On Point – Encouraging SMEs to compete on the global stage

O'Callaghan also gave his thoughts about the current state of the defence industry, as well as what can be expected to come.

What is the feeling in Victoria in the SME sector? Do you believe they're keen to continue forging ahead in the defence industry?

Absolutely. The great news is that the federal government's decision to have continuous ship or frigate and submarine build underpins some certainty for the industry over a long period of time, as you rightly point out. I would think over the last 12 months from my dealings with defense industry players, there's a skip in their step.

It is the case that for many SMEs, their first orders won't come until downstream. That can be a challenge for them.

However, they know that there's opportunity for them and they can position themselves accordingly. Some need to invest in upskilling some of their workforce, employing more people, or improving some of their facilities, but they're on a journey to do that knowing that, given their skills base and the abilities that they've proven in the past, they can join that journey.

The great thing, particularly for young people, and in Victoria we produce more engineers than any other state basically, they can think about a serious 40-year career, not necessarily just working for one company, could be for a number of companies, but a 40-year career, which will give them good pay, great work experience opportunities at the advanced technology level, opportunities to travel as well, and to engage with players all around the world.

So, it's a really exciting time, to use the term that a former prime minister used. I think the excitement is clearly evident among the CEOs and their staff who I've been dealing with, for example, during this week.

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What is your advice to SMEs looking to emulate the "success stories" in the industry?

Well, I'm always a great believer in showcasing some success stories and I had a shadow minister in at the Victorian stand yesterday who said to me, "Who amongst the various players here can I have a quick chat to about how they've gone about business successfully?".

So, I took him to the Marand stand and introduced him to Rohan Stocker, the CEO.

Marand is a classic example of a company that started in the vehicle construction industry, got a bit involved in rail activity many years ago, but could foresee that the government's support for the vehicle industry was probably not going to continue and that led eventually to the demise of that industry.

They were very smart probably 20 years ago to think seriously about what could they do to develop a capability which would give them guaranteed, long-term income and they [were] smart enough to realise that that was in the defence industry space and what are they doing now, they're doing something like $400 million worth of work for Lockheed Martin via BAE for the Joint Strike Fighter F-35 program.

Interestingly, this week here in in Sydney they're now venturing into the maritime space. So, this was a small family company that's evolved brilliantly over a long period of time, an exemplar of how to go about doing business and I say to other CEOs who come to me and say, "Johnno, who should I talk to?" I say, "Go and have a chat to the Marand team."

What about those success stories? Are they willing to help out possible competitors?

Happy to share their experience and do it in a way which is not only encouraging because they can see the benefit for industry more widely and that's a great thing. I might add, by the way, they're not on their own.

There are many companies of that ilk, not just in Victoria but all across the nation who can share their experiences in a sensible way, which will benefit those perhaps who've never been in the industry, who are faced with the challenges of entering. Many of them can do so and do so successfully.

How can SMEs go about participating in AIC content?

Well there's huge opportunity to participate obviously, but I think the key element here is to just reflect on the capability that already exists in many of those companies and this is across Australia-wide, not just in Victoria but particularly in Victoria, from my perspective.

There are companies who have been very successful supply chain members for prime defence contractors like BAE, Thales, Raytheon, Lockheed Martin etc, and they've proven their credentials from a domestic perspective in regard to development of defence capability, increasingly on the global supply chains of each of those companies, and they don't just supply to one of those companies in the main.

They supply across the board. Importantly too, they've got skills in other civilian domains, so that allows opportunities for technology transfer, for skilling transfer and upgrade, and investment in R&D. I should also point out that I'm the chair of the Defence Science Institute Advisory Board in Victoria, which has a principal role of facilitating connecting defence industry firms with defence research arms in the universities, not just in Victoria but elsewhere.

That institute has now been duplicated in other states using the Victorian model, which has been terrific. But the point about saying that is that this is about developing smart technology to give commercial outcomes which are of benefit not just to the Australian Defence Force and for the Navy in the case of this activity here this week, but also for other civilian activities as well. We do see that transfer coming from that research. Increasing those relationships will continue to develop. In fact, interestingly enough, we're now developing relationship with universities in Tasmania to assist them to join this activity. I should also say that we've got a PhD program, which is running brilliantly in regard to the Defence Science Institute activity, and this has been duplicated in other states as well.

So, I'm very upbeat about the confidence that the industry players have. It's a tough journey for many of them because they've got to upscale and up-skill to meet the requirements of the increased demand from these programs, but the programs are going to last for many years. The industry enterprises which are evolving as a consequence are great for the nation and great for the health of these companies but more particularly great for work opportunities for their people.

Podcast

To listen to the full episode of the Defence Connect podcast with Victorian defence industry advocate John O'Callaghan, please click here.