Interview: David Thodey

Christopher Niesche speaks to the CSIRO chairman about technology, innovation and the need for greater collaboration between research and industry.

Over the past year, David Thodey FAICD has worn an Apple Watch on his left wrist. He is keen to stress, however, that when it comes to wearing new technology “it has to make a difference to my life.” He is not excited by technology for technology’s sake.

A technologist for four decades, Thodey was chief executive officer (CEO) at both IBM and Telstra, before moving to his current role as chairman of the Commonwealth Science, Industry and Research Organisation (CSIRO). His approach to his watch neatly sums up his attitude to science and technology.

“At the end of the day, science is about better understanding the world we live in. If we better understand the world we live in, that allows us to take action, be it for better communities, better social outcomes, better quality of life, or for better commercial outcomes. That’s what our job is,” he says.

“CSIRO’s job is to be the enabler of that. It doesn’t do it all, but it can work with many different parties and be that bridge. If we get that right, I think there’s enormous opportunity. We have some of the best people in the world working here and it’s our job to help them be successful.”

Role at CSIRO

Thodey took over as chairman of CSIRO in October last year and was excited by the opportunity to lead what he calls “one of the greatest government-funded national science and research institutions in the world.”

“It has made such a difference to Australia and I’ve always been intrigued with CSIRO and the wonderful people that are here,” he says.

“I think CSIRO – more than any other research organisation – is able to bring a multidisciplinary approach to big national issues and that is its unique value proposition and that’s what we have to continue to develop,” he says.

One example of the work being done by CSIRO is its involvement with airplane manufacturer Boeing on the development of a chemical reactivation process that helps reduce maintenance, labour and the risk of damage to the aviation giant’s aircraft. The work involves multiple disciplines including aerodynamics and the physical modelling of the plane itself, plus very complex chemistry at the molecular level. Another project was developing a new strain of cotton, involving genetic breeding, field trials and the development of sound management techniques. It has also conducted research into the nation’s diet.

In addition to scientists, CSIRO employs behavioural researchers and social scientists, allowing it to look at the societal impacts of scientific phenomena, such as natural resources management.

Broad view

Thodey’s own broad view of technology might be attributed to his undergraduate degree – a Bachelor of Arts in English and Anthropology at Victoria University in Wellington. He had always focused on science and maths at school and planned to become a doctor, but decided he wanted a more general education before starting his medical studies. “I took a little bit of a left-hand turn for a while in terms of doing an undergraduate arts degree,” he says.

He quickly re-entered the world of maths and science when he sat an aptitude test at IBM and joined the multinational computer company straight out of university. “When I joined IBM, it was in the late 70s and what they were looking for was logic and analytical capability. I then went through two years’ of training in what we now call computer science,” he says.

Thodey spent a year in Sydney training in technical and management skills, and says he is “forever grateful” for what he learned. Forty years later, companies are less inclined to hire staff with general education and then train them, instead preferring to hire workers with vocational degrees. It is not a trend Thodey welcomes.

“To train someone for a year or two is quite uncommon in today’s corporate world. I do think it is a concern because it’s hard to predict exactly what specialised skills we’re going to need in five to ten years, particularly if you’re running a big company,” he says. “Essentially, the skills you’re looking for are aptitude, flexibility and an ability to respond to different environments. If you can employ people with a broader education base and hire outside a specific discipline, then I think that can put companies in a better position in terms of responding to market dynamics.”

Back on home ground

At IBM, Thodey worked in Australia, Japan and the US, before moving back to Australia in 1997 as CEO of the local arm. By then he was in his mid-40s and had to decide whether to move to the US to continue his career with IBM or stay in Australia. He opted for a job at Telstra.

He had always wanted to work for a publicly listed company and be responsible for profit and loss and dealing with shareholders. “The challenge with a large multinational is that as a country manager, you don’t have control of all the elements of running a successful business.”

Thodey’s career at Telstra started as the group managing director of the mobile phone division. The CEO role “may have been a gleam in my eye,” but he realised he had to initially establish himself in an operating division before he could be considered for the top job. In fact, soon after he joined the telco in 2001, the company sought a new CEO and at that point Thodey wasn’t a candidate.

