DIFFERENT PACES FOR DIFFERENT PLACES

Australia’s prosperity is spread unevenly. While measures of economic growth and wellbeing have improved overall, many people and communities feel left behind.

This is understandable given disparities such as:

  • A strong rise in national income in 2016, but very weak growth in the wages of workers.
  • Just ten locations across Australia that are contributing over half of the nation’s economic growth—the largest share comes from Sydney and Melbourne as major cities, but regional centres and outer suburbs are languishing with low or no growth.
  • Greater Sydney (with GDP growth about twice that of Australia’s) has a marked divide, with jobs growth in the centre and East but population growth concentrated in Western Sydney.

This variation in prosperity between different places reflects the naturally-occurring benefits of agglomeration. It also results from the spatial effects of changing patterns of economic activity, with strong growth in the services sectors and the relative decline of traditional manufacturing and some resources industries.

For example, Sydney performs well in financial and professional services which concentrate in and around the CBD, contrasted with the ongoing reduction in manufacturing mostly located in industrial estates dispersed in suburbs.

However, communities on the wrong side of this prosperity divide should not be resigned to being less well-off and disadvantaged in their access to jobs, services and opportunities. These communities can shape their own future, both as an economy and as a society, by learning from what the Brookings Institution calls “the new geography of innovation”.

Brookings researchers, Bruce Katz, Julie Wagner and Jennifer S. Vey, have reported on their investigations into the shift from innovation being dominated by isolated, stand-alone Silicon Valley-like corporate campuses and technology parks, to emerging compact and vibrant ‘innovation districts’. These innovation districts have a mixed use of housing, jobs and social amenities which attracts both employers and talented employees, promoting knowledge-sharing and connections for better economic and social outcomes for these areas.

The rise of innovation districts reflects the growing trend for ‘open innovation’ and creative problem-solving across diverse firms, disciplines and sectors. Innovation districts are also a response to the preference of people to live, work and play in dynamic neighbourhoods that are walkable, liveable, and offer choice and the possibility of serendipitous encounters and relationships.

Innovation districts are geographic areas which foster uncommon connections between firms, people and places, resulting in an innovation-friendly environment for generating and using fresh ideas and knowledge, and spurring the growth of new businesses and jobs.

Brookings finds that innovation districts work by combining economic, physical and networking assets. This acts not only to advance economic development, but for social inclusion, liveability and sustainability of communities.

Economic assets are the organisations that drive or undertake innovation practices including companies, universities, research and medical institutions, entrepreneurs, start-ups, incubators, schools, training bodies, and supporting services and amenities.

Physical assets are the public and privately-owned spaces—buildings, co-working areas, open spaces, streets and plazas, broadband, transport and other infrastructure—designed and organised to stimulate new and higher levels of connectivity, collaboration and innovation.

Networking assets are the relationships between the actors in the innovation district that activate quick and seamless flows of knowledge and the building of trust, essential for collaboration and business alliances.

Innovation districts can take many forms, and are evident in cities from Barcelona to Stockholm, to Seoul, Manchester and London. But, from its analyses in the US and Europe, Brookings identifies three types of innovation district:

  • Those emerging around anchor institutions like universities and hospitals, e.g., Cambridge Massachusetts around MIT.
  • “Re-imagined urban areas” near historic waterfronts and industrial and warehouse districts, e.g., South Boston.
  • Reformed science parks with the inclusion of housing and new activities including retail and restaurants, e.g., North Carolina’s Research Triangle Park.

While innovation districts are a feature of urbanisation, their lessons can be applied to all regions and centres seeking to revitalise their communities.

So, what can communities aspiring to be innovation districts do? Three actions stand out:

  1. Understand their strengths and gaps as an innovation district through rigorous auditing and assessment, and champion a clear vision and action plan to address these.
  2. Strengthen the skills and capabilities of local people and attract talent so their community is well-equipped for the new jobs and industries that match their competitive advantage.
  3. Constantly search out new customers, markets and partners to help realise their opportunities as an innovation district.

