’ve never seen cash burn before and it wasn’t my cash getting burnt, it was my partner’s cash – that was even more terrifying, and the courage to hang in there and the courage then to come up with something innovative and creative to get you out of the crap.

I think your point is a very good one, courage is really, really important, because when you get tired, in Simon’s case you deal with fatigue from time to time, you’re sick of looking at deals.  In Ann’s case you’re sick and tired of going through the processes and organizations, process can kill innovation.  In Nik’s case bureaucracy probably gets him caught up, and courage to persevere is really, really important in the formula for the profit and success.

Without courage creativity and innovation and execution don’t work.  So I think that’s a very good point.

 

ANN SHERRY:  Courage is a better word, because we don’t all have balls – it was a cheap shot I know, but I had to do it.

MARK BOURIS:  I’ve got a reply to that, but I won’t.

ANN SHERRY:  I think also, sometimes you’ve just got to make a call.  You've got to put yourself out there and sometimes they’re things that feel small at the time that end up being big, as well.

I talked earlier about people.  It was quite interesting you know, when Westpac first did paid maternity leave – which is now quite a long time ago – that at the time felt like a really courageous decision because we were so breaking out of the packet.  It’s a bit like the discussion earlier about changing the length of time before you pass on rate rises and so on.

Sometimes at the time you just know that’s actually the right thing to do at a point in time but making that decision does cause you to have to go into a corner and breathe deeply for a couple of minutes and then come out with the confidence to do it.

I guess my view on that is that if you’ve thought it through and you’ve got the courage to stay with it, and you really have thought it through, then it probably is the right thing to do and you just need to go with it.  Although, you need a check point sometimes as well, because if you screw it up you need to know how to get out of it too.

NIK KARALIS:  For us the word isn’t courage, it is living with risk and fear.  Unless there’s a design that you really feel uncomfortable with, that you’re not sure that your client is going to accept it, then you’ve got the wrong product.

GERALDINE DOOGUE:  Do you really mean that, do you?

NIK KARALIS:  Because our competitors come from all over the world and that’s what they thrive on all the time.  They are presenting to our clients schemes that we know are well beyond what the normal market does.  This happens every day in our life, so one of the questions we have to ask, are you feeling uncomfortable about this?  Are you sure that this is the right thing to do?

If you’re feeling that they’re going to be squirmish, we actually adopt the risk – we’re actually the opposite to Simon, where we have to feel that there is some fear about it, but it’s supported by, as I said, the research and study.  You have to make sure that it is well founded, that the risk is well founded, but for us it’s business every day, same day.

GERALDINE DOOGUE:  I read the other day about Peter Beattie’s decision to build that museum, the contemporary art museum which apparently is just the most beautiful building – I haven’t seen it – but it was interesting, I thought it was a superb bit of public policy myself, that he made that decision and it’s achieved far beyond – from what I read – Harold can probably flesh this out – but far beyond what could have been expected.

He knew that there was a need to almost re-position Brisbane’s sense of itself – even Queensland’s sense of itself and he took a big, big risk actually.

HAROLD MITCHELL:  Well it’s absolutely true and that’s a very clever thing to do.  At an earlier time we saw it in Adelaide, which re-positioned itself from a very comfortable old pastoral town and Don Dunstan reinvented that city, with the arts again.

Canberra itself, when you look at Canberra, what they’ve done with Canberra, it’s a wonderful place to live now.  Second, third, fourth generation people are there and the arts can do that.

Just on the point of making decisions, I was just thinking how I have reacted to it and being brave about it.  I’d have to say I’ve never thought of it like that.  I find making decisions very easy to do.  However I worked it out, I will decide when I’m going to make a decision.  If I’ve got to do something, I might decide next Sunday I’ll do it, then I put it out of my mind because I found you could get very, very warn out going over and over that particular subject – will I do it, won’t I do it, and I decided not to do it, ever. It didn’t make the decision any better, but it made me tired.  So what I now do is if I’m going to decide something, I’ll know all the issues – that’s pretty easy to take in and then sometime – usually in the morning when I’m going for a bit of a walk – I’ll decide and that’s the way to do it.

I know I’ll make a bad decision here and there, you just move on with it.

The other thing I do in my life is I’ll decide there’s probably ten things that are happening in my life right now.  Two of them are really awful and eight are okay.  I don’t let the two get on top of me, because I think eight out of ten, that’s pretty good, isn’t it.