Instead, the Telstra board settled on US telco executive Solomon “Sol” Trujillo, whose tenure was marked by a fractious relationship with the government and sharemarket underperformance as the government pursued its plans for a National Broadband Network (NBN) independent of Telstra.

Thodey says he had a good working relationship with Trujillo and credits him with giving the company a much-needed shake-up. “Sol was a visionary and a great technology leader. He brought a boldness to the company that was really needed. He was a very strong marketer and he was very committed to what he believed. The challenge was his relationships – or the company’s relationships – with the government were not strong, and that became an issue,” he says.

When Trujillo resigned in 2009, Thodey was appointed CEO. Along with the very poor relations with the government, he also inherited the challenges of a declining market share, poor customer service and poor staff morale in the wake of all the changes and pressures on the organisation and indeed, the wider telecommunications industry.

The NBN challenge

The biggest challenge Thodey faced, however, was the Rudd Government’s decision to build the NBN, which involved renationalising the fixed-line telephone network owned by Telstra and using it as the basis for the NBN’s planned fibre-to-the-premises network. Not only did this require legislative changes, it also called for a very complex commercial relationship to be negotiated by Telstra and the government.

Thodey says restoring good relations with government was a slow process as it negotiated the NBN contract. “To re-establish some degree of trust to allow that contract to be executed took a long time. The only way you can do it is to be consistent, to be true to your word, and to have a degree of transparency and forthrightness in your deliberations,” he says. “It took probably 18 months before we got there. It was two years before the contract was signed and there were many stakeholders – it was a team effort”.

The key stakeholder for Telstra was its shareholders, says Thodey, and it was their interests he had to represent during the negotiations. “We were a commercial operation with responsibilities to shareholders; that was what I was in that job to do. That came with all the Australian Investments and Securities Commission’s responsibilities and it meant being very clear about what I could and couldn’t do,” he says. “We had to get to a solution knowing that the political ambition was to renationalise the network, so we had to be very clear about what our expectations were.”

Thodey agrees that ambition to build the NBN and create a high-speed connected Australia is “absolutely right”, but the challenge is how to do that in a commercially sensible way and manage the cost base as the technology evolves and changes.

The Rudd Government initially planned to lay superfast fibre connections to the vast majority of Australian homes, but this technology was abandoned by the Abbott Government as costs mounted.

Thodey says fibre is the “ideal”, but adds: “The challenge for a country like Australia, with 24 million people and an 8.5 million square kilometre land mass, is that fibre to the home can only be cost justified in the denser urban areas.

“Unfortunately, the reality is, as you start to get into outer metro and regional areas, the returns on relaying fibre to the home become less and less attractive,” he says.

Thodey says there was a tension between the NBN trying to implement government policy of fibre-to-the-premises and generating a commercial return at the same time. “If you were willing to make that investment and were not looking for a return – and that sometimes is the role of government – then that’s fine. But don’t set up as a commercial organisation. I think there was confusion between commercial outcomes versus social good,” he says.

Telstra legacy

Asked to assess his legacy at Telstra, Thodey gives a caveat before he responds: “Telstra is a very large company and it’s been around for a hundred years. CEOs are there for a period of time and then they move on. Any legacy you leave is always dependent on what others have achieved or the situation that you find when you get there. It is also dependent on the team of people you work with and guidance of the chair and board,” he says.

He says that during his tenure, there was a refocusing on the customer and that shareholder returns were very strong. At the start of May 2009 when Thodey took over as CEO, shares in Telstra closed at $3.36. By the time he left in April 2015, shares were sitting comfortably above $6.

Reflecting on his time at the telco, Thodey says he is most proud of having been able to re-establish the reputation of Telstra. In 2014, it was voted the most respected company in Australia in a survey by the Australian Financial Review and Hay Group.

At CSIRO, his first ambition is to maintain its standing as one of the preeminent, national government-funded research institutions in the world. This will equip it to partner with industry and work on issues that are important to Australia, such as climate change and water management.