The essential ingredients of innovation districts provide distressed communities with a greater chance of sharing in Australia’s prosperity.

REFERENCES:

Australian Bureau of Statistics, 5206.0 Australian National Accounts: National Income, Expenditure and Product, December 2016, issued 1 March 2017.

Matt Wade, Now for the good news: Life got better for Australians in 2016, Sydney Morning Herald, 4th-5th March 2017.

SGS Economics & Planning, GDP by Major Capital City, 2015-2016, December 2016.

Committee for Sydney, Adding to the Dividend, Ending the Divide #3, Issues Paper 14, January 2017.

Bruce Katz and Julie Wagner, The Rise of Innovation Districts: A New Geography of Innovation in America, Brookings Institution, 2014.

Bruce Katz, Jennifer S. Vey, Julie Wagner, One year after: Observations on the rise of innovation districts, Brookings Institution, 24th June 2015.

INNOVATION CREATES WINNERS, NOT LOSERS

It is perilous to dismiss innovation as irrelevant to ordinary Australians. Certainly, innovation is not well-understood, but it is nonetheless vital to how ordinary Australians—not just boffins and tech entrepreneurs—earn a decent living and fight off job insecurity and rising costs.

Critics of Government attention to innovation say it mostly serves the interest of elites, or worse, that innovation equals automation, which equals job losses particularly the more routine, low-skilled and lowly-paid jobs.

But the reality is different. Innovation actually occurs in many different, ‘low-tech’ ways and many successful Australian businesses are innovating not simply with new technologies, but in co-production with customers, supply chain and logistics management, bundling products and services into new business offerings, creating new businesses in the shared economy, reinventing their business model and/or how they deliver exceptional value to customers.

Put simply, innovation means making a change for the better.

It covers more than commercialising new products, technologies, inventions and discoveries. Innovating by successfully implementing a change for the better is open to all and allows potentially everyone to benefit.

This innovation can make ordinary businesses and people winners, because it transforms what Australian businesses can do; it opens up new more flexible jobs and industries; it gives school leavers more options for different careers; it lifts Australia’s competitiveness internationally and our national income; it capitalises and builds on the skills of Australians at work including retraining as necessary; and it can occur in any locality and in any size business.

More specifically, innovation benefits happen by:

  • Solving big social, economic or environmental problems.
  • Recognising and reinventing the skills of people in declining industries for employment in relevant, but unrelated, growth industries.
  • Creating new enterprises, jobs and ways of working online and through social media.
  • Making old communities thrive again with new facilities and opportunities.
  • Helping established small and medium sized enterprises discover and become adept at new ways of doing business profitably in the face of market disruptions.
  • Finding and filling a gap in services people need and are prepared to pay for.
  • Helping people turn hobbies, passions and creativity into a sustainable way to make a living.

From this wider angle, innovation creates winners not losers.

But, to gain these benefits, action on innovation needs to be shifted beyond a focus on start-ups to transforming the capabilities and resilience of all Australian businesses, their current and future workforces. Further, innovation does not stop at the borders of capital city knowledge precincts—action is needed to support home-grown entrepreneurial activity tailored to different regions and localities across Australia.

Tony Featherstone, in a Sydney Morning Herald commentary, argued that Australia’s innovation policy should be rebooted to address today’s problems by focusing on regional entrepreneurship, local government collaboration, and small business. This, he said, is a vision of innovation that is real, relatable and delivers early results.

One practical program to kick start such an innovation agenda that is worth a look are Maker Spaces like TechShop. These are open access, community based spaces providing tools, classes, software, teachers as a DIY workshop and fabrication studio.

Described as a ‘playground for creativity’, it attracts a mix of arts and technical people, including entrepreneurs, small businesses, hobbyists, artists, students and corporate employees. Maker Spaces encourage collaboration and learning, and are used to retrain workers, trial business ideas, test out the business application of new technologies, create artworks or manufactured products, or just for having fun.

REFERENCES:

Tony Featherstone, Innovation not just for inner-city hipsters, Sydney Morning Herald, July 23-24, 2016.

