PODCAST: Getting stronger, smarter and connected – NSW Department of Industry’s Peter Scott details the state’s strategy to attract defence business

Phil Tarrant:

G'day, everyone. It's Phil Tarrant here. I'm the host of the Defence Connect Podcast. Thanks for joining us today for a chat with a former serving Royal Australian Navy commodore who is now helping to drive the growth of New South Wales defence business, Peter Scott. Peter, how you going?

Peter Scott:

Yeah, good morning, Phil. I'm very well, and thanks for having me in this morning.

Phil Tarrant:

You've got your feet under the table. A couple of months in the new job now as Director of Defence New South Wales after a transition from the Royal Australian Navy, which I think from the quick bio I looked at, you started off in 1983 as midshipman.

Peter Scott:

Yeah, a little way back.

Phil Tarrant:

How's it going? Is it good?

Peter Scott:

Yeah, it's great. I am freshly appointed, Phil. Just started about six weeks ago and recently transitioned from a fairly lengthy career in the Royal Australian Navy. My ultimate role there was as Director General Submarines. What I saw there in my time happily some great performance across that capability in acquisition, sustainment, operations, and even an unprecedented workforce growth in the uniformed workforce.

What I know is that those great achievements were only made possible by a highly collaborative and really focused submarine enterprise. So as I do come into this role as Director of Defence New South Wales, I come in absolutely convinced of the value and the necessity of strong partnerships and close alignment between governments and defence and industry. I've seen the results when that doesn't work, and I've seen the results when it does. So that's a great motivator as I step into this role and this job.

Phil Tarrant:

I want to pick your brain today on some of the work that New South Wales in undertaking to not only underpin or support the businesses already operating within the state which have a particular defence bent but also the promotion of the state in terms of potentially helping to growth the slice of the pie for New South Wales defence business. But before I get there, just quite keen on your transition out of uniform into, I guess, a more corporate environment now. When you were on subs and working within the Navy, did you always know that you would lead the Navy at some point, and were you always thinking about what's going to happen in life after service? Is that a conscious thing or was it just an organic thing that's happened?

Peter Scott:

You know you're going to leave the service in one way or another at some time. My approach while I was serving was very much one of take a hold of the job you've got at the time, do the very best you can in that, and typically, good things will follow. For me, it was a pretty natural transition point. I had really reached a professional pinnacle as the head of the submarine profession, and some family reasons and other things, it was just a good time to make a move. But I didn't make a move with any clarity on what I would step into. I actually stepped out looking to explore and discover a few different things. Happily, this role appeared before my eyes as I was making that transition. It is quite a neat feat, and there's some great work to be done there, so I'm really happy to have landed in this spot.

Phil Tarrant:

The leadership skills that you used within the service in a uniformed environment versus in a more corporate environment now with people who won't have the same sort of culture in terms of servicemen, how are you finding that transition to drive and grow? Because you've got a big task ahead of you in terms of developing this part of the New South Wales government.

Peter Scott:

Yup.

Phil Tarrant:

Enjoying leading civilians rather than uniformed personnel?

Peter Scott:

Yeah, I am. I enjoy leading people. People are people. I've got a role here to recruit and establish what I'm describing as a compact team. We will need to be really sharply focused on the strategy, which I'll talk to a little bit in a moment, and the outcomes that we need. So I'm building that, selecting some great people, building that focus into the team.

One of the things we're looking to do is clearly not do everything ourselves because we're small in number, but we're connected to a very capable government, so understanding our own business in the first instance, but then looking to really understand all those capabilities that New South Wales government can bring to bear to support defence and support defence industry. So we're pretty quickly establishing working relationships with other parts of government like Jobs for New South Wales or Trade & Investment or the Office of Regional Development because they're all people that, depending on a company's needs or requirements or defence's capability needs, they're all people that can bring something to bear and support defence.

Phil Tarrant:

Let's have a chat about the strategy. The government released earlier this year the Defence and Industry Strategy for New South Wales, so the sentiment within defence industry is that perhaps New South Wales hasn't been as quick as some of the other states in really identifying and mobilising the opportunity to champion industry within New South Wales. Obviously, New South Wales is looking to counter that now with a reinvigorated approach to drive this part of government. Can you chat me through the Defence and Industry Strategy? What are the two or three real takeaways which are really going to shape New South Wales defence growth moving forward?

Peter Scott:

The strategy, I'll give you the byline that we're using, it's the Defence and Industry Strategy — Strong, Smart, and Connected. I inherited that byline, but I really like it because it not only describes New South Wales as a state, but it also describes defence industry within the state.

So if you start at the top, the "strong." To quote the Premier yesterday, so she said that New South Wales is a standout global economy, full stop. It's absolutely the case. Whether you look at unemployment rates or employment growth, whether you look at the total value of the economy relative to other states or, in fact, relative to many other nations, New South Wales comes from a position of tremendous economic strength. The "smart" is directly relevant to the strength of the population, the strength of academic and educational institutions and research institutions. And "connected" is about being connected not just regionally and interstate but also globally.

