Tony skinner 00:03
Hi, and welcome to the podcast channel podcastmybusiness.com.au. And today we have Dr. Danny Davis with us who is well known in business circles for innovation and governance and IT cybersecurity. We’ve got you on for a very apt purpose, but we’ll get to a few different things. So, if you want to find out more about the, we’ll say, the Optus hack, and how you can help be a volunteer and volunteer in different types of organizations, including linked I’ve got to make sure I’ve pronounced that correctly. Link community and transport. We’ve all seen the buses around then stay tuned. Hey, Danny, how you doing?
Danny 00:53
Pretty good yourself?
Tony skinner 00:55
Yeah, yeah. Look, can’t complain. Are you in Sydney? Yeah, Melbourne, Melbourne. Okay, well, you’re gonna get the same thing. Apparently. Today’s the last day for good weather for a little bit.
Danny 01:07
Yeah, I think you’re right. So rain is coming.
Tony skinner 01:11
Yeah, well, you guys are used to it in Melbourne. We don’t tend to get this many seasons in one day.
Tony skinner 01:17
Yeah, see? Are you got that even get it out of the way, get it done.
Danny 01:21
I was born there. I can stay dry this side.
Tony skinner 01:29
But that’s perfect. And talking about sledging and we’ll get straight into it because it’s apt. I don’t like doing podcasts that deal with particular themes. But when podcast when COVID hit two and a half years ago, I was initially not prepared to get into because I thought it’ll pass and whatever. But you know, some things won’t. And Optus and Optus being hacked is going to be a very, very big story for a very, very long time. And we were talking about governance and that the Board should have been and would have been aware about the risks.
Danny 02:07
That’s right up just will come and go. And there will be disasters in other places. The issue really and that the fundamental perennial issue here is that boards are not on top of it. There are risks in organizations that these organizations, large organizations who are very well well resourced, they have huge exposure to you know, the way we live in Australia.
Danny 02:33
Just not embracing and, you know, governance is at the core at this, the board is ultimately accountable. I’ve spoken directly, I guess, fortunate through my PhD work to be able to engage with about 60 directors across the ASX 100. directors across all of the AX 10. Seven of them are chairman. And talking to them about the way they engage a whole range of different complexity issues. business growth, innovation, and indeed, cybersecurity.
Danny 03:05
And this is just a real reminder, in case anybody had forgotten, that boards just aren’t engaged with the degree of complexity that’s required to survive. So in less they find the method to engage with it fruitfully they’re going to continue not to and they’re going to continue to do a bad job. The Optus one has been a huge embarrassment in the national scale, but it hasn’t actually taken them down. I’m here to predict that cybersecurity issues actually taking an organization of that scale down is not out of the realm of possibility. It could take them off the map.
Tony skinner 03:48
Yeah, well, certainly I mean, their reputation have taken a massive hit, they will lose customers. They’re expenses, just gone up. I don’t know what their cyber insurance would be like.
Danny 04:00
I think it’s one of those a really good point because insurance is a kind of a traditional thinking way of deal with cyber risk. And I’m not, by any means advocating not having insurance, but it’s not sufficient. They actually need to have a credible way of sitting there and being able to have hand on heart go, Yep, we’re under control. Not that, you know, things won’t happen. You can control any you can control a car you can control a train or an airplane, things will still happen.
Danny 04:39
But by being in control, you can make sure that you’re not falling out of the sky on a regular basis. The cybersecurity risks, the innovation disruption risks are just not being met on a on a competent basis at this stage. I mean, it’s a bit of an accusation, but I think it’s true. I think boards from what I have seen firsthand, and from the research that I’ve done as well, are generally just not engaged with the level of change and risk that is out there.
Danny 05:14
And seeing it through a risk lens is really only one window. And there are multiple windows, they need to be engaged in it, they need to be able to credibly stand there hand on heart and say we are sufficiently engaged in this, I’m going to use a term here that’s the one that came out of out of my research, which is the concept of future fiduciary.
Danny 05:36
So we kind of understand fiduciary responsibility. And it’s kind of the director’s ultimate responsibility to make sure that the, assets of the organization aren’t leaking out that, you know, people aren’t going home with wads of cash in their pocket and that kind of thing, making sure all financing is under control. And they know what they’re doing. Great. Future fiduciary says, Can a director assure not just, you know, finger in the wind and hope for the best, but actually assure that they are optimally invested in their own future. That all of the resource and efforts and actions of organization are actually optimally aligned towards creating value to creating what is meaningful value.