TechShop, go to www.techshop.ws

WHAT MAKES BUSINESSES RESILIENT?

The evidence is growing about what makes businesses resilient in the face of adverse economic conditions and disruption.

There are a wealth of insights from researchers and experienced business executives on the features of business strategy, competitiveness and innovation that are decisive for success when confronting economic boom and bust cycles, new and unexpected competitors and fundamental changes in business practices, technologies and consumer expectations.

Key among the prescriptions for resilient businesses are:

  • An adaptable business strategy: one that balances the improvement of existing business offerings with an eye to future opportunities for growth, new markets and different customers.
  • A strong ‘over the horizon’ radar: priority to finding and using new knowledge and business intelligence, particularly technology trends and capabilities, growth prospects in adjacent sectors, and opportunities from business model change, unrecognised demand and/or unserved, hidden customers.
  • Investing in people: recognition that human capital, perhaps more than financial or physical capital, distinguishes between high-performing enterprises and the ‘also-rans’—making it a smart move to fight for and develop talent with breadth and depth of technical and non-technical skills, diversity and devolution of decision-making.
  • Deep engagement with current and prospective customers: not just the big and lucrative accounts, but understanding non-customers, unarticulated needs and radically different value creation and pricing models.
  • Collaboration in varied external networks: complex business challenges are unlikely to be solved by individual enterprises alone, but need informed and trusted partnerships, including with suppliers, customers and even competitors.
  • Learn by doing: business leaders deliberately providing opportunities for safe, sanctioned business innovation experiments that advance new ideas and commercial prospects without putting the whole enterprise at risk.

The latest compelling evidence comes from a study of the resilience capabilities of 400 small businesses in regional towns in Queensland Australia, affected by the end of the resources boom in local coal seam gas projects.

Conducted by University of Queensland researchers, Jerad A. Ford, John Steen and Martie-Louise Verreynne, this study examined the capacity of these small businesses to respond, adapt and transform in response to changes in the business environment—in this case, the ‘bust’ after the ‘boom’ of investment, construction and transition to operations.

The study found that four key resilience factors significantly contributed to the successful performance of these businesses post-boom. The researchers described these four qualities as follows:

  • Pro-activeness: Proactive small businesses actively seek new product and service niches and reorient their business accordingly. They often are the first to initiate competitive actions such as introducing innovative products new to their industry. They are quick to recognise new business opportunities based on rigorous market analysis. They fully support reorganising business structures and investing in new capabilities.
  • Connectedness: Connected small firms actively cultivate and maintain business network partnerships. It appears that robust external network connections provide the basis from which firms can see, anticipate and exploit market trends. Connected firms are more likely to increase their income in lean times because they use their diverse networks to mitigate against market demand fluctuations.
  • Adaptation: Adaptive businesses find workable solutions to new challenges and accommodate market disruptions by using existing resources in new ways and by quickly shifting things around to ensure that customers are never let down.
  • Access to ‘slack’ (readily available or spare) resources: Businesses with slack resources are more hopeful of surviving into the future. In good times, they actively invest in spare equipment, facilities and other production capacity. They accrue finances and build and maintain new staff, who are looking for new opportunities, not tied to the existing business.

Rather than being at the mercy of the winds of change, this research suggests that businesses can plan for and build up their own resilience.

REFERENCES

Jerad A. Ford, John Steen and Martie-Louise Verreynne, Four qualities that helped small businesses survive the end of the resources boom, The Conversation, 28th July 2016.

University of Queensland, Measuring economic trends and benefits of CSG developments on local businesses, 20th May 2016.

 

PUTTING SMART CITIES TO WORK

Cities, by definition, are magnets for people and jobs. Cities, both metropolitan and regional, and their hinterlands are where most people live and where most economic activity and employment occurs.

Recently, there has been renewed interest worldwide on policies to capitalise on the smart growth of cities for both economic prosperity and social wellbeing.

