|
Rural Industries
|
Vision |
|
|
What's Shaping Rural Industries |
|
|
Serving
the Broader Community |
|
|
Corporate
Performance Indicators |
Our business is about managing and funding priority research and translating results into practical outcomes for industry development. Put simply, our business is about new products and services and new and better ways of producing them.
Here at RIRDC we have a special charter to foster new industries and to target high priority generic, cross-sectoral issues facing rural industries. We also provide research management services to a set of established industries such as chicken meat, eggs, honey, rice and horses.
This Strategic Plan is about each of these core functions. For each, it sets out our key objectives, strategies and performance indicators.
The research agenda is a long and complex one with important questions now being asked about such issues as the impact of high input agricultural systems on the resource base, the mounting gene technology debate, and the need to accelerate the pace of development of new industries and products. There is also the question of how to capture the gains that will come from the proliferation of the Internet as an information sourcing and dissemination tool.
Within such a broad and important agenda, RIRDC must focus its budget on priority areas. The framework for this is our charter and this Strategic Plan. Our annual budget is around $20 million and a part of this comes from matching industry levy funds. To an extent, the level of investment between RIRDC related industries reflects these matched funding arrangements. But the point that needs to be stressed is that we must focus our efforts, particularly in the cross-sectoral agenda given the finite amount of funds available for investment in that area.
RIRDC is about "Shaping the Future". To Shape the Future, we need to understand our present and its past, as well as the new forces affecting us. We also need, in one sense, to step out of the present to develop new ways of thinking and doing business. That process is not easy but is essential for a more profitable, dynamic and sustainable rural sector.
Bob McCarthy
Chairman
Our vision is for a more profitable, dynamic and sustainable rural sector.
To achieve this vision RIRDC will be:
RIRDC’s mission is to make and manage research and development investments on behalf of government and industry for the benefit of the rural sector. RIRDC has three core businesses:
The charter establishing RIRDC is detailed in the Primary Industries and Energy Research and Development Act 1989.
These core businesses differ in their research and development requirements as reflected in our strategic plan. But in each area the objective is the same: to invest research and development dollars in those areas that offer the highest expected payoff to the industries in the rural sector represented by RIRDC.
Evaluating the expected payoff from investments means assessing the riskiness of projects and giving consideration to future developments affecting the rural sector.
There are vast changes shaping the future economics of markets for rural products. While some changes are largely unpredictable, many others are.
We can count on the technological progress occurring and the world getting richer as a whole. Richer people mean changes in the form and place of the products they consume. And, as people get richer, they have different attitudes toward issues such as the environment.
The world’s population will continue to grow and place yet more pressure on resources. So the changes described below discuss some of the regular and reasonably predictable changes that will occur — and the research and development implications that follow.
For the unpredictable changes the only research and development implication is to ensure that participants in the industry have the ability to change and adapt to the new circumstances. That itself is a major challenge for the rural sector to face, and the whole issue of innovation and change forms an integral part of this strategic plan.
Rural industries exist because someone buys their product. The biggest consumers of traded rural products are in wealthy countries. And the modern consumers are changing — they are becoming time-poor but money-rich.
Consumers want more convenience, more processing and preparation, more eating out and they are becoming more demanding about the safety, health and nutritional aspects of what they are buying.
Markets have become more discerning with far greater choice. Consumers can now have fresh blueberries year round, but there is also a vast array of other products and services for them to spend their money on. Wealthy consumers do not just purchase calories to stay alive — they buy food, beverages and fibres for the satisfaction they get. Receiving a consistent quality product which represents value for money is the key to consumer loyalty.
The implications are that quality systems to deliver a consistent product to consumers are critical for success. Branding and marketing are crucial in the battle for the consumer dollar.
Indeed, for some industries it has been shown that the payoff for producers from research and development is far greater from investments aimed at increasing consumer demand than investments made at reducing supply costs. Identifying market segments and exactly what consumers want requires good market research and analysis.
Australia is one of the world’s large exporters of rural products. We have a large rural resource, but a relatively small population. Most of the increase in world population and incomes will occur in Asia.
It follows that the major growth in markets for Australia will be in Asian export markets, although significant growth can occur in Australia for import competing industries such as tea and coffee as well as for industries like "bush tucker".
A problem with export markets is that they are often subject to barriers — either tariffs or non-tariff barriers, such as quotas.
Following substantial worldwide publicity about the high costs of agricultural protection and the gains from reform, progress on reducing agricultural trade restrictions was made in the Uruguay Round. However, significant barriers remain and, in some cases, violation of the agreed rules has occurred.
The next review of agricultural trade is scheduled for 1999 and a lot is at stake. A strategy needs to be developed and implemented well before this review to maximise Australia’s chances of achieving further agricultural policy reform in key countries.
Apart from barriers to trade, the critical factor determining success is how competitive the product is for the quality being offered — a point that applies to both export and import competing industries.
Australia’s terms of trade for rural products has shown a steady decline over the last two decades. This decline in the terms of trade reflects the global increase in the productivity of agricultural production.
Whether or not this decline translates into declining incomes depends on the reasons for the decline. For many industries faster productivity growth in other countries has squeezed incomes.
The decline in profitability for major rural industries has widespread ramifications for sustainability and the state of rural towns.
Profitability is the key to investment in rural industries. It is also the key to sustainability of the sector — when profits are down, the resource base comes under pressure and there are fewer resources to address issues such as salinity.
Without higher profitability, the pressure goes on the resource base. Whether it is the lack of fencing off of sensitive areas in the rangelands or the lack of use of lime to combat acid soils in high rainfall areas, the most common cause is the same: insufficient funds to make the necessary investments.