So I don’t find any of that difficult.  However on earth I did it, I don’t know, but that’s the easiest way to do it.

QUESTION:  Ann, you were talking about engagement of the people, you were talking about refreshing the organization.  How do you sustain that – aside from having fun but what are the processes in your business and some of the ideas that you’ve used to sustain that with your people?

ANN SHERRY:  There’s not one answer to that.  I guess there are some processes that we’ve put in place to keep people engaged.  I talked about graduates, engaging graduates in thinking about business ideas.  I think often big organizations in particular assume that all the wisdom somehow has risen to the top, whereas I have to say that I’ve taken a view that most of the wisdom probably sits at the bottom and harnessing that by either giving people the opportunity to come up with ideas or whatever is one way of doing it.

The second way we’ve harnessed that is to get people to do things outside work as part of their day jobs.  We were talking earlier about some of the opportunities that we’ve given staff.  For example, to go on secondment to Cape York and work in Aboriginal communities. 

That in itself doesn’t sound like refreshing the organization but I have to tell you that the 300 or so bankers who have spent a month in a remote Aboriginal community come back to their day jobs understanding firstly how skilled they are.  Secondly, understanding how privileged they are and thirdly, understanding that there are lots of ways that you can make a difference in people’s lives, including just teaching them how to manage money, doing quite simple things.

So great things don’t have to come in very neatly wrapped up packages.  I think there’s something about giving people the opportunity to unleash their own capacities and understand themselves better. 

Of course we’re in the business of managing risk so we do all of this in a whole set of parameters.

I think the third thing is just giving people permission to speak when they think something is happening that’s really stupid.

I think that ultimately refreshing organizations, the power of that often comes from within, allowing people or encouraging people to speak the truth.

I think organizations, over time, often discourage people from really speaking the truth.  They learn to speak a corporate dialect that somehow massages or masks often the things that really, if you’re running a company, you really need to know.

GERALDINE DOOGUE:  Can I just follow up, because what if people are here and they’re listening and they think, well I don’t know if I want to be that creative.  I think I should articulate this because I bet no-one’s prepared to stand up and say it, but I mean—

ANN SHERRY:  That’s okay, I’ve got jobs for you too.

GERALDINE DOOGUE:  I assume you’ve all got jobs for people who don’t put themselves at the apex of creativity, have you, or have you not, Nik?

NIK KARALIS:  For us, unless—

GERALDINE DOOGUE:  Less jobs.

NIK KARALIS:  No, no, no.  I think a lot of conventional businesses over time will become redundant as new types of businesses emerge.  Definitely ones of environmental issues are going to influence the money making mechanisms in the world.  Doing something for the environment normally means you get money indirectly, so I think there is a call for demand for innovation across all the businesses.  You cannot not do anything.  You are going to be redundant sooner than you think.

A lot of the financial institutions are quite lucky in Australia, they’re contained within Australia, but if you’re in a global business environment where the competitors are greater, unless you do it, you can sit back and say no, I’m going to do it my own way, the same way I’ve known it for the rest of my life.  Maybe I’ll just get enough super to survive and then that’s over.

We have an obligation for success so for us we have to.

GERALDINE DOOGUE:  Harold, you borrow the lawyers, don’t you?  You've got your finders, your minders and your grinders.

HAROLD MITCHELL:  Yes. I got that from a lawyer mate of mine and I thought, that’s very clever, because I’ve got a belief that everybody is good at something.  When one of my managers comes in and says, they’re no good.  I say, hang on, we hired them because we thought something about all of this and everybody’s good at something.  Maybe they’re not good at that, let’s move them into something else, and we haven’t usually been let down.

I didn’t have much time one day, so I couldn’t spend half an hour dividing the whole place up, and we’ve got clients and we’ve got jobs to do and we need to keep getting new clients and we need to keep doing the work and we need to keep the clients happy, and a lawyer mate of mine told me that we divide our people up into finders, minders and grinders. 

I thought that’s very good.  So finders are the people that go out and get the clients.  The minders are those wonderful people who take them to lunch and look after them and talk to them all the time.  Then someone has got to do the really hard work and they’re happy doing the hard work.

In my place there are a whole lot of people doing that.  Now I don’t like to tell the people that’s what it is, but it seems to work out okay.

I don’t want to put people down, but I only had about a minute to tell the story, so that’s how I did it.