Chief among the benefits of the density and diversity of cities are the twin advantages of access to jobs and access to labour. Often the challenge for cities is how to ensure the right jobs are in the right places.

Further, as the nature of work is changing, the challenge is how to anticipate and prepare for change. In particular, what can be done to help people make a timely transition from skills more suited to the old economy to ones that fit the new world of advanced manufacturing, knowledge-based services, small high tech start-ups, or disruptive business models like Uber and Airbnb.

One insight is the importance of job density to the productivity and competitiveness of particular localities. Consultants SGS Economics & Planning, in recent studies, have defined ‘effective job density’ in terms of the proximity and accessibility of jobs, measured by the level of employment relative to the travel time to that employment by employees by various modes of transport.

Investigations by SGS Economics & Planning and others by the Victorian Department of Transport show that the doubling of job density can result in productivity improvements of between 4% and 13%. This is due to the sharing of infrastructure and inputs; the sharing of ideas (knowledge spill-overs) that occur due to close proximity and that drive innovation; and the ability to match skilled workers to jobs.

So, creating employment precincts and jobs close to home through smart work centres and co-work spaces should be encouraged.

But, there is also concern about the ‘tale of two cities’. Commentators point to the divide between the growth of well-paid jobs for knowledge workers in the inner areas of capital cities and outer urban areas where population and housing are growing, but with few jobs and poor job access, significantly due to traffic and transport obstacles.

Solutions to this mismatch between jobs and residents include strategies for metropolitan-wide mobility and access to key services, through improved transport connections and better provision of information and communications technologies that diminish the disadvantage of distance.

Single solutions, however, are unlikely to be effective. For smart cities, the natural benefits of agglomeration are just a starting point. Action on a broader front with a mix of policy instruments is necessary to boost access to jobs where they are needed most. Smart cities invest in both the hard and soft infrastructure that allows them to make the most of their existing strengths and their distinctive, if embryonic, local capabilities.

This approach was summarised as ‘smart infrastructure’ factors in earlier work by SGS Economics & Planning as follows:

  1. Factors that reduce investment and operating uncertainty, such as transparency in government processes, leadership directions and economic management.
  2. Infrastructure to support basic production processes such as transport, labour, communications, power.
  3. Workforce skills and accessibility to quality education institutions for ongoing skills development.
  4. Innovation infrastructure and programs that underpin the development and commercialisation of new ideas.
  5. Business cultures that promote competition, collaboration, entrepreneurship, risk taking and openness to new ideas.
  6. Connectedness to other members of the value chain, including relevant research institutions and brokers of market intelligence, capital etc. through clustering.
  7. Quality living environments that offer the necessary services for attracting and retaining knowledge workers.
  8. A strong cultural economy which helps to power the industrial economy with new ideas and which keeps knowledge workers engaged with their local community.
  9. Social cohesion, whereby the various economic and other agents in the community have a strong sense of a shared future and a willingness to support each other’s ultimate competitiveness.

These smart infrastructure factors integrate policies that are typically treated as separate. To secure the right jobs in the right places means acting on initiatives at the intersection of industry and economic policy, innovation and business support, infrastructure, urban and land use planning, and education and employment policy, to name the key areas.

Putting smart cities to work goes beyond technology and data analytics. Cities are smart when they understand their competitive strengths and weaknesses, anticipate realistically patterns of business and jobs growth, and shape their future prospects to meet both the social and economic aspirations of their people.

REFERENCES:

SGS Economics & Planning, Productivity and Agglomeration Benefits in Australian Capital Cities, Final Report, COAG Reform Council, June 2012.

SGS Economics & Planning, Comparing Effective Job Density in Sydney and Melbourne, 2012.

Victorian Department of Transport, Job Density, Productivity and the Role of Transport, 2012.

SGS Economics & Planning, SGS Forum on Agglomeration 12 April 2012, The Fifth Estate, 2012, http://www.thefifthestate.com.au

Place Making — Beyond the Florida Thesis, Urbecon, Volume 4, 2009.

Attracting Jobs to Outer Urban Growth Areas, Urbecon, Volume 1, 2015.

