A frank discussion on grants, government’s role and getting our self-belief back

Panels don’t always cover topics such as unforeseen disasters attached to winning a grant or the untapped potential of propaganda, but the final discussion at the recent Spotlight on Scaling Up seminar did.

Simon Crane, CEO and majority shareholder of 95-year-old industrial and automotive supplier Lovells Group, shared that his company had only once applied for a state government grant, and it was a giant negative.

As he recalled it, Lovells set up a new division to build electrical systems for the NSW government's OSCAR trains, lost $25 for each dollar of support received, and then the government cancelled the project. 

“To this day I feel that it distracted me from thinking about whether this… new division of Lovells was really a good idea. I became so fixated on getting this rotten little grant that I didn’t really sit down and think ‘is this a long-term, viable business?’” he said. 

“Never have more than 10 per cent of your business with one customer. That is asking for trouble. Well I had 80 per cent of this company’s business with one customer, the [then-]NSW government.”

Martin Ripple, the Group CEO of machine tool business ANCA, said that the cost of doing business in Australia had increased in the lower single digit percentages every year for his company since 2015, citing the cumulative burden of new layers of red tape.

“My preference would be to stay out of the way, have some long-term policies, but by and large let business do business, let markets decide,” he recommended. 

“That’s where I see we should go. They’re getting too often involved.” 

Jon Bulman, Senior Director of Manufacturing at communications equipment supplier Finisar, said there remained a role for governments, and that international competitors were certainly helped by theirs. He wasn’t confident giving any particular prescriptions for assistance.

“Having been in several startups, I actually think the key ingredient to getting going is some passion, passion over an idea and a team that wants to drive that idea,” he shared. 

“Governments can’t create that. That’s actually a group of people or an individual seeding that.”

All three panellists shared certain attitudes in Australia were unhelpful for the industry.

Bulman, whose company has exported approximately $2.7 billion worth of products, cited a default tendency from high-tech startups to use Asian factories, when “there are things that can be done and done well in Australia”.

Ripple's company, like Finisar, exports almost everything it makes. He observed that companies looking to internationalise had “a cultural preset” to look to the US or UK, and that it was very easy to “pick the wrong country”.

“I would encourage everybody to do their homework, work with professionals in those countries.. before you go and invest,” he cautioned.

Crane – whose family history includes running the biggest copper tube plant in the Southern Hemisphere at Penrith – said that the government might have one really useful role in correcting attitudes.

“There’s a total lack of belief that Australia could ever make stuff again,” he said, before offering a tongue-in-cheek proposal.

“It’s called propaganda, actually. It’s been tried before in some countries quite successfully. It’s going to take, I would say, a quarter of a century of propaganda to convince the Australian people we can make things,” said Crane. 

“And children have to hear it from about the age of three. By the time they graduate with a technical degree from a university they’ll actually believe. But that’s pretty ideologically unsound.”

The below episode of @AuManufacturing Conversations is the “It can happen here” session recorded at our June 25 Spotlight on Scaling Up seminar, which is also available for download at most podcast platforms. Speakers are ANCA CEO Martin Ripple, Lovells Group CEO Simon Crane, and Senior Director of Manufacturing at Finisar, Jon Bulman. The moderator is David Martin, the Australian Industry Group's Director of Emerging Industries and Innovation.

Spotlight on Scaling Up was hosted by @AuManufacturing in partnership with AMGC, BDO, and the Australian Business Growth Fund.

Episode guide

0:50 – Session gets underway

2:00 – Panellists introduce themselves 

5:56 – The one government grant that Lovells won, the horrors attached to it, and the lessons learned.

7:35 – ““That was a great example of focussing on the grant, not on whether this is a good idea at all.”

7:50 – A lesson learned at Finisar from a difficult project, which led to “a period of pain”.

9:22 – It’s very easy to pick to wrong country before trying to export. Ripple's advice on this.

11:10 – Why Lovells is attached to making it here. “I come from employing a lot of Australians. I really like it and I’m just not interested in building factories overseas.”

12:29 – Finisar’s approach to production and its supply chain. “A good balance” has been established across South Korea, China and Australia.

15:30 – The “Australian government should” issue and why companies should maybe ignore it and be masters of their own destiny.

17:35 – Issues of scale versus the United States market. “It’s not one order of magnitude…difference.”

18:45 – A libertarian point of view.

19:44 – Government has a role, but it cannot supply the key ingredient of passion that startups need, believes Bulman.

20:52 – Creating a culture of believing we could do it.

22:05 – The mentality among startups of looking to Asian factories first.

23:18 – A case for propaganda to convince Australians that yes, we can manufacture.

24:10 – A question on access to finance from an audience member to the “landed gentry”.

26:40 – A question from Crane to ANCA about customer service, and an EOFY sales offer.

27:50 – Succession difficulties.

29:30 – Increases in the cost of doing business in Australia.

30:35 – “You can turn red tape into a profit.”

32:02 – Australian biotech and why it so often ends up overseas.

33:12 – The situation of being US-owned and owning a factory in China.

Further reading

Spotlight on Scaling Up event wrap-up

@AuManufacturing Conversations episode 3 – Jon Bulman from Finisar

The Sydney factory with a hand in half the world’s internet traffic

ANCA co-founders make Australia Day honours list

Australia’s niche champions – how ANCA sharpens the world

Manufactor hub at Penrith opens for business