GERALDINE DOOGUE:  If you talk to some of the young lawyers, I don’t know whether the grinders are very happy, grinding away there in the back room.

QUESTION:  Now, I’m going to hit you from the right brain, being a female.  I’ve been very, very fortunate to be self employed for the past 27 years and I get to interview some really amazing, amazing people all over the world, from business, singers, actors and I found it all comes down to the bottom line where they all had a dream from the time that they were very small.

I’d just like to know if the five of you had a dream and have you achieved it?

GERALDINE DOOGUE:  I’m going to go to the private equity man first.

SIMON MOORE:  I must have drawn the short straw.  We’re dreamers in everything we do.  I don’t think I woke up one morning as a five year old and decided that private equity sounds like the go.  I think realistically as you evolve through life you have different influences.  Through my time I grew up with a family, a father who did certain things, and so financial—

GERALDINE DOOGUE:  What did he do, as a matter of interest?

SIMON MOORE:  He was a stockbroker and then he took a turn for the worse and became a politician.  He now describes himself as a reformed politician who is now a director of a couple of companies.

I grew up in a world where the financial materials were there and an environment with a desire to work for yourself in a capacity was something that was drilled into me from an early age, encouraged to go off and do things for yourself, work your way through university and do that sort of stuff.

A combination of working for yourself and finance ended you down one track and I started working for Macquarie Bank at one point and worked out in the area I was at that Macquarie didn’t have enough capital to do it properly and so I came to the conclusion unless I married extraordinarily well, I could never do that for myself.

So I then went back and went to university and did some other different things and ended up in private equity land where eventually if the world goes according to plan you could end up in a situation of having your own firm and managing people’s money and doing things.

For me it was an evolution, it wasn’t an epiphany at any point in time.

GERALDINE DOOGUE:  Did you dream of being rich?

SIMON MOORE:  No, I don’t think it ever was a case of being rich.  I mean, I think of being financial comfortable is always a nice result of being successful at what we do, but I think it’s much more – I used to play a lot of sport as a kid and it’s a competitive outlet and the financial side of things often is more a score board and a recognition that you’ve actually achieved what you want to achieve and you’ve done well in a competitive sense.

Money for money’s sake, once you pass a certain point, it really isn’t that.

GERALDINE DOOGUE:  Mark, what would you say?

MARK BOURIS:  I probably did dream about stuff.

GERALDINE DOOGUE:  You did have a dream?

MARK BOURIS:  Yes.  I didn’t have a dream but I used to dream.  I wanted to have better than what I had.  I wanted to have what I saw other people having, so I was also sort of a competitor in sport and I competed in the swimming area where you had to have money to put your kid through swimming training, and my parents worked pretty hard to put me through it, but all the other kids in the swimming always had a much better environment, and I remember growing up and going to their houses and things, and I used to see the difference between where I lived and how I was growing up and what they were doing, and their cars and then I got my first job in the city, after I finished my university, and I started seeing people driving things like Porsches.

So my dreams sort of developed and I thought, well, I wouldn’t mind having a bit of that.

A bit like Simon though, the financial services business that I’m in, it’s more a game as well, so I achieved my dream, if you want to put it that way, or my wish through the game of financial services.

GERALDINE DOOGUE:  You achieved a dream through a game, how interesting.  Because you do a lot of other things now—

MARK BOURIS:  Yes.

GERALDINE DOOGUE:  Are they fulfilling a dream more, are they?

MARK BOURIS:  They’re more the game.

GERALDINE DOOGUE:  The other things?

MARK BOURIS: The other things I do are more a game now.  I’ve sort of got the things that I saw other people have and Simon’s point, I’m not trying to make money now so to speak.  It’s more the game.  Can I succeed in other areas, other pursuits, other start ups, other innovations, other businesses?

GERALDINE DOOGUE:  So it’s testing yourself?

MARK BOURIS:  It’s become more the game.  I’ve become addicted to the game effectively.

GERALDINE DOOGUE:  Thank you for saying it.  That’s what I see looking on as a reporter, the deal making game, I just think captivates people. Nik, I’m assuming it’s different for you?

NIK KARALIS:  Yes it is.  I think the question is a very good question.  All of us as leaders, we are individuals and we have quirky behaviours and there’s something that you shouldn’t be afraid, as a leader, to use in your business world, because that is why you’ve got to where you’ve got.

