On the face of it, business innovation and community-led change are opposites.

Business innovation aims to boost the commercial and technology capabilities of business enterprises and the performance of the economy as a whole. Community-led change is focused on activism and people power, designed to foster innovation on social issues and self-determination, wealth creation and social cohesion in local communities.

Community-led change emphasizes improved wellbeing and quality of life. While business innovation is concerned with new ways of working productively that result in more sales, jobs and profitable livelihoods.

One is a clear economic development strategy, and the other a classic example of community development.

However, these two concepts have more in common than first meets the eye. Both business innovation and community-led change serve the ultimate purpose of creating better lives for people – both through earning a good living and having a good life.

Both also work for transformation, not business as usual. They are ambitious in their aims, whether it is re-inventing business offerings or even entire industries, or empowering local communities to generate and invest wealth locally.

Whether explicit or not, innovation, in its widest sense, is central to both business and community change activities.

Further, both business and community change share modern methodologies such as open innovation, crowd sourcing and co-design, aimed at welcoming and curating diverse perspectives. Both are tasked with addressing complex societal and economic challenges and opportunities that don’t have easy answers.

Official efforts to monitor and report on Australia as a wellbeing economy, measuring both economic and social progress, is recognition of the interdependence between the two and the added value that results for both.

The shared purpose between progressive economic and social initiatives is often masked by narrow understandings of the active ingredients of business innovation. Namely, business innovation is equated with new-to-the-world technology or scientific breakthroughs, R&D spending and linear ‘mind to market’ commercialisation, or entrepreneurial start-ups. Little attention is paid to non-technological innovation and to steady, incremental ingenuity in mainstream businesses.

Sometimes called the human dimensions of innovation or innovation eco-systems, a wider view provides important insights into the realities of innovation. Drawing on previous Latest Thinking articles on this website and recent policy commentary by the Acton Institute for Policy Research and Innovation, a more open and dynamic picture of innovation emerges as follows.

Not just ideas, but impact

While innovation is more than just technology and research breakthroughs, it is less than just any form of creativity, bold new idea or entrepreneurial flair. Innovations hinge on execution; they must be put into action and make an impact by demonstrably addressing opportunities and problems that matter.

Innovation is distinguished from R&D because it puts smart ideas into practice, not just generating them. Innovation is a complex and uncertain process, open to serial experimentation and responsive to market demands.

As Gopalakrishnan Nair, R (2025) comments: Technology appears at the end of a science pipeline; innovation emerges through a spider’s web of interactions, false starts and surprises….. boosting innovation is not achieved by R&D spending but through building innovation capacity as well.

Learning, not ‘light bulbs’

The dominant concept of innovation as R&D is challenged by the literature and practice of innovation management. Innovation management explores how value from innovation is created, captured and deployed. (Dodgson, Gann and Phillips, 2013, Dodgson, 2018).

The key insight is that there are many ways of innovating, not just by original discoveries and inventions. Chief among these is learning—learning by doing, by using existing knowledge and productive technologies, and by interacting with others.

Be alert for innovation in how enterprises learn and absorb knowledge, how they manage their people, understand markets, organise relationships with customers and other key parties, and the business model they use for earning money and sustaining the enterprise.

Not a solitary pursuit

The popular view of innovation seeded by the gifted lone scientist or tech genius is questionable. Rather, innovation operates as an eco-system, involving multiple actors, intermediary organisations and first-class collaboration skills.

Innovation eco-systems thrive where businesses, researchers, universities, government agencies, consumers and entrepreneurs are co-located and enjoy dynamic interactions, and where issues are debated, knowledge shared and joint action taken.

Collaboration involves solving problems by cross-fertilisation of knowledge and expertise, managing relationships, building trust and shared interests, negotiating diverse opinions and outlooks, undertaking joint ventures and seeding stable industry clusters, innovation eco-systems and communities of practice.

Innovation for all

The case that innovation benefits ordinary people, not just knowledge workers, is still to be made. The public at large either ignores innovation as irrelevant or fears it as a source of job losses and service closures.

Innovation must be managed to benefit the wider population, including those who are most likely to become the casualties of economic transformations. 

A good starting point is with essential work and workers of the everyday economy, those providing the goods and services that sustain our daily lives. They include nurses, teachers, aged care and child care workers, those in retail, transport and the like.

The everyday economy is an intersection point between economic prosperity and social wellbeing. Action here is high impact because it serves the important and growing care sector. It also reinforces the social ties and human interactions crucial for social cohesion, resilience and a sense of belonging and community identity.

Though not well-recognised, strengthening the performance of the everyday economy is an innovation strategy-because it unlocks the untapped potential of communities.

Conclusions

These attributes of business innovation, from contemporary studies and practice, update how innovation contributes to economic success. But, at the same time, these attributes all serve a social purpose, which aligns with community-led change aspirations of diversity, belonging and empowerment.

The key insights linking community-led change and business innovation are:

• Greater value is likely from innovation initiatives that integrate both social and economic impacts, eg. businesses operating commercially as social enterprises such as mobile laundry services for homeless people, or cafes or plush toy manufacturers and retailers employing asylum seekers.
• Innovation is primarily social and relational, rather than technological and transactional.
• Societal benefits from well-managed innovation depend on the diffusion of ideas and technologies, old and new, across industries. (Gopalakrishnan Nair, R, 2025).
• The democratisation of innovation is a potent emerging force, through open innovation approaches, engagement of a broader array of stakeholders and action on issues that cross sectors.
• The concept of ‘place’ (e.g. local communities, digital spaces) is a unifying unit for analysis and action, where business and community interests converge and where innovative collaborative economic and community development pilots can be stress-tested.

In short, while distinct areas of work, business innovation and community-led change share more commonalities than differences. They share purpose, transformative aspirations, a commitment to innovation in its most up to date form, strong collaboration skills and methods of operation with high social and/or economic impact.

Their interdependence is an asset which allows them to learn from each other, and add value and opportunities to succeed.