Thodey also wants to support the organisation’s culture, morale and sense of purpose, as he believes one job of the board and management is to create an environment that is strong and diverse and allows people to be successful.

Budget cuts

These objectives are playing out against a backdrop of significant budget cuts, which CSIRO has suffered over the past three or four years. This is one of its biggest challenges, says Thodey. “You have to keep investing in the core of what you do. For CSIRO, that is scientific research and partnering with industry on national opportunities or issues. So, focus is very important and we need to make sure that we are outcomes-driven so that people can see the value that we create,” he says.

Thodey says a lot of people do not understand the breadth of CSIRO’s work. The organisation’s central role in the invention of wifi is well known, but less so is its work in climate science; carbon emissions, capture and storage; flow chemistry; and polymer development. To boost its profile, CSIRO needs to tell the stories about how its scientists are partnering with industry to really make a difference, and hopefully over time the organisation can attract more investment.

Improving Australia

Australia scores in the top 10 per cent in the Organisation for Economic Cooperation and Development league tables of scientific research, but falls down on collaboration with research and academic institutions, and in commercialisation. “We do great research but we find it harder to get it out the door and make a difference. What we think the real challenges are now, what we’re trying to do, is to address those big issues,” he says.

Thodey wants to ensure CSIRO remains a strong collaborator with universities, with other research institutions, and with government. “In fact, the mantra we have within CSIRO now is to be the innovation catalyst. What that means is to be a connector across all the wonderful initiatives going on across the country and to be a catalyst to bring them together so we make sure we get true outcomes,” he says.

The lack of commercialisation success in Australia is partly cultural, says Thodey. In the US, researchers freely move from academic careers into industry and back into research, but in Australia structures are more rigid. And in the US, there is a view that it is okay to be a good scientist and to make good money.

“At the end of the day, we should be recognising and celebrating great scientific research and great commercialisation. If we can do that, then we can be as good as anyone in the world,” Thodey says.

One role of government is to set up an environment that allows the private sector, government-funded groups and academics to work together to create value for this country. He welcomes the release last year of the National Innovation and Science Agenda – a government strategy aimed at helping Australia better commercialise its scientific research – and the government’s focus on science, technology, engineering and maths education, as well as its acknowledgement of the importance of a long-term strategy.

“Setting a long-term vision is very important for what we want to do. I do think that we need to have clarity around the areas that we want to focus on as a nation,” Thodey says. “That’s what government should be doing; then it’s our responsibility to spend that money wisely and to be accountable for it and to show real value creation. If we get strategy and execution right – then it will be a great outcome for our country.”

Embracing innovation

Thodey says running a research organisation is very different from running a private sector organisation. “You need to foster an environment that has a certain amount of structure but often what motivates scientists is solving a problem using deep insights into an area of chemistry or physics or engineering. That’s the climate you should create and, therefore, it needs to be innovative, it must be inclusive, and it must be collaborative as well,” he says.

As an IBM executive and Telstra CEO, Thodey had to stay abreast of technological changes and how they would affect his organisation, and this certainly still applies to his role as chairman of CSIRO.

He says boards need to bring perspective and views around addressing challenges or opportunities based on their own experience. They should read and draw on their networks so as to be aware and educated about the changes going on in the economy, in society, or in many cases now, technology. “Good boards bring that broader perspective to provide management guidance. Management are responsible for executing and driving the business, and the board can bring a broader context to the table and alert them to things that might impact their strategy,” he says.

Directors shouldn’t be afraid of the word “innovation”, Thodey says, describing it in its purest form as nothing more than finding a new way of doing things, such as running a process, building a product or transforming something.

“You can innovate every day – whether it be in a process or in product design – or in how you apply science to improve our lives,” he says.

“It isn’t purely about setting up an innovation fund – that’s part of it, but it’s also about recognising that innovation is important and giving people the freedom to think differently and to come up with new solutions to problems,” he says. “Don’t get caught up in the hype. This is real and just part of life and running a business.”