So you shouldn’t recess it in your business behaviour, it should be something that’s quite upfront, and you won’t succeed unless there is a certain characteristic about you that makes you different or makes you think about things differently, and as a child, for me, I was not satisfied with the built environment.  I felt like I didn’t fit into the big business class about what residential housing should be or the way people should live.

There was something really uncomforting [sic] about what I saw.  So you’d go to school, you study, and the first chance I got was I got the greyhound bus out of Adelaide, the yellow pages under the other – which was then the Google of the 21st century – off to Melbourne and within three hours there were three job applications.

Hopefully that’s what I like to see with the new young generation, to have that excitement and enthusiasm and use their education that their father’s have paid a lot of money for and hopefully oust their father’s quicker than they can so they can go in and influence the world that they live in.

GERALDINE DOOGUE:  I know a lot of people are wondering out loud about – I just think it’s as old as the hills, if people get comfortable, they often don’t see the need to drive themselves and I just think it’s going to be fascinating to watch who comes through in this next generation.

It may not be at all the people in the 99 categories, they may not be the ones who end up being the innovators.  I think it’s going to be very interesting to watch.

ANN SHERRY:  Maybe it’s always been so.

GERALDINE DOOGUE:  Maybe it’s ever-thus.  We allude ourselves actually that that somehow gets broken, that mould.

ANN SHERRY:  But also the motivation.  I mean, people here have talked about particular motivations.  There are also motivations that you find in different places.  So the game that perhaps has been talked about here, I don’t think that’s the game I play and yet it’s the game I’m in.

That’s not my motivation. My motivation is not the game and I didn’t—

GERALDINE DOOGUE:  What’s your motivation?

ANN SHERRY: Certainly when I was growing up nobody would have wanted to run a bank, and certainly no woman would have dreamed of running a bank.  It looked like the dullest job in the universe and with really dull people in it as well – nice people I’m sure.

But then there’s something about opportunity to influence shifts over time and unlike some of my colleagues here, I’ve changed sectors, cities, countries, jobs, as I’ve looked for places where I could grab jobs I love – to your point – but also where you can make a difference in a whole lot of other ways.

GERALDINE DOOGUE:  So you’re a reformer?

ANN SHERRY:  Yes and also proving that things can be done differently.  Motivation isn’t necessarily just about doing the deal or whatever it is and moving on, it can also be showing that it can be done in different ways.

QUESTION:  Hi, my name’s Katherine Brooks and I look forward to being the next innovator in the next generation.   Firstly, I just wanted to thank Ann for being such a fantastic role model.

A report by Forrester Research criticised Australia saying we’re not putting enough money into research and development when it comes to innovation.  Australia actually ranked 23rd of 26 countries in innovation transformation.

As leading key players in your fields, would you agree with this and would you also suggest that government needs to play a stronger role in innovation?

 

 HAROLD MITCHELL: I must say one thing that probably Geraldine’s given you all the heebee geebees here tonight because as people who want to succeed, I think you’ve probably just worked out that if you’ve got a bob or two now, you’re probably not poor enough to really try hard enough to get there.

So given that it’s at Crown and the casino’s down below, you might like to start tonight.

Back to the question, I was thinking before Mark travels, that we all travel a lot.  I was in Singapore just a little time ago.  We’ve got a particular focus on Asia with what we do, and when you think of how clever Singapore has been and by comparison the generation – which is my generation, baby boomers – it was always the case since European settlement here, that every generation did better than their parents.  That’s just the way that it was.

This generation it stops, and every generation from here on will be poorer.  That’s what’s happening to Australia.  So, what is it about innovation and where we are – Singapore, consider that Singapore in 1945 was nowhere and it was a swamp, and what it is now.

I was amazed, I was talking to one of the Ministers, the head of their bank, their federal bank and one of the other important people in Singapore.  They now, through that whole period of some sixty plus years, have always had a plan to make it better in everything that they did.

Their new one is that they’ve got three things that they’ve settled on.  They want Singapore to be a hub, a hub for Asia. 

All companies like ours have got to have a hub somewhere, Melbourne, Sydney, Auckland, Hong Kong or whatever, and they are encouraging companies, all types of companies, to be a hub in Singapore.

So here’s four million people – and they’ll make it work, because they’ll give you a tax scale of some 15% or so, they’ll fix that for ten years.  They do all sorts of things to make that the case.