REFERENCES:

Dodgson, M., Gann, D.M., Phillips, N. (2013), Oxford Handbook of Innovation Management, Oxford University Press

Dodgson, M. (2018), Innovation Management. A Research Overview, Routledge

Howard, J.H. (2024), Beyond the Lab: The Critical Difference between R&D and Innovation, Acton Institute for Policy Research and Innovation, 2^nd August 2024

Howard, J. H. (2025), Changing Policy Mindsets 1: The Critical Differences between the Science of R&D and the Practice of Innovation Management, Acton Institute for Policy Research and Innovation, 11^th March 2025

Gopalakrishnan Nair, R. (2025), Changing Policy Mindsets 2: What’s in a Name? The Role of Definitions in Australia’s R&D and Innovation Policy, Acton Institute for Policy Research and Innovation, 18^th March 2025

The Kennedy Company, (2022), Innovation: Where the Economy meets the Community, September 30^th 2022, https://kennedy-company.com/2022/09/30/innovation-where-the-economy-meets-the-community/

The Kennedy Company, (2023), Lessons from the World of Innovation Management, 10^th July 2023, https://kennedy-company.com/2023/07/10/lessons-from-the-world-of-innovation-management/

The Kennedy Company,(2024), High Tech Innovation Districts Under Scrutiny, Part 2, 3^rd June 2024, https://kennedy-company.com/2024/06/03/high-tech-innovation-districts-under-scrutiny-part-2/

Wilson, B. (2025), Building Place-Based Innovation Systems: The Challenge of Effective Capability Development, EDA webinar, March 2025, www.edaustralia.com.au

How does the power of ‘place’ influence economic prosperity and social wellbeing, resulting in greater impact from economic development strategies and practice?

This was the priority question explored by 300 economic development professionals, experts and partner organisations at Economic Development Australia’s (EDA) national conference for 2024. This has kicked off a year-long look at how the active ingredients of place-based policies and practice can be applied by skilled economic development professionals to achieve lasting social and economic progress desired by local communities, regions and nations.

Firstly, the power of ‘place’ lies in its broad definition. Place is often defined as a specific geographical location, precinct, town, buildings or area with a natural agglomeration of population and/or characteristics, problems or activities in common. Place can also refer to a position in an organisation, system or competition. Further, ‘place’ can have a more intangible definition, being a sense of belonging, a home, something in its correct position, or being in a community of interest with like-minded fellow travellers.

Each of these aspects of place—and others only more recently defined, like digital or virtual space—provide new angles on both economic development initiatives and their success factors.

Key Insights

Some significant new angles on the power of place emerged from the hard-won knowledge and experience energetically shared by participants at the EDA national economic development conference. While still a work in progress, the key insights connecting place and prosperity include:

• Proximity has changed. Once, physical proximity was key to activating local communities and neighbourhoods, business collaborations, industry clusters and local employment lands and other urban renewal and land use planning schemes. The terminology used was ‘local and regional economic development’. This has changed with the widespread access and mobilization of social media, resulting in online communities of interest, often self-organising and operating globally. While geographically close communities remain significant, there are more choices available for design and operation of economic development projects using smart technology.

• Digital space adds to demand and to new enterprise capabilities. The most productive attribute of working in digital or virtual space and using smart online technologies is that it opens up and aggregates new sources of potential customers. Usually, specialty businesses find it difficult and costly to sell to customers who are spread thinly internationally, e.g. Leyland P76 car enthusiasts, followers of minor sports, practitioners of heritage needlework crafts. Use of digital technologies brings this scattered potential demand into a single market, which is feasible to engage and serve and to experiment with innovative and profitable business models. In addition, radical advances in use of digital technologies can create and deliver transformative capabilities and products and services.

• Join up economic prosperity with social wellbeing, community with capital, and earning a living with quality of life. Typically, economic development functions are clearly identified as separate from community development functions, both operationally and structurally, especially in local government. This may be a lost opportunity. Such a quarantine makes it difficult for these two disciplines to understand and adapt best practice experience from each other.

Blurred boundaries: connecting economic and community development  

The answer is to connect both economic and community development practitioners so that they can realise the added value and enhanced impact of initiatives that intersect both approaches. (For example, high-performing business enterprises strong in technical skills, like science and engineering, rarely succeed without creativity and business acumen. These in turn depend on proficiency in arts, humanities and social science skills, such as marketing, critical thinking, analysis and communication. Similarly, for-purpose social enterprises are adept at deeply understanding consumer needs and tailoring services accordingly. There are lessons here for the for-profit sector in their operation of customer relationship management programs.) Capitalising on these cross-overs and blurred boundaries will enhance the power of place.

Wellbeing Economy

Place-based opportunities also emerge from action on a Wellbeing Economy, measured beyond just financial and economic indicators like GDP to include population health, housing affordability, transport and IT access, rule of law, pollution levels, loneliness, and many more. Significant research and enquiries are underway to ensure Australia performs well on social and sustainability wellbeing indicators. More than metrics alone, economic development professionals need to understand and act on the goals underlying specific wellbeing measures. Notable are publications by the Federal Treasury, research by the Centre for Policy Development and the Cities and Regions Wellbeing Index by SGS Economics and Planning.  EDA Chair, Jason Macfarlane, summarised the substance of this work in his conference wrap-up in one question: what is a prosperous life?

• Empower community-led change. We are witnessing the comeback of community, after decades of the conventional wisdom that we operate in an economy not a society. This is evident in the above developments on the wellbeing economy and the intersection between community and economic development. Further, the importance of community is reinforced in one key insight highlighted by several of the expert presenters in redefining both ‘place’ and ‘impact’ of economic development initiatives— the essential role of fostering community-led change.