Danny 06:21
And that’s not just financial value. It’s non financial value, and Q cluding, reputational sustainability, environmental, ethical, can community value all these kinds of things? So, you know, value is a complex concept? Can they stand there and say, We are optimally invested in our own future with everything we’re doing? And there are few organizations? Who could honestly say yes to that question.
Tony skinner 06:51
Well, I think what’s interesting is that the role of directors has changed how you got to be registered and have qualifications and what have you. But back in the day, it wasn’t that long ago, you would have directors that will just turn up once a quarter for the free lunch and a cucumber sandwiches?
Danny 07:11
Yeah. Tony, I don’t think that’s changed. You know. It hasn’t been it has not changed. The qualifications, as you said, first of all, they’re not enforced. But you know, I don’t think that’s actually a path to an end, we’re actually looking for a capability up lift here, that the various accreditations that are out there, and even the various training courses, don’t engage. It is actually a much higher level of competency and capability.
Danny 07:47
And as I said, there are few if any, who are actually engaged with this appropriately. Now, what my research was into, was into how do you measure who is and who isn’t? And does it make a difference. And what I actually found was a series of competencies in governance, and I’ll come back to say what that means. Because that’s not just what happens, it’s not just the training that happens to the board. It’s a whole lot more than that. It’s organizational competence, to engage with local governance of sustained value creation.
Danny 08:23
And what I found was a way of measuring it, and a way of saying that those people who do have the practices in place to engage the complexity that’s involved in not just cybersecurity, which is kind of a downside risk, but digital disruption and global change and innovation, the people who can engage with that fulsomely make better decisions, and massively outperform. The leading example in my research is 800%, the head of the ASX index sustained over a 10 year period. This is this is not a fringe thing, it’s a survival thing.
Tony skinner 09:05
There’s a great word because as we discovered with COVID, yeah, things can change. And the traditional way of looking at disaster recovery with hacking and what have you, but even things like COVID Okay, hopefully, we won’t have another epidemic or another pandemic for another 100 years, but we will have another one, two or three or more in the next 100 years.
Danny 09:30
We will have other shocks, whether they’re a pandemic with we’re a war, whether they’re environmental, there are shocks ahead of us. So the the rate of change and the need to have, you know, this word sustainability is not just an environmental word. It’s about ongoing sustained viability through shock. It’s about being able to determine performance through change.
Danny 09:57
Yeah, I mean, he can put this back to the the old thing you know, we used to write strategies that were, you know, 10 year strategy. And it was a five year strategy. It was a three year strategy, it was one year strategy with a rolling window.
Danny 10:08
And now it’s basically just an action list on the back of an envelope. It doesn’t cut it.
Danny 10:14
They don’t large organizations, and the vast majority of them, this is on the back of actual academic research. Don’t have the practices in place to deal sufficiently with the complexity of their organization and their environment. That’s a bit scary. But that’s that’s where we’re at. You know, Optus is no surprise whatsoever. It’s not the only one when
Tony skinner 10:39
They’re just, that’s right. If not, then it would have been somebody else. And it will be whoever the next one is. And it’ll keep happening forever. But I guess also the concept of Wargaming. I don’t think these companies do anything like that. They’re all siloed. So you’re the director. So we’ve got the director deals with cybersecurity tick. But that deals with financial viability tick, but the director that deals with the auditors tick, and it’s all a tick box exercise.
Danny 11:10
Yeah, yep. So you hit on something really important there. And it’s not the war gaming, although, you know, war, gaming is fine. And I think it is a really important part of risk management, again, risk is looking at the downside. It’s actually that the point you hit on there is they’re working in silos. And you really need an integrated pattern, an integrated set of disciplines that bring together not just the activity and the downside risk, but the upside activity, where are we? How are each of us contributing? How does each of us see future potential. And, again, ultimately, the people who are using the best practices in this place, in this kind of area, can talk about the level of certainty that the organization has in achieving its future outcomes.
Danny 12:08
Most organizations can’t have that discussion, and are operating on very low levels of certainty where they really don’t believe it even when they say it. But it shouldn’t be a matter of belief. They don’t believe it, because history has proven that it doesn’t work. But it should not be belief, it should be fact, it should be measurement, it should be a consistent, and continuously improved version of measurement. And I know there’ll be people out there again, there are people doing it today. It exists, it can be done. And it works really well.