The second thing – there are three things they do – and this is about innovation and moving ahead and planning into the future.  I’m saying, Australia, this is the generation where it starts to get poorer from now on.

The second thing they want to do, is they want to become expert at water.  How clever is that?  Expert in the world at water and they’ve got great links in the Middle East.  Lee Kuan Yew visits Saudia Arabia.  I mean, that’s very clever.

The third thing they want to become expert at is oil.  They don’t have any but they want to be the best player to do it.

This is a country, a tiny nation state which is now so important in banking as a hub for airlines and all the things around like that, so consider that’s what Singapore is doing, and standing back from it ourselves and saying, what on earth are we doing?  What is it that is going to make the next generation – all those young people that Geraldine was talking about who have all had a pretty good time of it, in their twenties and their thirties and have known nothing but a good time.  Are they going to fight hard enough, and do they want to, and do we want them to, to make us competitive?

ANN SHERRY:  The story that has been printed a few times lately about China’s richest man and Australia’s richest man, who took his study at the University of NSW into solar energy and has turned that into a massive company in China.

That was university R&D in Australia.  It was university based innovation.  It had a bit of money initially but when it came to taking it to a commercial level and really making it work, somehow we didn’t have capacity to make that happen.

I think that’s not a bad analogy for the issues that we face.  So why wouldn’t we have thought we would be the world’s leader in solar energy?  Why wouldn’t that be our space?  Why wouldn’t we be the world leader? 

Look at the issues that we’ve got in our own communities and yet we left the solar business—

GERALDINE DOOGUE:  The Germans are also taking over on solar.  They’re just going gang-busters with our solar energy research.

ANN SHERRY:  I don’t have an answer to that, except to say that it seems to me there’s something not quite in our own value chain as a country that you can invest in the start up.  I mean, quite frankly, we did the hard yards on lots of that and then the rest of it disappeared.

It’s a bit like innovation without the execution, means that you’re left with a bit of IP that’s not worth anything and the execution has gone somewhere else.

Perhaps that loops back to Mark’s initial point, that having the idea by itself is not enough.  You've got to have the R, D and then the execution and investment to make it happen for it really to pay dividends to the next generation of Australians, which is what we should be investing in.

GERALDINE DOOGUE:  Mind you, Nik, when you read all your material, we’re outclassing the Brits and the Americans in all sorts of ways that we find hard to actually articulate, don’t we?

NIK KARALIS:  Yes, and it’s actually, when you get in front of clients they see the will to want to change and the energy to do things is quite remarkable.

I think the point about governments being involved is an interesting one.  They are lazy.  They are beginning to learn that we have to do something.

Our government in Victoria is embarking on a PPP program for most of its major projects.  For those of you that don’t know this, public/private relationship and unfortunately what the governments do - not in all the cases – accept the lowest price every time.

The project we’ve just won recently is the Melbourne Convention Centre, which is almost a billion dollars worth of investment for the State to bring in industry leaders from all over the world.

Our bid was $80 million over the public sector comparator.  We were funded by quite a large bank and investment group but it was able to convince to the government, not through the normal tendering process unfortunately, by going direct to the politicians, caucusing to the politicians, telling them why Melbourne needed the world’s best convention centre, so we could compete against the Brits, so we could steal the business out of Singapore – which is what we’re trying to do, and be aware. 

Everyone around us is trying to steal the tourist business, so at certain points I do congratulate the government for initiatives but it’s got to do things on its own and water is one of the big things that the government has got to act on.

GERALDINE DOOGUE:  I suppose I was just trying to get you to put words to, because I know you’ve really tried to work it out.  That our lack of hierarchy, and I’ve certainly met this in aid projects in Indonesia – it’s staggering how successful we are and we don’t quite realise it – our lack of hierarchy seems to work.  It’s actually an advantage, isn’t it, by comparison with some of the ways in which the big boys operate?

NIK KARALIS:  Correct, because we assimilate a lot easier and we’re not bound by class, so our success in London, for example, the company we bought, they thought when we first went and bought it, no, you can’t go and talk to this particular person because they went to this school and I went to that school.

We said, hang on a minute, we’re just Aussies, we’re going to go and do what we think’s right.  So we were able to transcend in London the class constraints that London operates in and in the Middle East the example is there, that the Americans didn’t want to know anything about the Islamic culture, and we said, well, what’s wrong with the Islamic culture, it should be embraced.