Community power and the everyday economy

More than community consultation or engagement, the imperative is to give communities the opportunity to shape and lead the transformation they seek. This applies particularly to those not usually involved in direct decision-making in their community and/or those likely to become casualties of economic disruption. It involves making sense of economic development plans and what success looks like in the community’s eyes. It also means giving agency to the community to take practical action and see results. This involves taking the initiative to both question and listen deeply to the community in all its diversity and contradictions. Therefore, the performance of the everyday economy and what financial journalist, Martin Sandbu, terms ‘the economics of belonging’arerelevant to successful place-based economic development. The everyday economy, referring to the essential work and workers providing the goods and services that sustain our daily lives, is often overlooked. So strategic action in this regard adds to the power of place by unlocking the untapped potential of communities. Community-led change, with its focus on caring and social cohesion, can be an antidote to the rise of popularism, alienation and mistrust of politics and politicians.

Examples of community-led change being put into action in Australia currently are Community Wealth Building and Place-Based Capital initiatives. These aim to empower local people and places to maximise the financial and other resources being channeled back into their communities. These programs seek to foster wealth creation, ownership and investment by local people in local enterprises, infrastructure and problem-solving.

• Community identity, through branding, is a powerful asset. Distinctive community attributes, effectively communicated and authentically branded, are fundamental to the power of place. This is a strong potential success factor for economic development activities in both physical and digital spaces. Skillful application of a unique or well-recognised community identity makes it possible for small communities to reach and serve large global markets or to collaborate in supply chains or joint ventures with much larger partners.

Authentic and eccentric branding

Brand Tasmania was one case example featured at the national economic development conference. As for the previous action on community-led change, the first step was to ask the community and to probe beyond the obvious answers for a simple, compelling and unified expression of brand strategy that is uniquely Tasmanian. Tasmania has pioneered business offerings that are small, special and valuable—high quality wine, new whiskey varieties and the innovative and edgy Museum of Old and New Art. Their branding strategy was chosen to mirror the character of Tasmania, which was described as “hardships, left off the map, but do it well despite the odds”. A statement about culture, it is used to inform product branding, but also to shape the collaborations to help other businesses. Brand Tasmania responds positively to requests for help, but with conditions that offerings use Tasmanian ingredients, focus on quality and if others ask for your help, you give it.

Another illustration is the response to the question if the NSW Northern Rivers region was a person, how would you describe it?  The reply is: colourful, full of life, values-driven, leaning to left-field and keen on creative industries. This off-centre community identity was even more strongly expressed by Austin Texas, USA firstly in its mainstream tagline “how a honkey tonk town became a global tech hub” and then in a slogan reflecting authentic interests and lifestyle and a maverick pride, “Keep Austin Weird”. This slogan aimed at maintaining Austin’s off-beat counterculture community identity given the development of the tech hub and the accusation that Austin was becoming a ‘tech bro’ theme park.

These examples show that the intangible concept of community identity can have a transformative effect on real place-making.

Conclusion

In summary, there is a common thread running through these new insights on place and prosperity interpreted from the EDA conference. It points to the importance of taking a broader focus on what constitutes economic development and pursuing the wider and blended variety of economic development activities available to advance economic prosperity and social wellbeing.

Among the new directions warranting further investigation and real-world testing are:

• Working on place-based programs that incorporate both physical locality and digital space.
• Action at the intersection of economic and community development, and on the mix of social and economic challenges and solutions.
• Experiment with establishing community-led change projects.
• Learn about and pilot community wealth building and place-based capital programs.
• Priority to listening deeply to the community, starting with perspectives on distinctive community identity.

Authored by Narelle Kennedy AM as a commentary on the presentations and discussions at Economic Development Australia’s 2024 national economic  development conference. Narelle Kennedy is the Managing Director of her own business research and consulting company, The Kennedy Company Pty Ltd, and a member of Economic Development Australia.

This is the second article in a two-part series looking into high-tech innovation districts and similar clusters.

Community-led change meets innovation management

The previous article on high-tech innovation districts questioned whether they are living up to their promise. Focused on being ‘smart hubs’, they are concerned primarily with economic and commercial results, not community and social wellbeing. Perhaps they can do both. 

The crossover between lessons on managing business innovation and those on empowering local communities is fertile ground to both broaden and strengthen the capabilities of high-tech innovation districts.

Innovation is more than technology

Innovation management has been defined as “the strategies and practices that can be used to improve organisational (and community) benefits from innovation” (Dodgson et al, 2013).

Innovation management covers a wide research field, drawing from an array of perspectives including science, economics, engineering and psychology. Similarly, innovation covers a broad sphere from the traditional topics of R&D, intellectual property, technology and creativity to the emerging initiatives in design, social networks, open and social innovation, and innovation in business models. (Dodgson, 2018).

Innovation management studies seek to explain how value from innovation is created, captured and deployed.

The key insight for innovation districts is not to become fixated on powerful new technologies, as they are only one of many ways to innovate. Don’t undervalue innovation in how enterprises learn and absorb knowledge, how they manage their people, organise relationships with customers and other key parties, and the business model used for earning money and sustaining the enterprise.

The imperative is not more advanced technologies or discoveries, but to ensure a critical mass of adept, agile enterprises, competing globally and able to solve problems that matter to customers or communities.

Innovation for all

Next, avoid the stereotype of innovation working and benefiting only the boffins and nerds, the ‘knowledge elites’. 

Innovation should not be a rarefied concept, either ignored or feared by the public at large, because it is irrelevant or else, brings job losses and service closures. Innovation must be managed to benefit the wider population, including those who are most likely to become the casualties of economic disruptions. 

A good starting point is with essential work and workers of the everyday economy, those providing the goods and services that sustain our daily lives. They include nurses, teachers, aged care and child care workers, those in retail, transport and the like.

The everyday economy impacts on innovation because everyone, irrespective of income, is involved and a significant element of the everyday economy is learning, caring and social support work. This work reinforces the social ties and human interactions crucial for social cohesion, resilience and a sense of belonging and community identity.

Strengthening the performance of the everyday economy is an innovation strategy—because it unlocks the untapped potential of communities. This includes those left behind by technological and economic change. It has been referred to as ‘the economics of belonging’. (Sandbu, 2020).