In the past, ignorance has played a part in resource degradation but, in contemporary Australia, all too often the real constraint on sustainability is the lack of profitability.
But while profitability is a necessary prerequisite, it can't be at the expense of the longer term integrity of the resource base. The sustainability agenda is an intimate component of a profitability framework for rural industries.
Profitability can be improved only by improving the returns from sales, lowering unit costs or switching resources to alternative, more profitable enterprises. Improving returns implies better marketing and often involves improving the linkages and signals between the consumer and the producers.
Lowering unit costs mostly involves improving productivity. Switching to alternative, potentially more profitable enterprises implies investment in both time and money by farmers as well as developing new skills and acquiring new knowledge. For emerging industries, the hurdles to success can be high and the risks larger.
In addition, it is clear that government policies can have a substantial impact on profitability. As an indication, the National Farmers' Federation argues that an integrated package of reforms could, over the medium term, raise farm production by around 20 per cent and more than double farm incomes.
Whether it is better marketing, higher productivity, reforms in government policies or switching to new enterprises, a common thread underlies each strategy: more and better ideas and information. All too often the information on better ways to do things exists but the ideas are not taken up — either through ignorance or the lack of support on how to interpret and apply new knowledge.
The vast changes occurring in the world’s consumption and production of food and fibre means that our own agricultural industries must change and innovate if they are to remain successful. Research and development plays a key role in this process of change and innovation — generating new ideas and technical solutions to constraints on profitability.
The whole process of innovation from the basic and applied research to development, demonstration, and finally adoption and commercialisation is complex, involving many interactions and processes — many of them social and cultural.
Farmers are often isolated from the interaction with professional researchers and colleagues and, in small communities, conservatism is natural and common. Access to information in a user friendly form is often difficult and there are examples where new ideas have been oversold.
Greater end-user involvement is essential across the R&D continuum if this isolation is to be addressed.
Information technology (IT) is undergoing a revolution with far reaching consequences for accessing knowledge and establishing networks of individuals with common interests. This revolution is being driven by the rapid reduction in the cost of computing power and in the cost of communications.
The cost of computing power has fallen by 30 per cent a year in real terms over the past 20 years. Fibre optics and other technical advances look to increase the productivity of IT even further.
Vast sums of money are being spent on the Internet to enhance the productivity and accessibility of the service — investments which will pay dividends down the track. Farm business operators need to avail themselves of the advantages the information superhighway offers.
One of the large costs of business and innovation in the rural sector — that of remoteness and expensive communications — is changing rapidly as the real cost of communication plummets and new products such as video conferencing come on stream. Ensuring that a good proportion of farmers are "superhighway ready" is one of the leading challenges for RIRDC.
There is the opportunity to lift the level of adoption and innovation in the rural sector, facilitate change and thereby lift profitability.
Ideas can emerge from anywhere and turning ideas into maximum economic benefit depends on strong lines of communications between all parts of the system and the skills of the people involved. This people factor is a necessary precondition in putting ideas to work - the process of innovation.
The vision for the rural sector is for a more profitable, dynamic and sustainable sector. This vision cannot be attained unless the research results from RIRDC programs are adopted and put into practice. Most public funded research, by its nature, has a strong public good value. It tends to have wide applicability and a first priority is to focus on adoption. Some of the research outputs can be commercialised in the sense that the technologies can be priced but this commercialisation agenda is secondary to the fostering of adoption and innovation.
Notwithstanding this, the commercialisation processes can have their own set of incentives which foster adoption. And it is this commercialisation phase which often is the most difficult. Moreover, the skills required in this step are very different from those of the researcher. Risk taking, commercial sense and entrepreneurship are required. Often strategic links have to be forged with venture partners or capital raised on financial markets.
People with these commercial skills do exist in Australia — they are found, for example, in venture capital companies. Unfortunately, this need for commercialisation of R&D results has meant, in many cases, that demands have been put on the researcher to commercialise the results. We need to recognise the importance of specialisation: researchers should research and commercialisation should be undertaken by those people with marketing and commercial expertise. RIRDC can explore ways to enhance this commercialisation phase by contracting out suitable R&D results for commercialisation by those individuals or groups best suited to undertake it.
The vast macroenvironmental changes described above have major implications for RIRDC’s research and development program and are summarised below.
Within these common themes there are important differences between the three core businesses as follows.
|
New Industries |
Established Industries |
Future |
|||
|
Prospective |
Emerging |
||||
| Key characteristics | Viability largely unknown
Market potential and technical possibilities largely unknown |
Viability established, lacks critical mass
Market and technical knowledge rudimentary |
Markets and production techniques well establsihed
Refinement of exiting market and production techniques |
Issues affect all industries
Strategic, broad |
|
| Payoff characteristcs |
High risk
Small volume Big impact required for large payoff |
Medium risk
Small volume Big impact required |
Low risk
Large volume Small impact can give large payoff |
Medium risk
Very large volume Very small impact can have large payoff |
|
| RIRDC focus | Market analysis and testing required
Prove up technical possiblities Financial work with leading entrepreneurs |
Market research - consumer needs
Improvements to technical production and surmounting constraints Establish networks of participants and information systems |
Refinement of marketing strategies
Improvement of yields and productivity Focus on faster adoption of new research Build networks |
Global competitiveness Resilient agricultural systems and Human Capital, Communications & of Information Transfer* |
|
* All three core areas need communications, information transfer
and adoption
Last updated: 18 June 1997
Copyright © RIRDC
http://www.rirdc.gov.au/pub/strat1.html