So it’s because we do cut through the hierarchy, we are polite, we get to the real issues, that we just jump over those global hurdles that a lot of businesses are too afraid to do.

MARK BOURIS:  I’m glad you said that, because we have a business in India.  It’s something we’ve been working on for two years and we launched it at the beginning of this year and we needed to get a licence over there and our Indian partners said, we’ll make an appointment – the Reserve Bank of India, which runs a thing called the National Housing Bank, which is like the licensing entity – said that we heard you’re opening up a business here – this is myself and G Money – you’ve got to come and tell us before you open the business up.

So I was sort of quite nervous that I had to go and see the guy in charge there, and the Indian team sent lawyers, Indian lawyers and investment bankers and all sorts of advisers and there was me, who made a presentation about a half an hour presentation, and it was amazing we cut through, like you just said, I just treated the guy like a normal guy, the head of the department there, the Indian guy, within 45 minutes he was sort of being very pleasant to us.  He even sent an email back to Australia and said – because India is interested in all the innovations that Australia has in capital markets, securitisation, licensing, the sorts of products Australia has in financial services – to your point – are probably the most sophisticated products in the world and the Indians were actually embracing - the bureaucracy was embracing it and our Indian partners have said, we can’t believe this happened, and to me it wasn’t all that unbelievable.  It was no big deal.  We just went in there and said, yes, we’re happy to help.  We’ll come in there and do a seminar for you. 

In five weeks time we’ll bring all our experts our from Australia and we’ll sit down and explain how it all works and that will push ahead our licence, and at the end of the day all it was was just the next point – just being Australian, and we’ve exported a product to one of the world’s biggest emerging markets.

GERALDINE DOOGUE:  What I’m getting is in the people who are doing well and connected with the world, there’s a real sense of push through and creativity and onward and ever upward.  That’s exactly what I detect.  I don’t know whether that’s going down the population.

I mean, Ann, you must reign over a wide range of talent in a traditional bank.  I know Westpac is hugely reformed and everything, but how do you bring along the bulk of your people who may not think of – that’s what I was trying to get at – themselves necessarily as highly creative but are very good people?  I mean, do you think that’s an issue?  I’ve got a small thing about this, about bringing the bulk of people along, not just the very bright.

ANN SHERRY:  But you don’t have to bring everybody along as though everybody has to invent solar panels.  You've got to give people context.  I’m actually with Harold, I think everybody in an organization has a contribution to make.  The art of it is finding the job that both suits that person when they can be really good at what they do.

I’ve got a lot of people who are great customer service folk and there’s a lot of innovation you can do at the front line of an organization, you don’t have to reinvent the next best financial product in the universe to do that, but quite frankly, giving better service to the next person who comes along has huge benefit for an organization.

GERALDINE DOOGUE:  And you call that creativity and innovation.

ANN SHERRY:  Yes, so I think we need to be careful that creativity isn’t some magic concept that you can only do if you’re building a wonderful building in the Middle East.  Creativity happens at quite micro levels in organizations, doing one small thing better in a slightly different way can generate a huge benefit for an organization and is just as creative often as doing some great big wiz bang thing.

So it’s not somehow a magic thing.  It’s not so magic that everybody can’t have a piece of it.

QUESTION:  My colleagues and I are bosses in the not-for-profit sector, we’re from one of Melbourne’s art agencies, eminently creative and innovative and I’m sitting here wondering how the formula applies to us.

I suppose if you replace the word ‘profit’ with the word ‘success’ and if you replace the word ‘success’ with ‘bums on seats’ and ‘sponsors’, ‘column inches in the paper’ and so on, you might have a formula that was relevant, but I think in fact in our line of business it sometimes can be quite the opposite, that the more creative and innovative you are, the less in fact people want to know you and the more out on a limb you get and the less bums you get on seats.

So there would be a line through that equals sign perhaps in arts organizations.  I wonder if that is a conundrum any of the panel might like to comment on.

SIMON MOORE:  I’m probably the most controversial person to have taken this topic, but I think the perspective we have is trying to put creativity and innovation against a goal or an outcome or a desire or ambition and I think the question in a not-for-profit is what are you trying to achieve and what is the end goal, or what is the aspiration, because creativity and innovation for its own sake in our business or in your enterprise endeavour can tend to isolate if it’s not directed towards the achievement of whatever that end goal is.