 Work on the economics of belonging has been taken further in Australia by projects on place-based capital and community wealth building, which aim to foster wealth creation, ownership and investment by local people in local enterprises.

Action on the everyday economy delivers both economic and social outcomes, and is a useful crossover strategy for innovation districts.

Community-led action for economic development and social wellbeing

Finally, social and community wellbeing measures should be included in the design of the priority economic development projects implemented by those responsible for high-tech innovation districts. A vital feature is ensuring community members and residents are co-designers of these projects and measures, not just consulted along the way.

A useful tool is the Cities and Regions Wellbeing Index for 2024 by SGS Economics and Planning. This is a rigorous and data-driven set of spatial wellbeing rankings for over 500 Local Government Areas across Australia, with 7 wellbeing dimensions measured by 24 indicators. Going beyond GDP, it shows how place impacts community wellbeing.

Innovation districts can use the Cities and Regions Wellbeing Index to explore the measures and indicators most relevant for their circumstances, to start conversations and to begin the assessment process to measure their progress on social and community wellbeing outcomes.

Equally important as what to measure, is how to measure. Participation by community members as equal partners is a priority. Rather than sporadic consultation or asking people what they think of a plan already developed by Government authorities or other officials, communities should be empowered to lead the task.

A case example is the broad-based wellbeing economy plan in the Corangamite Shire in south western Victoria, Grow and Prosper Corangamite. 

The distinguishing features of Corangamite Shire Council’s approach include comprehensive interrogation of data sources to explore trends and policy approaches, to define unique needs, diagnose the Shire’s strengths and weaknesses and identify the most effective actions for change. It made deliberate decisions to span boundaries. For example, melding three previously separate strategy plans, recognising the links between community and economy, and deriving the crossover benefits between economic development and cultural industries.

A further distinctive feature was abandoning standard consultants’ reports in favour of producing an integrated economic prosperity framework from a close, rigorous and highly interactive and interdependent working relationship with community members. Community members included residents, businesses, artists and creatives, service providers and more.

The method used was based on a human or user-centred design process, where priority is given to the ideas and solutions of those for whom the program is targeted. The motto was “with you, not for you”.

Council asked and aimed to understand what their people and communities actually wanted and worked through potent solutions and imaginative actions with them. They shared knowledge and collaborated on knotty problems around a myriad of ‘kitchen tables’ to come up with a common approach that incidentally, addressed both economic and social issues, from Agriculture to Art.

Australia’s current major industry policy debates centre on how we can become a powerhouse of cutting-edge technologies to underpin self-sufficiency in industries of the future and to aid solutions to big intractable societal challenges. The focus is on renewable energy, critical minerals processing, advanced manufacturing and the like.

But, focus does not mean loss of vision.

Australia’s future prosperity will equally depend on the human dimensions of innovation as the technological; knowledge and problem-solving from the arts and humanities as well as from STEM disciplines; and progress on measures of social wellbeing as well as on economic performance.

High-tech innovation districts keen just to mimic Silicon Valley need to be more ambitious!

REFERENCES:

Dodgson, M., Gann, D. M., Phillips, N. (2013), Oxford Handbook of Innovation Management, Oxford University Press.

Dodgson, M. (2018), Innovation Management. A Research Overview, Routledge.

Sandbu, M., (2020), The Economics of Belonging, Princeton University Press.

Szafraniec, J. and Tjondro, M., (2024), SGS Cities and Regions Wellbeing Index, SGS Economics and Planning, May 2024, https://sgsep.com.au/projects/sgs-wellbeing-index

Corangamite Shire, (2023), Grow and Prosper Corangamite: Framework 2023-2033, May 2023.

This is the first article in a two-part series looking into high-tech innovation districts and similar clusters.

Beyond Silicon Valley

Everywhere wants to be the next Silicon Valley, a rich concentration of advanced technology enterprises, entrepreneurs and world-class universities and researchers, attracting global talent and investment, quality jobs and high-growth industries.

Think again. Experienced policy analyst, John H. Howard, scrutinises these much-lauded technology-led innovation places and finds flaws in what he calls their “rhetorical technology visions”. They are more about passion and persuasion, than data and facts.

Howard marshals the research showing that while these innovation districts are epicentres of collaboration, creativity and technology leadership, they are not proving universally beneficial. Innovation districts offer little explicitly to the general population, particularly those bearing the brunt of economic transformations.

Innovation districts can displace minority groups, being breeding grounds for inequality and gentrification. They disproportionately represent the interests of ‘power elites’, such as property developers, urban renewal agencies, research think tanks, politicians and the media.

They are focused on commercial incentives and economic returns, not social needs or community-wide aspirations.  Consequently, these high-tech innovation districts have downsides relating to equity, inclusivity, sustainability and social cohesion.

Other commentators go further to question whether Silicon Valley is a hub of creativity any longer, as it has become homogenised as a “self-segregated business park monoculture”, according to Tom Foremski, publisher of Silicon Valley Watcher.  

Foremski contends that Silicon Valley has lost its edge, a place for scaling businesses but not for original novel ideas. Insulated from everyday struggles, Silicon Valley creatives experience an essentially frictionless and predictable living. Little adversity or diversity diminishes Silicon Valley’s role as a massive innovation incubator of new, useful ideas skillfully executed for impact.

Saving innovation districts

The answer is not to scrap technology-led innovation places, but to expand their remit to advance community and social wellbeing, and environmental sustainability, as well as their foundation aims of boosting place-based economic development.

How to help high-tech innovation districts to make this shift?  The broad disciplines of innovation management provide valuable insights, together with civic innovation initiatives that foster people-led change in local communities.

In essence, rather than quarantining economic development from community development, the opportunities for linking initiatives in both areas and multiplying their joint impact should be explored and implemented.

The findings of the 2024 Edelman Trust Barometer illustrate how the interplay of social and economic considerations affects community acceptance of innovation as a driver of future prosperity.