So all of those characteristics play into the defence industry sector as well, and they point to some of the critical capabilities and really strong capabilities of the defence sector in the state including advanced manufacturing and systems integration and cybersecurity and so on. So that's the byline of the strategy — strong, smart, and connected.

There's about five major themes that run through the strategy. They start with building stronger relationships, and I guess that points to that perception that you referred to there, Phil, focusing on strengths in those critical capabilities. It really is a strength-based approach to the sector. Building the future workforce, making sure that the upscaling programmes and the academic qualifications are there and available for people and encouraging people into the defence industry. There's a very strong focus on regional New South Wales where, of course, defence is very important as a investment stream and for promotion of new jobs and so on. As you might expect, a strong focus on innovation and commercialisation, so we're working very closely with many of the major academic and research institutions.

So it is broad, all-encompassing strategy. It's forward looking, and it looks to take advantage of the change in the strategic environment around defence in Australia and defence industry in Australia.

Phil Tarrant:

What type of role will the state take in terms of attempting to support the businesses that operate within New South Wales or New South Wales domicile to win these major defence projects? 195 billion has been allocated for defence spending over the next decade. It's a lot of money. What's the state going to do to really underpin its businesses to help get a slice of this?

Peter Scott:

I think the way I'd describe that is we'll take a tailored approach because the needs of a prime or the needs of an SME depending on what work they are competing for will vary, and the support that the state government can provide to those companies will vary a lot. So a big part of my job right now is actually listening, and we're working hard to engage with stakeholders and understand what it is that they need and how best we can support defence industry, to best support defence.

This actually goes back to a lot of work done last year in the development of the strategy. It was worked up in very close consultation with key defence industry stakeholders through the year, and it's continuing now through the conduct of a parliamentary inquiry. The strategy was launched in February of this year. In May this year, a parliamentary inquiry into the defence sector looking for opportunity to invest and grow that sector was launched. That's ongoing and will be through the next 12 months. That's fantastic for me because it's another avenue where we can get the ear of defence and defence industry and really listen to their concerns and shape our thinking about how we respond to their challenges moving forward.

Phil Tarrant:

For the SMEs and also primes within New South Wales, that consultation that took place to help shape the defence and industry strategy, what were the one or two things that universally they thought that New South Wales could do for them?

Peter Scott:

Universally, they are looking for the state government to be more vocal in their support of defence and defence industry. I think we're doing that. We're doing that through the strategy. We're doing that through the inquiry. We're demonstrating political understanding of the importance of the sector, and we're demonstrating political will.

A recent win was state government has been working quite closely with Thales as they soughtt to develop the maritime sustainment capability up in Newcastle. That work was announced by the Deputy Premier just a couple of weeks ago, and they'll be receiving our support to help revitalise a shiplift up there and bring some of that work back into Newcastle. In the bigger scheme of things, that's not a huge step, but it's a step in absolutely the right direction. It's what that company, what that port needed at the time, and it's moving forward.

Phil Tarrant:

These major defence programs on the way, in particular, shipbuilding, which South Australia and WA seem to be getting the lion's share of that work, but New South Wales businesses are able to participate in those programs as well.

Peter Scott:

Yeah, absolutely. The public discourse often focuses on acquisition, and it focuses on certain parts of acquisition like the assembly of major systems. That's not necessarily our strength. I mentioned before some of our critical capabilities in systems integration and advanced manufacturing and so on. So we look to shine the light on those capabilities that are strong in this state and bring them into those projects. It might not be at the final assembly stage.

Another area of defence expenditure that doesn't get quite so much light is the sustainment field. Over 30% of the ADF is actually based in New South Wales, and over 30% of its major systems are based in New South Wales. There's 80 bases and facilities resident here. There's over 20,000 service personnel in the state. So sustaining all that equipment, sustaining and operating those bases involves very large sums of money on an annual and ongoing basis. That is one of the sort of ... There's not a whole lot of focus and light goes onto that sort of defence and defence industry support. But it's there, and it's there in big numbers.

Phil Tarrant:

In terms of the capabilities of New South Wales-based defence organisations and the state itself, is there any ... Let's talk about this. This business, right? What's the points of difference with the New South Wales state's proposition to defence and defence industry versus the other states? What makes us different here?

Peter Scott:

It's the position from which we move, which is a position of strength. I mentioned earlier the economic strength, political strength, population and demographic strength. In many respects, defence is not proportionately a huge part of the New South Wales economy, whereas in other states, it's a very, very significant part of their economy. So it doesn't mean that defence and defence industry here isn't important; it's very important, and proportionately it's a great deal of the defence effort across the country.