For us, just putting guys in a room and telling them to knock themselves out and be creative, without a purpose or at least a functionality towards achievement of a common goal for the organization, it really doesn’t get you to where you need to go, and I think that is where you end up in not-for-profit land as well.

My experience has been that a lot of the very best not-for-profits would put to shame some of the strategic palling and execution that we see in businesses, certainly ones that we have owned.

It’s the same sort of mentality, its focus to an end result, so at the end of the equation, instead of profit it is whatever the ambition or objective of your organization is.

But creativity, innovation, execution and a clear vision I think is what you need in all organizations.

GERALDINE DOOGUE:  But what if the clear vision is to be out of the edge, because I think that’s what you’re saying, if they have a clear vision, but it’s not a shared vision or whoever backs it is going to be always feeling that they’re not with the middle ground of the society.

SIMON MOORE:  I guess at the end of the day, you and society as a whole don’t want to be together – you know what I mean – if your goal is to be edgy and be out there on the peripheral – you can’t please everybody and if you’ve targeted a certain segment of the market place and a certain segment of the population, and they’re who you’re addressing, if they’re happy, then I think as an organization you should be happy.

To even survive there on a financial and support basis, then, that’s good.

HAROLD MITCHELL: In my experience I do believe a lot of the profits is – often you want to get into business and we want to get into the world that you’re in.  In fact, some of your companies obviously are not-for-profit – you didn’t plan that, but that’s what you get.

I think we’re in pretty good shape with a lot of our not-for-profits I’d have to say, because they’re very well run, they’ve got great wisdom at certain levels of it, they are involving in the community and they are involving on a world stage I’d have to say.

I just saw the experience of the Melbourne Symphony Orchestra, which can be called a not-for-profit because they don’t get enough money I suspect, but they’ve just done a wonderful and spectacular European tour of some of the great cities – Paris, Rome and all the things they did there.

We happened to be involved with them.  They’ve upped the anti of who they are, they now are probably in the top twenty orchestras in the world and all the things that they’ve done, and they’ve shaped that orchestra so that now it fits entirely with the community here in Melbourne and within the world.  They have been enormous about all of that.

So my message about the not-for-profits is, the really good ones, link completely with their community, with government and with business, and importantly, with the world, because more and more we simply won’t be isolated in any way at all and that’s the good thing about Australia.  It’s what I was saying before, that we can close our minds, that everything’s all okay, but it isn’t because it is so competitive, and whether that’s not-for-profits or business generally.

But what I find with not-for-profits – they’re always chasing money, I know that, but because of what you are, that you’re often so good at business, it works and works well.

NIK KARALIS:  I lament the response to that not-for-profit thing.  I think Australians suffer from this lack of philanthropy.  I think a lot of business leaders need to encourage, and I think it’s a reflection of the values of the organization is to do philanthropic exercise and support organizations.

So it is incumbent upon all of us to actually find those little gems and take them in on board, almost like under your wing.  So we look out for that all the time.

QUESTION:  I’ve got two questions regarding creativity and the first one is regarding creativity killers, bureaucracy is one of the major ones.  I was wondering if there were some tips or examples of how you manage to overcome that.  That’s probably directed at Ann, and the second question is do you believe in all the different areas of your organizations that creativity is innate or can it be learned?

ANN SHERRY:  I’ll take the first one. Tips for managing bureaucracies - bureaucracies work best when people are deferential.  I think less deference to hierarchy probably is the biggest bureaucracy buster there is, and if you know something and you think you’re right, then you should have the courage if someone’s blocking you or making it difficult, to go around and find someone who’ll listen to an idea or a way of doing things.

Somehow people lose the capacity that they would use in everyday life to perhaps persevere and to have the courage to just push it a bit harder and basically break through.

I think also the other symptom of bureaucracy, as I said, is committees and there was an example a few years ago of a whole lot of us who just banded together – and this was before I was running any bits of the organization – we banded together and we decided we would not go to any committee meetings for an entire month and see whether anything changed.

What happened, in fact, was the committees stopped meeting in the end because nothing really happened when people went or didn’t go, it didn’t seem to matter, so perhaps that was a signal that we should stop meeting completely and just find a different way of doing things.

Sometimes just pushing back a bit harder and maybe using a bit of creativity and innovation to stop things that are happening that are stupid does change the way things work in organizations. 