It shows Australians—across income, gender and age– as particularly sceptical about the communication, management and impacts of innovation. No institution reached the trust threshold, and the media were definitely distrusted. Australians are also highly likely to feel society is changing too quickly and not in ways that “benefit people like me”.

High-tech innovation districts, therefore, need to make a persuasive and authentic case on how innovation activities improve the lives of ordinary individuals, families and communities, and identify ways they can gain more control over their future.

Deliberate attention is needed to examine the social and community impacts of planned economic development initiatives, particularly from the perspective of the lived experience of local people.

The headline message from John H. Howard’s commentary is the complex interplay of vision, power, and governance in innovation districts, precincts and hubs results in a social downside. The reality of these innovation districts fails to match the rhetoric.

Action to redress this deficiency in high-tech innovation districts is the subject of the second article in this two-part series.

REFERENCES:

Howard, J.H. (2024), Rhetoric and Reality in Technology Visions, Acton Institute for Policy Research and Innovation, https://www.actoninstitute.au/post/rhetoric-and-reality-in-technology-visions 

Foremski, T. (2016) Silicon Valley gets on the same bus everyday—innovation needs diversity, LinkedIn Pulse, 15 January 2016

2024 Edelman Trust Barometer, (2024) Innovation in Peril, https://www.edelman.com.au/trust/2024/trust-barometer

24^th May 2024

Contrary to decades of economic orthodoxy, forthright and prolific economist and author, Professor Mariana Mazzucato of University College London, is a vocal advocate of strong public sector leadership in collaborations that bring prosperity by addressing difficult societal challenges, the missions and ‘moonshots’ of our time.

In her early work on ‘The Entrepreneurial State’, Professor Mazzucato demonstrates that governments have led the way on transformative innovations from GPS technology, to internet searching and smart phones. She rejects as flawed the conventional view that entrepreneurship is the province of the private sector, with governments focused only on keeping the broad economic settings and conditions on an even keel and fixing market failure.

Rather, Professor Mazzucato envisages the public sector as a first funder of technologies, a shaper and co-creator of markets and a leading player in realizing the opportunities to enhance living standards and economic inclusion. Central to this is championing the complex aspirational missions that challenge us, such as net zero emissions and climate change; reindustrialization and the transition to green energy; enhancement and equity in health care and aged care; closing the gap on indigenous disadvantage.

But, activating this more radical approach is not a trivial exercise.

Sandy Plunkett in an InnovationAus.com article questioned it as Australia’s mission impossible. She pointed to gaps in Australia’s capabilities in both public and private sectors:

They range from (lack of) large project management expertise…..; siloed and disconnected ministers and their departments; an economic and industry structure that is dominated by the subsidiaries of foreign tech, defence, and industrial multinationals; and a public service that has been gutted of internal expertise.

So, how do Australia’s policymakers confront these hurdles and make a start on missions-based economic prosperity?

One answer is going local. 

Going local means undertaking mission-oriented problem-solving projects at the level of local communities. Working at this smaller geographic scale is more manageable and allows for a variety of different tailored initiatives to be experienced. Most importantly, local projects benefit from operating at the level closest to the community, with ready access to informants with local insights and to networks which can be distribution channels for information, learning and engagement with other stakeholders. 

However, the most significant reason for going local is that action in local communities provides an ‘innovation lab’ for high-impact policy that is fit for purpose.

The radical new thinking needed for mission-based initiatives to be implemented can’t rely on traditional policy development measures, nor just involve the usual suspects with strong existing links to decision-makers.

Action projects at local level can provide a live policy innovation experiment in the following ways:

• Joined-up policymaking and program delivery—collaboration at the local level across the myriad of government agencies and programs with a responsibility for some aspect of the mission-based project. Local players usually have existing working relationships with each other, not just case by case transactions. They are more likely to negotiate compromises and shared outcomes, and to collaborate for joining up different policy areas, or using a single point of entry for accessing different government programs.

• Embracing local differences— variation is at the heart of evolutionary change and innovation, so customizing universal or central government programs for local circumstances is a positive move for good policymaking. This diversity allows for autonomy at the local level in implementing programs and policies, while maintaining a coherent unifying purpose overall. Further, mission-based projects that prove successful in one local community can be rolled out in others, or scaled up to be a nation-wide initiative.

• People-centred change—-action at local level can build relationships and regular interactions between policymakers, and residents and local community members. This is more effective a communication channel than spasmodic consultation. It makes it easier for local people to engage, not just to provide ideas and feedback, but to be co-creators of locally-suitable policies and programs, together with solutions to problems that matter to them.

• Local communities as Innovation Spaces—-when dealing with the big intractable issues in missions-based projects, we can learn from the edge, i.e., make deliberate efforts to source fresh insights and imaginative solutions from other than mainstream views. The edge refers both to geography (local covers towns, cities, suburbs, districts, regional centres, remote settlements) and perspectives and experiences that are usually overlooked. Some local activities and places can be earmarked as Innovation Spaces, safe places for blue sky thinking and for all policymakers to experiment and stress-test early policy ideas.

Usually, prescriptions for Australia’s economic and social development feature centralised, one-size-fits-all policies, which are spatially neutral.  But given the more ambitious dynamics of a mission-based economy, the insights from the local level are more valuable.

‘Going local’ capitalizes on a positive side effect of the global pandemic, namely, the importance of place and the comeback of community.

REFERENCES:

M. Mazzucato, The Entrepreneurial State, (2013), London, Anthem Press.

S. Plunkett, Australia’s mission impossible: What next if we choose to accept?, InnovationAus.com.au, 15^th March 2024.

Australia has the opportunity to re-think its industry and innovation policy.  After decades of the dominance of small government, free market, neo-liberal economic settings, the promise of widespread economic prosperity and productivity gains has not been realised.

New approaches are in evidence, even if low-key and experimental.