Tony skinner 12:43
Want to step from the for profit sector? Another tradition, we say not for profit im going to say for purpose sector, beautiful. Love it. Yeah. It’s not for profit is a misnomer. If you’re not making money to cover your costs and doing things, then, you know, I just say for purpose, so you stepped in as MD of link community, and transport. Have i got that right?
Danny 13:14
Yep. that’s Link Transport. Right. Yeah, that’s, that’s definitely in the for purpose, space. And look that, from what I’ve seen, and again, from the research and where I’ve come from, these are all on the same sphere. If ultimately, you’re looking at multi bottom line, you’re looking at financial and non financial value. It’s really up to any organization to determine what value is for them.
Danny 13:48
And there might be some organization that says, you know, we’re money only and we don’t give a rat’s about the rest, and that you could debate, you need to debate it’s actually the leaders of the board who needed to debate what is value, and they should have a discussion about social value and where they fit and different answers for different people. If you’re in the community sector, you still need to worry about the financial costs, you should be more worried about the about the full purpose because ultimately, you can say, you know, our reason to exist is to achieve this purposeful outcome.
Danny 14:21
Money is purely a means to an end, we need to assure viability, etc. But if we’re achieving viability and achieving nothing, we should just hand the reins to someone else and get the hell out of it. So yeah, look, it’s it’s been a I guess, it’s been the beginning of the pandemic, I read the room in terms of people’s ability to really get into some meaningful discussions in this space and decided I’d do something useful while while people were panicking and running around, screaming about the fire so you know, it’s been it’s been a good chance to kind of refresh the on the ground skills.
Danny 14:59
There is a Real alignment between what is happening in the commercial world and these large organizations, what’s happening and forefront of the accounting world. So there’s things like the value reporting Foundation, which it brings together integrated reporting and SASB. And a whole lot of those others for anybody has a measurement nerd out there. There’s huge global movements in this. And it’s all about trying to, again, engage with these multi bottom line outcomes in a measurement phase. The leading edge of that work, the work in global audit, practice, etc, is all trying to move to this future mode, multi bottom line future, again, this is the governance of value creation thing. It’s equal in corporate, it’s equal in community sector.
Danny 15:50
And it’s about to get a big lift in government. So federal government’s about to put out a wellness budget, the first Australian wellness budget following on from New Zealand and a couple of other jurisdictions. As I have said a few times, it has every opportunity to be a massive greenwashing exercise, that is still a potential, it’s really up to them. But done well. It actually brings a whole lot of social outcome measures that governments different governments have been working on. Unfortunately, each state and federal government has been working on a different set, but go figure, bring those into the budget and actually bring the federal budget is really a self contained item, looking at financial impacts from financial expenditures, and the long term financial flow of what will happen from today’s decisions.
Danny 16:41
Hopefully it brings in, does any of that make a difference? Do any of our financial measures, do any of our financial actions to any very investment actually create a better future? That’s where wellness budget, well being budget should go? It should actually measure things that matter to people’s lives and people’s futures, and determine, according to my future fiduciary, are we optimally invested in our own future? That same mantra, that same approach and interestingly, the same deep mechanics of how you actually do this, in practice, apply, in the government sense in the community sector sense in a corporate sense. And interestingly, in a complete sector and an economy wide sense? So there is a real method there for providing accounting and audit discipline using, you know, the leading edge of best best practice in those disciplines applied to the well being budget applied to is the Australian society putting its time effort and alignment towards a better future? Or we’ll get greenwashing.
Tony skinner 17:51
Well, I thought you’re cracking a joke, when you said government discipline I thought wow.
Danny 18:00
Naughty no but it you know, it’s there. Interesting. Look, every organization’s has its own unique culture, its own unique personality and government personality types fit within a particular span of of personalities. They mean, well, they want to do the right thing. They, you know, their fundamental problem is silence. Just as he picked up before, it’s a same problem. They put it in different language, because it’s about departments, and it’s about jurisdictions, etc, it’s silos, they have no capacity to reach across silos and cooperate between different departments or different levels of government.