Never underestimate the power of individuals to change what happens by challenging it as well.  It just doesn’t happen that often, so sometimes when you do, it changes it quite quickly.

GERALDINE DOOGUE:  Innate or learned, creativity?

ANN SHERRY:  Buggered if I know, maybe we should talk to someone.

NIK KARALIS:  It’s primarily innate because it relies on a childlike state where you’re not worried about delivering an outcome, you’re playing with the ideas.  So that’s the innateness.

Can it be learned, yes, it can be learned, but it relies on what I call a collaborative principle, where you put that person that you think can’t contribute creatively with someone who can and the two together make something new.

So you can influence the non-creative by an affiliation.

ANN SHERRY:  That sort of suggests that creative is something magic though, doesn’t it?  I guess I’m slightly railing against the idea that there is a bucket that’s just called creative – there are people who are creative and there are people who aren’t.  Which in fact underlies the question, so I’m thinking about that – I’m not sure the world is that neat.  Don’t we all have creative moments or environments that make us more creative than other environments?

GERALDINE DOOGUE:  I don’t know.

ANN SHERRY:  Part of that is maybe we’ve got to create better environments for people to bring the best out in them—

NIK KARALIS:  Definitely.

ANN SHERRY:  --rather than that notion that you either are or you aren’t.

NIK KARALIS:  Definitely the environment or part of the office where there is the ability to storytell and adlib is very important.  If it’s a stifling environment, yes, the signs aren’t very positive at all.

But it is a state of mind, creativity.  Everyone can do it.  Everyone in this room can be creative, they’ve just got to turn a switch on in their brain that allows the freedom to be creative.

MARK BOURIS:  It’s all very well for us to talk about it because there’s a pot of gold at the end for us, there’s a motivation – it can be money or success generally within your own organization, because there’s a lot of proprietors or people at the top of the tree.

When you’re not in that category and you may well be a creative person, but you think, well what’s the point?  What am I going to get out of this?  No-one bloody listens to me anyway.

I think that then comes down to the environment that Ann creates for her organization, whether or not she can create that environment and unfortunately, the bigger the organizations get, the harder it is to do it, because you are protecting profits, you’re protecting shareholders, you’re playing to analysts, etc, and you’ve got these things competing all the time, so the poor innate person with an innate ability to create – which I think everybody has – says, I’m not going to do it, there’s no-one vying for me to do it, no-one gives a crap whether I do it or not, there’s nothing in it for me.  I’ll just get on with my job and go home at 5 o’clock and watch television or be creative at home perhaps.

GERALDINE DOOGUE:  Looking at the time – I better not be too creative with it – top tips – what top tips would you offer as your final parting message, Nik?

NIK KARALIS:  For me there’s about three or four tips, one is learn to document your thoughts.  Two, as a business leader, make sure there’s a reward system with your staff.  Make sure it’s part of their KPIs, so it’s part of their performance and commitment to actually give something, so to demonstrate that the values of your organization are supported and make sure your environments are set up in a way that it is encouraging.  So they’re the three tips that I would have.

HAROLD MITCHELL:  Mine are three also, which are simply this – you would have gathered from what I’ve said – never give up, never give up, never give up.

SIMON MOORE:  Mine would be to take the time to map out where you are today, where you want to go and then really take the time to plot the course between there, the process and what it is that’s important to get to the end.

It’s often you focus on the end and you really don’t draw a sensible pathway to get there, and taking that little bit of extra time and the ability to step back and think about it is the key.

ANN SHERRY:  First for me would be to have the confidence to do what you think is right.  I think confidence, we could put creativity, innovation and confidence in there because that is action oriented.

The second is to be who you are personally at home and at work, which we talked about before.  I think that thing about knowing who you are and bringing that to whatever your environment is is really important.

The third for me, particularly given we’re hearing it from the bosses, is to make sure that the environment that you create is the environment that aligns with the outcome you’re looking to achieve, and then within that creativity and innovation will give you the end gain that you want.

MARK BOURIS:  There’s a lot of things I could say, but just two things, I think the first thing is back yourself and then find someone else, whether it’s within the organization or if you’re in business yourself, find someone else who’ll back you.

GERALDINE DOOGUE:  I hope we can welcome you back again for the next BOSS forum and that you can apply all of this fascinating advice as you wish in your own lives.  Thank you very much indeed for coming along.

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