• Designing industry policy as the operational means of addressing ‘wicked problems’ like intergenerational indigenous disadvantage or advancing aspirational goals like the transition to green energy. 
• Commitment to measuring social wellbeing, as well as economic growth, in the national accounts. 
• Supporting ‘smart specialisation’ in advanced industries and technologies where Australia can demonstrate a competitive advantage. 
• And simply, backing the policy goal of sovereign capability, of Australia being a nation that makes things.

Opinion is polarised on these new approaches and policy-makers puzzle over the programs likely to have most impact on improving the opportunities and living standards of all Australians.

A common critique of Australia’s industry and innovation policy is that it lacks coherence by being fragmented over a myriad of programs and agencies, and its effectiveness is diminished as modest resources are spread too thinly. 

By specifying selected priority technologies that are to be the focus of the National Reconstruction Fund and the Industry Growth Program, the Australian Government is placing a bet on proficient supply and use of those technologies being Australia’s best chance for an enduring competitive edge.

But as eminent innovation researcher and adviser, Professor Roy Green, cautioned “the National Reconstruction Fund is a financial mechanism, not an industry policy”.

Australia’s industry policy must be an intelligent and flexible mechanism for transformational change that addresses the deficiencies in Australia’s competitiveness and productivity, its economic complexity and industrial structure and its knowledge and skills base. 

The end goal is not merely being a technology powerhouse, but home to a critical mass of innovative competitive enterprises, providing good jobs and opportunities for a skilled and adaptable workforce. This drives sustained economic prosperity and enhances the quality of life, living standards and sense of social cohesion for all Australians.

Stronger industry policy

What are the key factors for re-shaping a stronger and more coherent industry policy for Australia? 

Firstly, an understanding that innovation, in all its dimensions, is essential to sound industry policy. The success of a broad range of innovation practices can strengthen manufacturing enterprises and redress industrial decline; open up imaginative new business offerings and markets; and apply technologies to pioneer fresh competitive capabilities.

Too often, however, innovation is perceived narrowly— commercialization of break-through technologies and discoveries; or simply creativity and bold ideas; or in entrepreneurial start-ups. Such single solution thinking extends to industry policy itself. Advocates abound—- for more new-to-the-world inventions; investment in STEM; better business links to universities; Silicon Valley-style tech parks; more funds for R&D; access to capital for scaling-up high-growth firms.

These advocates are warriors. They make a strong case for their cause and individual solution. But the missing link is how these disparate answers can be knitted together to make a positive impact on both Australia’s social fabric and economic performance.

Re-thinking the elements and dynamics for a robust industry policy for Australia needs bridge-builders, not single-issue warriors.

Bridge-building and collaboration

The importance of bridge-building is often under-rated, being seen as a set of soft skills like making connections, networking and being a go-between. To the contrary, bridge-building is a hard-headed intangible asset, better described as purposeful and sustained collaboration. It encompasses skills in negotiation, knowledge synthesis and translation, relationship management, collective problem-solving, and ability to appreciate different and contrary views and to broker acceptable ideas and compromises.  

Proficiency in collaboration is increasingly highlighted by innovation researchers and analysts as fundamental to successful economic and industry development. (Green,2023a; Forbes,2024; Merchant and Kastelle,2023).

This type of collaboration sets a high bar; it does not happen by accident, nor by periodic joint work between enterprises, nor through online matchmaking services and the like. Collaboration that impacts industry policy outcomes is relational, not transactional. It presupposes shared interests, mutual learning and trust. It operates on multiple levels with diverse but related parties. Collaboration of this calibre is a mutually reinforcing eco-system of interactions and interrelationships between those with a common cause.

An observation by Professor Roy Green on university-business links is illustrative.

Professor Green said commercialization is not all about a linear pathway from lab to market, but setting up a place-based innovation eco-system. Universities should engage with business, but not on a university campus. He commented that the way of the future which multiplied the benefits to firms beyond a single research project locally was constant interaction, not just one-off research activity between industry and universities and other researchers.

Making this type of collaboration a reality requires deliberate action.

Fund collaboration infrastructure

An immediate and practical step is to approve funding for collaboration infrastructure in the National Reconstruction Fund and the Industry Growth Program. This involves investment in intermediary organisations tasked with creating, nurturing and implementing industry-building collaborative clusters and eco-systems.

Canadian policy analyst, Nick Scott, illustrates the value of networked governance, his term for collaboration infrastructure, especially to achieve “lofty missions” such as reindustrialization or seeding new industries in declining regions or growing robust innovation hubs and jobs in advanced industries.

Intermediary organisations, designed for this purpose of bridge-building, are essential.

The skill set of these intermediaries is described as having “the potential to drive meaningful change by uniting diverse stakeholders around shared long-term goals……intermediaries can pool resources, leverage diverse expertise, (utilize collective intelligence), and forge connections between government and across sectors to tackle problems from multiple angles.”

Intermediaries shape industry policy

The other powerful bridge-building action the Australian Government could take is to ensure collaborative network governance approaches are used in the processes for reshaping Australia’s industry policy. Skilled intermediary organisations need to do this work, not special interest groups.

Appropriate intermediaries to lead the collaboration task of making Australia’s industry and innovation policy stronger and more coherent is an open question.

Calling all bridge-builders!

REFERENCES

Howe, B (2023), Australia’s industrial policy to be ‘re-cast’ for net zero world, InnovationAus.com, 2 November 2023.

Industry Innovation and Science Australia (2023), Barriers to Collaboration and Commercialisation, Barriers to collaboration and commercialisation | Department of Industry Science and Resources, 27 November 2023.

Howe, B (2023a), NRF is a financial mechanism, not an industry policy, InnovationAus.com.au, quoting Professor Roy Green, 30 October 2023.

Forbes, T. (2024), Unleashing Australia’s Economic Potential: The Imperative for Synergistic Innovation Eco-Systems, LinkedIn, 12 February 2024.

Merchant, N and Kastelle, T (2023), Intangible Labs, webinar presentation, 31^st March 2023.