Danny 18:43
Without an end, you know, he’s a real case in point for the corporates as well. In order to cross the silos, you have to go to the top of the tree, which all of a sudden means the Premier or the Prime Minister is responsible for the most trivial piece of cooperation across different departments. And it’s that same type of issue. It’s actually clearer and more easily observable in government than it is in the corporate, but it’s exactly the same thing. And the mechanisms, your integrated approaches to this governance, value grasping integrated bases are about providing the metrics where people can cooperate from within their domain and within their rules, but determine whether cross silo cooperation is good in terms of what the leaders have determined is value to atmospheric they’re trying to get
Tony skinner 19:42
And that’s right. Look, I’ve got to so we’re going to run out of time. So what I’d like to suggest is that we didn’t get into link very much and the community sector and the for purpose sector very much, but what I’d like to do is if we can begin after the budget I’d love to get your thoughts on how that’s gone with the community sector. And you’re talking how is going to be a good? What was the term you use not touchy feely it was
Danny 20:14
whether it’s greenwashing or whether it’s real. Or being big government, the complexity that we’ve got there, it’ll be a bit of both. Really, it’s all in the follow through, it’s what people do with it. I’m hoping it I’m hoping it activates thinking in this space, both in government and and and in community sector and corporate. But it may just wash over us. It depends what comes next.
Tony skinner 20:38
Yeah, yeah, exactly.
Danny 20:40
The future belongs to those who embrace it. You know that the challenge that I put out there is I’ve got very clear research that says massive out for performance for people who embrace complexity with discipline. And, you know, anybody wants to give it a go, they can? And if they lie, they will.
Tony skinner 21:02
What exactly will change you certain so, so one thing you can rely on? All right now? Okay, well, I’ll have a chat. So it’s LCT.org.au. If people want to find out more about link community and transport, and we’ll cap it off a little bit more
Danny 21:20
If you’ve got 30 seconds on that, you know, we’re we were titled Not for profit, like it all of the others, and decided during the pandemic had a bit of a look at ourselves and went, you know, what are we here for, you know, why are we here at all, we’re here for a purpose.
Danny 21:35
We’re basically bringing disruption to the care sector. We’re not doing that with a big stick, we’re not doing it with the kind of, you know, startup rapacious, money oriented approach, we’re just saying, change is needed. Let’s do it. And using my skills in innovation, and leadership and engagement and a bunch of other things to make that actually happen on the ground. So far, so good, it’s working well, and we’re getting a pretty warm embrace from people are saying, Oh, that time somebody has done something about this?
Tony skinner 22:09
Well, okay, I’ve thought of something. So talking about innovation, and the for purpose sector always looks at new ways of raising revenue, so they can do more things. I thought of, okay, I’m gonna put a challenge out to you. Have you thought of doing a delivery service like Uber, as part of your offerings, and use that as also a way of maybe making some revenue?
Danny 22:38
Yeah, look, it’s not the approach we’re taking. In a disruptive approach, we’re not so much looking at just starting off, spin off businesses. And there will be plenty of opportunities there. With a full purpose mindset, you look at the business opportunity and say, yes, we want it to produce a financial return because money is good. That’s great. Is it changing the way the sector behaves?
Danny 23:05
So we’re looking at services that yes, provide us financial benefit in some way, which could be greater efficiency, or it could be greater income, but we’re looking at ones that actually change behaviors. So we’re looking at ones that actually activate care in community, if we can support carers, if we can make older and vulnerable people more independent, more able to do their own thing, then that is a perfect example of something that has that multi, multi bottom line Halo, rather than looking something just because it generates cash. So it’s a really good, thank you for the time. And I really appreciate that. Back to that better decision making based on being able to look at decisions in the context of financial and non financial, purposeful value. So we’re choosing actions that are going to create behavior changes way beyond their own organization, and path for power on on financial return. Or even with slightly less good financial return, we’re getting so long as we’ve got balance for viability, and we’re moving forward, etc, we should choose the ones that have the greatest impact, both because it’s our purpose to exist, and it’s why we’re here and it’s where our efforts should be going.
Danny 24:29
You know, are we optimally invested in our own future, we’re doing the things that make the biggest difference for us. But it has that really positive halo effect that if you’re doing right things and you’re actually making a difference, you attract people to you, and that creates the next contract and the next partner and the next opportunity and the next delivery. So you know, these things have a way of echoing and building and supporting, you know, it’s what we’re doing within link on a smaller scale. It’s just an example of for profit decision making, you know exactly in the mode that you’ve, you’ve kind of raised there. But, you know, it’s like accounting. It applies everywhere.
Tony skinner 25:10
Cool. All right. Okay. Well, we’ll have to leave it there for now. But we’ll definitely catch up again after the budget and see what the response is to that.
