The impact of COVID-19 on industry innovation, skills and the need for training

About

Innovation can offer a pathway to economic recovery from COVID-19. The VET sector could assist by providing training for new skills required to implement innovations. Most of the 21 interviewed businesses changed their usual operations in response to COVID-19 but training in new skills was generally not necessary. Any training undertaken was short-term, unaccredited and internal. The VET sector requires structural changes to better serve industry during a crisis, including reducing course duration, focusing on skill sets rather than qualifications, online delivery where possible, and meeting skills needs in industries where VET has not been a traditional source of training.

Summary

About the research

The economic impact of the COVID-19 pandemic has been felt in some industries more than in others. Individual businesses within industry sectors have also responded in different ways. Some businesses with products relevant to the pandemic have capitalised on the situation by making innovations in their products and in their operations. Many others have merely adapted to the changed conditions, making changes to survive while under intense strain, as a result of reduced demand, disrupted supply chains and labour shortages.

Using semi-structured interviews in three case study industries (manufacturing; healthcare; and hospitality and tourism), this research documents the different ways by which businesses have responded to the pandemic and the extent to which innovation was an element of their response. It identifies the implications for the vocational education and training (VET) sector in providing training for any new skills needed for innovation under pandemic conditions.

Key messages

• Most businesses adapted to changing conditions during the pandemic, rather than innovated.
• A limited amount of training was required for the innovations or adaptations made, with most staff able to transfer existing skills to any new tasks.
• Where training was undertaken, it was mostly unaccredited and done informally on the job or via free online training (from government, industry associations or vendor websites). Where accredited training was used, such as in the aged care sector, it tended to be conducted online.
• Some businesses reported that VET was irrelevant to their needs (even pre-pandemic), while
  others reported that VET should be more agile or responsive to the conditions and provide training of short duration.
• Barriers to innovation during the pandemic included a lack of financial resources, limited innovation options and the conservative nature of their sector, as well as survival of the business being a higher priority. A lack of skills or inability to access training was not identified as a barrier to innovation.

Executive summary

Innovation^[1] is defined as ‘the introduction of a new or significantly improved good or service; operational process; organisational/managerial process; or marketing method’ (ABS 2020a). It can occur as a response to a sudden widespread change — such as a pandemic — and may require new or flexible skills in the short-term. For the purposes of this project, it was hypothesised that securing the skills for the new tasks associated with the innovations and adaptations resulting from the COVID-19 pandemic could be important for the survival of individual businesses, employment and economic recovery.

This project identified how businesses have innovated in their practices or markets to remain financially viable during the pandemic and whether the vocational education and training (VET) sector assisted them to equip their staff for these changes. Based on interviews with businesses in three case study industries — manufacturing, healthcare (including aged care and pharmacy), and hospitality and tourism — the research examined sectors that were substantially affected by COVID-19, in terms of trading, disruption of global supply chains, changing consumer demand, skills shortages and job losses.

Most of the businesses that were interviewed altered their usual operations in response to COVID-19 with the resultant initiatives most commonly described as adaptations (often imposed changes) rather than innovations. Both types of responses, that is, adaptations or innovations, and any subsequent need for skills development are considered in this report.

The use of VET to implement innovations/adaptations

Most of the adaptations and innovations implemented during the period of the pandemic by the case study businesses did not require training through the formal VET sector. Where training was required,
it tended to be conducted through informal on-the-job training or free online training (from government, industry associations or vendor websites) rather than through accredited^[2] VET. In many cases, workers’ existing skills could be transferred with little difficulty.

The aged care sector was the exception, where some accredited training occurred, especially in
infection control. This tended to be provided online by private registered training organisations (RTOs) and was either self-funded or paid by employers.

Online training was used by some businesses to upskill in web design, new contactless booking systems
or new student enrolment systems. This tended to be provided by software vendors rather than
through RTOs.

A lack of skills or difficulties in accessing training was not highlighted as a barrier to innovation in any of the case studies investigated.

Outlook for VET

Interviewees from the case studies had mixed views about the ability of the VET sector to meet current training needs, whether pandemic-related or not. A common theme from all three case study industries was that a future role for VET may lie in developing skills in leadership and management during crises (such as the pandemic, but also including floods, drought and bushfires) rather than technical skills.

Some respondents displayed a strong preference for short intensive courses or micro-credentials, which enabled businesses to be responsive to rapid change, although this view was not shared by all respondents, with some concerned about how such an approach would address enduring skills shortages. Online training was also seen as time- and cost-effective for consumers, although limitations in that delivery mode for some aspects of training, especially for hospitality and healthcare, were acknowledged. Businesses were generally not concerned with whether available training was accredited unless this was a requirement of the job.

Innovation and adaptation through the pandemic

The pandemic had exerted substantial impacts on almost all of the businesses interviewed, with most implementing a range of responses. The types of responses reported were highly dependent on the industry and their products or services rather than other characteristics, such as the size of the business or how long it had been established.

One commonly reported response across all sectors in hospitality and tourism and in some manufacturing companies was a reduction in staffing levels. Aged care, however, required additional workers, due to high rates of absenteeism and illness amongst staff. Similarly, manufacturers of personal protective equipment (PPE) reported having to increase staffing levels to cope with increased demand. For one manufacturer, this involved using personnel from the Australian Defence Force (ADF) to meet the labour shortage, an atypical solution.

Some businesses reported that they were able to ‘pivot’^[3] their operations in response to the pandemic, such as from:

• manufacturing fashion clothing to personal protective clothing
• restaurant dining to the supply of home-delivered fine-dining ingredients.

These innovations were often implemented to ensure survival and represented a response to
restrictions on normal trading, disruptions in usual supply chains or falling demand for their typical products or services.

Other businesses were either unable or unwilling to innovate during the crisis, as occurred with
the Global Financial Crisis (GFC) (Hausman & Johnston 2014). Barriers to innovation through the pandemic included:

• lack of financial resources
• limited innovation options
• sector-wide conservativism
• survival of the business viewed as a higher priority.

Some of these businesses focused on maintaining business as usual while coping with the restrictions and affected supply chains. Examples include the manufacture of gaming machines and food products. Other businesses, such as dentistry and those delivering first aid training, were so severely affected by restrictions they were unable to innovate.

Footnotes

1. Regulatory social distancing measures, working from home and infection control are excluded from this definition. They themselves could generate innovation, however, as part of the conditions related to the pandemic.
2. Accredited training leads to vocational qualifications and credentials recognised across Australia and is provided by a registered training organisation (RTO).
3. Pivoting in business is to fundamentally change the direction of a business when the current products or services no longer meet the needs of the market. The main goal is to improve revenue or to survive in the market.