Phil Tarrant:

And the Premier's right behind it, so the picture you paint in terms of it not being, as a percentage, a huge part of the New South Wales economy. That's quite a good thing in terms of de-risking, so we're not as open to changes in defence spending as other states might be and the subsequent challenges on workforces and lifestyles and all that sort of stuff. Is this high on the Premier's agenda to champion New South Wales as a place for defence? Or is it just one of many things in portfolios that she needs to manage?

Peter Scott:

There's plenty going on New South Wales, but I think the launch of the strategy and the launch of the parliamentary inquiry are really clear evidence of the state's commitment and the state's determination to work in this sector, improve our performance. Listening to the Premier speaking at a luncheon yesterday, she's absolutely recognising the opportunity for ongoing investment in many sectors across the state. Defence is just one of those, but it's a very important one.

Phil Tarrant:

You're now Director of Defence New South Wales, so you're tasked with driving this forward. Who are you ultimately responsible to? When they sit there after a year of you in the job and say, "Look, has Peter done a good job or not?," how are they going to work that out?

Peter Scott:

I'll give them an answer. My team has been established within Department of Industry, so I work to Simon Smith who's the Secretary of the Department of Industry. Obviously, that's a logical place for the team to exist. We work up to Minister Niall Blair who's the Minister for Trade and Industry.

That's a great combination for us as well because if you look at the focus from federal ministers, such as Minister for Defence Industry, there's a very strong focus on developing industries that are globally competitive so that we can not only compete well domestically but also compete on the international market and develop export markets and so on. That combination of us working within a portfolio of Trade & Investment is a really strong one. It's a natural fit, but it'll work to our advantage, I'm sure.

Phil Tarrant:

Interesting. You're quite fortunate that you can help steer this growth of New South Wales' defence industry with a foot in both camps. In the ADF, you've had 30-plus years experience working as a senior officer and now working within New South Wales government to fly the flag of defence industry. Looking back over the years that you've had in the navy in subs and other appointments, what were the sort of main frustrations that used to irritate or irk yourself and your colleagues when thinking about getting geared up for the job that you had at hand? So your relationship with defence industry, and now you sit on the other side and with that view, what are you going to do to help maybe massage perception to make the transition more effective to equip, I guess, our warfighters with the best and brightest out of defence industry?

Peter Scott:

The frustrations that you face through a lengthy service career, changes, you move through that career. So when you're working on a platform at the tactical level, they tend to be tactical level frustrations. And you don't need to and, very often, you don't have a view of the wider strategic picture that you're operating under. My most recent experience managing that submarine capability at the strategic level was great for understanding the necessity and value of taking the long view. We in Department of Industry describe our role as being there to create the conditions to enable sustainable and technically advanced and globally competitive industries. So taking that long view, realising that defence acquisition is a long-term game and setting up those conditions is the very best that I can do. In the short term, you've got to come up with some short winds. You've got to be making ground each and every day, but making ground knowing it is where you want to end up is really important.

Phil Tarrant:

Do you think your average sailor deployed on a ship or a sub or on a base somewhere has a relationship with defence industry? The defence industry now is a fundamental input of capability, and that's been a relatively new development based on the 2016 White Paper and subsequent documents, but do you think sailors and airmen and soldiers have a relationship with defence industry? Do they get it?

Peter Scott:

I absolutely do. You describe that as a new development; I don't think it is a new development. I think defence has always been a fundamental input. What's happened recently is it's been very publicly and at a very high level acknowledged as such.

Phil Tarrant:

Good point.

Peter Scott:

But where I see my own personal experience ... You come into a port. You've been deployed for four or five weeks. You've got a critical defect that's going to stop you from going out to sea again for the next four or five weeks. You've got three days to fix it. If it's not within your own abilities, you've got to get the defence industry expert there with the right equipment and the right knowledge to make a difference on the day on the spot.

We've seen that work, not work, and work. When it works, it's fantastic, and it makes an absolute difference to the operational effectiveness of the capabilities and the job that the people in the ADF are doing. So I think sailors, soldiers, and airmen in their own different ways will always have a relationship with defence industry. Sometimes it'll be at an arm's length. Sometimes it'll be very, very close.

Phil Tarrant:

What do you think industry can do to better support our servicemen and women? It's always an ongoing advancement. They're looking to deliver a greater value to the customer, the ADF, but what are those things, if you were able to chat with an SME or even a prime and say, "Maybe just focus on this. This is really going to enhance your service proposition?"

Peter Scott:

What I'm encouraging people to do is focus on the challenge and capability. Defence actually has some immense challenges ahead of it in acquisition and sustainment and operations into the next several decades. The ability for defence industry to understand what those challenges are, what those requirements are, and then shape their efforts towards meeting those challenges very directly is really important, and it's a great focus for everyone. Focus on the capability that ADF needs, use that to determine the capability that you in industry need, and then work together to bring it into reality.