Scott, N. (2023), Third Place Organisations, Networked Governance, and Mission-Oriented Innovation, Medium, 4 July 2023.

Australia’s quest for national prosperity and high standards of living and wellbeing revolves around whether Australia can be a maker or taker of industrial policy. 

That is, a choice for government between being hands-on and activist in selectively supporting local industries, or being minimalist, getting the factor conditions right (e.g. trade liberalisation, capital flows, microeconomic reform) and getting out of the way. 

The latter approach has been favored in recent decades, with Australia being a taker, i.e. doing what it is good at and buying in the rest. 

There are signs now, however, that the tide is turning.

The pandemic has demonstrated that it is important to be a country that makes things. Not just being agile and capable in rescuing the nation from a crisis, but in investing in the skills, capability and infrastructure for the industrial transformation that underpins resilience.

Political and community expectations are shifting towards government leadership, making and shaping industrial policy by more decisive and direct spending and intervention to safeguard local jobs and create new economic opportunities.

But this approach—‘picking winners’—is often said to run the risk of distorting markets, becoming a form of hidden protectionism and tempting self-serving industries to game the system.

How to mitigate this risk? The literature and practice of innovation management has lessons to make it more likely that activist industrial policy can avoid the traps and succeed in lifting the nation’s enduring economic performance and social wellbeing.

What is innovation management?

Innovation management has been defined as “the strategies and practices that can be used to improve organisational (and community) benefits from innovation” (Dodgson et al, 2013).

Innovation management covers a wide research field, drawing from an array of perspectives including science, economics, engineering and psychology. Similarly, innovation covers a broad sphere from the traditional topics of R&D, intellectual property, technology and creativity to the emerging initiatives in design, social networks, open and social innovation, and innovation in business models.

Innovation management studies seek to explain how value from innovation is created, captured and deployed. From a wealth of research and experience, Bessant (2022) summarises understanding of the dynamics of innovation as making change happen and creating value from new ideas.

Innovation management highlights the experiences and performance of business enterprises. But this is now being extended to innovation practices in non-profits, public policy, public sector service delivery and solving large complex societal challenges.

In short, innovation management is the study of how innovation works to make a positive impact on organisations and the community at large.

Innovation management and industrial policy

Innovation management is relevant to industrial policy as it is the means by which manufacturing enterprises, sectors and the industry as a whole redress decline; develop more productive and valued business offerings; open up new market opportunities and revenue sources; and become more technologically adept.

The Commonwealth Government has established a $15 billion National Reconstruction Fund providing investment in priority Australian manufacturing projects through loans, equity and guarantees. It has also announced a feeder initiative, the $392 million Industry Growth Program providing grants and professional advice for young start-ups and SMEs, as a pipeline for investment-ready projects for the National Reconstruction Fund.

These are significant initiatives aimed at a more potent industrial policy for Australia. Lessons and insights from innovation management can usefully help in their design and implementation. 

Lessons from innovation management

Learning, not ‘light bulbs’

The imperative is not more advanced technologies or discoveries, but to ensure a critical mass of adept, agile enterprises, competing globally and able to solve problems that matter to customers or communities.

Success through new-to-the-world technologies and discoveries is rare. More likely, the capabilities that lead to success come from learning by doing; learning by absorbing and using existing knowledge and advanced technologies; and learning by regularly interacting with others, including customers and competitors.

Most importantly, performance and productivity gains are realised when these innovation capabilities are brought together in a business model change, a recipe for giving customers superior value and earning a premium from doing so.

Knowledge flows, better than knowledge stocks

Innovation in industry development is not a solitary pursuit. Much mission-critical knowledge is held by others. Collaboration becomes a vital skill.

Collaboration covers the ability to share information and to learn, to be outward and forward-looking, and to solve problems by cross-fertilisation of knowledge and expertise. It involves managing relationships, building trust and shared interests, negotiating diverse opinions and outlooks, and brokering industry clusters, innovation eco-systems and communities of practice.

Encouraging flows of knowledge is more important for capability-building than increasing stocks of knowledge held by individuals and organisations.

Don’t forget the everyday economy

It is important that the benefits of innovation and activist industrial policy extend beyond high tech specialists and knowledge workers to ordinary people in the everyday economy.

Innovation should not be a rarefied concept, either ignored or feared by the public at large, because it is irrelevant or else, brings job losses and service closures.

Innovation must be managed to benefit the wider population, including those who are most likely to become the casualties of economic transformations. 

A good starting point is with essential work and workers of the everyday economy, those providing the goods and services that sustain our daily lives. They include nurses, teachers, aged care and child care workers, those in retail, transport and the like.

The everyday economy impacts on innovation because everyone, irrespective of income, is involved and a significant element of the everyday economy is learning, caring and social support work. This work reinforces the social ties and human interactions crucial for social cohesion, resilience and a sense of belonging and community identity.

Strengthening the performance of the everyday economy is an innovation strategy—because it unlocks the untapped potential of communities. This has been referred to as ‘the economics of belonging’.

To conclude, the key message for kick-starting a robust and transformative industrial policy through the Industry Growth Program and the National Reconstruction Fund is to prioritise the human, user-centred dimensions of innovation, as opposed to just increasing the supply of technology, science and research.

Successful innovation hinges on execution and impact, not just leading-edge technologies or creative ideas.

This means a prime focus on demand and capability at the level of the business enterprise, its management and workforce. Equally important is engagement in a healthy innovation eco-system of other business enterprises, regulators, researchers, customers, suppliers, policymakers and the like for shared learning, cross-fertilisation of knowledge and skills and collaboration.