Phil Tarrant:

Considering your role ahead developing or supporting the growth of New South Wales defence capabilities on a national stage, and it is very competitive. You've got some hungry states, and as you rightfully identified, the proportion of defence business for sustainment of these states in their local economies is a lot greater than what it is in New South Wales. We're recording from Sydney, so we're fortunate in New South Wales that we have a much more diverse economy that's not relying on any particular industry sector. When you sit there and think about the task you have ahead of you, what is it that really worries you or keeps you awake at night or those opportunities you think that you can really help steer the growth of New South Wales defence industry? What is it? What's the one thing?

Peter Scott:

I think any habit of less than healthy competition won't help us. We're certainly taking an approach of competition is absolutely vital and necessary. Otherwise, you won't have sustainable, globally competitive industry. But at the end of the day, each and every state is working towards on aim of national security and supporting the ADF in their efforts. A habit of healthy competition and an environment of healthy competition bringing the strengths of each state, bringing the strengths of each company or capability to bear at the right time and the right place will be what makes the difference at the end of the day.

Phil Tarrant:

So you're quite bullish and optimistic about New South Wales' capabilities in the years ahead?

Peter Scott:

I absolutely am. I think you can look back through literally centuries of history. New South Wales has been vitally important to defence for decades if not centuries, and defence is vitally important to New South Wales. I think as people build that awareness and understanding of that importance and the kind of activity between the two, we'll move forward positively, productively and achieve some great outcomes, not just for New South Wales but also for defence and the nation.

Phil Tarrant:

We have Pacific coming up at the end of the year.

Peter Scott:

Yup.

Phil Tarrant:

So you guys got a bit of a homeground advantages on your local turf. What are you guys doing for it?

Peter Scott:

Pacific has a very natural home here in Sydney. It's great that its conducted alongside the Sea Power Conference as well run by Navy. We'll have a strong presence there as Defence New South Wales, stronger than in the past from a government perspective. We've got 14 SMEs co-exhibiting with us, so we'll be doing everything we can to support them in their endeavours to shine a light on their capabilities. Of course, there's many, many defence primes who are headquartered or based in Sydney and New South Wales who will also be there at Pacific 2017. So the pack's pretty big for us. It's pretty big for the industry for the entire sector.

We've got a smaller but equally important conference coming up in August, which is the HunterNet conference up in Newcastle. That's the largest regional defence conference conducted in Australia. In fact, we're sponsoring that conference, and we'll be supporting the industries that are exhibiting up there. There's a bit of travel coming up. I'm heading over to DSEI in London in September. We've got many companies from not just New South Wales, but in fact that's a Team Defence Australia push over there to London. Really focused on that export part of defence industry for Australia. So plenty of activity, plenty of opportunities for Defence New South Wales to get out there, get engaged with industry, get engaged with defence, and be really supportive of those companies and the great capabilities that they offer.

Phil Tarrant:

Before we wind up, Peter, I just want to get your view on this investment marquee project underway, Badgerys Creek. What's the game plan out there for New South Wales Defence?

Peter Scott:

Badgerys is really taking shape as a possibly a once in a century development for Sydney and for New South Wales. It's going to change the shape and nature of Sydney. Within the wider development, we're developing a concept of the Western Sydney Aerospace and Defence Precinct. It is really conceptual at the moment, but there's some great opportunity in the aerospace and defence sector to develop a focused business park and bring some really strong capability into that area. Great opportunity for collaboration, great opportunities for jobs and jobs growth out there. We're not in the lead there, but we're working with many other parts in the New South Wales government to crystallise that concept, bring meaning and life to it, and that'll be a great opportunity into the future.

Phil Tarrant:

Interesting. Let us know how it all advances forward. It's good stories. It's good to see New South Wales being pro-active in terms of developing its defence industry. I think New South Wales is fortunate and has such a diverse economic base, but there's no reason why they should be overlooking defence because we have some very talented and capable businesses in this state, right across Australia obviously. I look forward to seeing how you go pushing this forward and corralling these talents into representing us on a national stage. Good luck with the job.

Peter Scott:

Thanks very much, Phil.

Phil Tarrant:

Thanks for coming in. Yeah, I've enjoyed the discussion. I'm particularly interested in that transition out of Navy into corporate life and how those challenges ... It's probably better to have over a couple of beers and let us know what's going on.

Peter Scott:

Yeah it's going well so far.

Phil Tarrant:

That's good. Remember to check out defenceconnect.com.au for daily news, market intelligence around defence industry. Don't forget to subscribe to the news at defenceconnect.com.au/subscribe. If you like to follow us on the social channels — Facebook, Twitter, LinkedIn — just search "Defence Connect." We'll be back again next week. Until then, buh-bye.