REFERENCES

Dodgson, M., Gann, D.M., Phillips, N. (2013), Oxford Handbook of Innovation Management, Oxford University Press

Dodgson, M. (2018), Innovation Management. A Research Overview, Routledge

Bessant, J. (2022), Managing innovation: creating value from ideas, various publications and resources. See https://www.johnbessant.org

Nieminen, J. (2018), Innovation Management—The Ultimate Guide, viima, June 25^th 2018

Reeves, R., Tomaney, J., Williams, K. (2019), The Everyday Economy: why it matters and how to rebuild it, London School of Economics and Political Science, April 7^th 2019. See https://blogs.lse.ac.uk

Sandbu, M. (2020), The Economics of Belonging, Princeton University Press

Atkinson, R.D. and Green, R. (2023), Can Australia catch up in the race for advanced industries? InnovationAus.com, April 13^th 2023

Based on a paper authored by Narelle Kennedy AM in response to a call for Capability Papers from InnovationAus.com.

Australia does not have to sacrifice social and community wellbeing for economic prosperity. Or vice versa.

Too often, political debates present a ‘winner-takes all’ trade-off between a better economy or a better society, between wealth creation and its equitable distribution. Australia’s public policy does not have to be locked into such binary choices.

A recent essay by Treasurer Jim Chalmers reminds us of the concept of ‘shared value’. He argues for a re-set to values-based capitalism in response to the serial crises of the Global Financial Crisis, the pandemic and now, energy and inflation shocks.

The Treasurer’s call is for a more progressive, inclusive approach to capitalism, without a choice between our economic and social objectives. Rather, priority goes to action that serves both goals. 

Why are binary choices between the economy and society so durable?

Partly, because of the adversarial nature of party politics. Perhaps because of the fracturing of debate into ever more divided and extreme outlooks. Or as economist, Ross Gittins, suggests, binary positions that shift from one extreme to another over time, are an easy way of communicating complex policies. They also serve as a short-cut substitute for necessary “hard thinking”. 

Not everyone agrees with the Treasurer’s enthusiasm for a new capitalism. Critics label his approach as highly interventionist and contrary to landmark financial and market liberalisation reforms of the Hawke-Keating era. Others minimise its contribution, arguing it is ultimately silent on genuine, far- reaching reforms to capitalism that result in sustained social dividends. They see the Treasurer’s efforts as a modest, not radical, set of ideas with a highly limited capacity for implementation. 

The Treasurer refutes these reactions with prescriptions for a reform agenda for modern times. He highlights: co-investment and greater economic co-operation; reform of institutions, e.g., the Reserve Bank and the Productivity Commission; and an overhaul of markets to be more informed and well-designed. He points to concrete current examples of policies and structures to serve as practical role models. 

Whether you agree with Jim Chalmers’ arguments or not, there are two good reasons to welcome the Treasurer’s more thoughtful long-form essay putting a different angle on issues shaping Australia’s future. 

Firstly, the fresh emphasis of its subject matter at the intersection of shared social and economic value. Secondly, the case it puts for collaborative problem-solving. 

Intersection of the social and economic worlds 

Jim Chalmers’ essay opens up the debate on capitalism. It questions the conventional wisdom of neo-liberalism, which has been the predominant, if not exclusive, driver of Australia’s public policy in recent decades. 

Not only is this orthodoxy uncontested, but its outcomes in terms of both business competitiveness and people’s wellbeing, are disappointing. This neo-liberal philosophy has effectively isolated economic decision-making from social concerns.

Now, the Treasurer has focused our attention on the intersection and interaction of social and economic aspirations. This allows us to explore the commonalities and interdependency of economic and social policy. Most importantly, we are invited to delve deeper into the dynamics of how creating shared economic and social value works in reality. 

The end result of this greater understanding is that decision makers potentially uncover more versatile policy options and more informed measures of success.

Earlier articles in this Latest Thinking website have contributed insights on shared value. They provide examples of the drivers and effects of aligning the commercial and social purposes of businesses. See Redefining Capitalism: More Than Money (March 2020) and Companies With Purpose: Jobs With Meaning (November 2019). These emphasise the importance of spanning boundaries.

Collaborative problem-solving 

The other important contribution of the Treasurer’s essay is its focus on collaborative problem-solving. 

This also involves spanning boundaries, particularly between government, business and community interests. A vital prerequisite is a combination of a common cause, shared intelligence and trusting and productive working relationships. 

Essential ingredients for identifying and implementing workable solutions to complex problems include the ability to embrace and make sense of diverse, even opposing, views and proficiency in critical and design thinking. Closeness to consumers and communities that policies are aimed to benefit is also essential. 

This does not happen by accident, but requires expert brokering of connections of both people and ideas, and skill at drawing out alternative plausible innovative solutions to problems that matter. 

One example of expertise in addressing challenging problems in an inclusive and rigorous way is the work of the Eidos Institute. See the October 2020 Latest Thinking article, Making the Contest of ideas ‘Shovel-Ready‘. Its key feature is the ability to foster uncommon connections, new ways of working and intelligent compromises. 

To conclude, it is worthwhile giving the concept of values-based capitalism a go. 

This concept has the potential to bridge previously separate ideas—profit and purpose, cooperation and competition, social and economic outcomes, urgent challenges and future opportunities— and to craft solutions to problems that to date have resisted easy answers. 

Better than stark binary choices and past orthodoxies, values-based capitalism offers a way to experiment with policies that simultaneously deal with historic vulnerabilities and advance both the living standards and the quality of life for all Australians.

REFERENCES: 

Jim Chalmers, Capitalism after the crises, The Monthly, February 2023.

Michelle Grattan, Jim Chalmers lays out agenda for pursuit of values-based capitalism, The Conversation, 27 January 2023.

Politics with Michelle Grattan, Treasurer Jim Chalmers answers critics of his values-based capitalism, The Conversation, 30 January 2023. 

Carol Johnston, Humanising capitalism: Jim Chalmers designs a new version of an old Labor project, The Conversation, 1 February 2023. 

Guy Rundle, Chalmers’ plan isn’t radical. Labor needs an alternative to the rule of capital, Crikey, 6 February 2023. 
Ross Gittins, A better economy comes from policy, not picking sides, Sydney Morning Herald, 6 February 2023