Smart Infrastructure Audits—How Well Placed are Communities for Future Prosperity?, Urbecon, December 2002.

THE SECRETS OF CITIES

There is a largely unheralded link between successful business performance and where an enterprise is physically located.

Successful businesses are good not only at the basics of competitively and efficiently meeting customer needs, but responding well to fast-paced change and disruptions in their business environment. The ability to do this depends on the right mix of people and skills, access to markets, customers and infrastructure, and flows of knowledge and capital.

These, in turn, are the ingredients for innovation – turning new ideas and ways of working into commercial successes – which is fundamental to the productivity and resilience of both businesses and communities.

A new Australian index from the Bankwest Curtin Economics Centre measures innovation performance at a local level and helps us understand what makes some locations more innovative than others.

In short, the index shows that proximity matters. The internet and social media are powerful communications tools, but local contact is key to forging the close connections, shared ideas, collaboration and trust which underpin business growth and prosperity.

The index authors comment:

The most innovative regions are usually in the largest cities and are typically near other innovative regions and relevant infrastructure that supports innovation, such as business districts, universities and research institutes….

Cities are the mechanism which facilitates the creation and dissemination of knowledge leading to better innovation performance. Universities increase the innovation performance of surrounding areas through direct research and innovation outputs and by improving the human capital of workers. Similarly, city centres and surrounding areas attract highly-skilled graduates.

The message is that cities as natural agglomerations, providing scale and diversity, are natural locations of innovation. This gels with the importance placed on cities policy, where Angus Taylor, the Australian Assistant Minister to the Prime Minister for Cities, has said:

‘Cities policy is the biggest transformative lever you can pull to improve people’s lives and economic productivity.’

But, it is not just a matter of bigger is better. Cities suffer from problems of transport and housing stress, congestion, pollution and mismatch between the location of jobs and residents. The answer is often expressed as designing smart cities, where technology and intelligence from big data is integrated and used for policy actions aimed at making cities more workable, liveable and sustainable.

Professor Marcus Foth of the Queensland University of Technology delves deeper into what makes a smart city.

Foth advises that big data algorithms intentionally filter data for similarity, which is good if you are planning transport journeys by fastest speed or shortest distance. It is not so useful if other more intangible factors are influencing your choice, like preference for slow backroads or the most scenic route.

Professor Foth argues for the diversity advantage of cities, offering possibilities, opportunities and choice. He quotes Ethan Zuckerman who thinks of cities as ‘serendipity engines’:

By putting a diverse set of people and things together in a confined place, we increase the chances that we’re going to stumble onto the unexpected.

The key is capturing the benefits of serendipity. Citizens and businesses alike are exposed to new ideas and contrary viewpoints, have space for reflection and discussion and the opportunity to form new opinions and courses of action.

The secret of smart cities is, in Foth’s words, ‘getting lost and getting to know strangers’. If this is true, it can drive both business success and quality of community life.

REFERENCES:

Alan Duncan, Rebecca Cassells and Steven Bond-Smith, Location, location, location: what’s holding back an Australian ideas boom? The Conversation, March 23rd 2016.

Peter Hartcher, City slicker PM hitches ride on urban express, Sydney Morning Herald, March 12-13 th 2016.

Marcus Foth, Why we should design smart cities for getting lost, The Conversation, April 8th 2016.

ROBOTS, JOBS AND THE HUMAN SIDE OF INNOVATION

Robots are set soon to take over more and more of our jobs.

That’s the prediction that comes from a range of recent research reports, notably by the World Economic Forum at its 2016 gathering in Davos, the McKinsey Global Institute and closer to home, a NSW Parliament briefing paper on future workforce trends.

This is the potential impact of what the World Economic Forum calls the ‘Fourth Industrial Revolution’. They use this term to describe the accelerating pace of technological changes, especially those that are “blurring the lines between the physical, digital and biological spheres”—the combination of things such as artificial intelligence, robotics, nanotechnology and 3D printing.

The World Economic Forum research report on the future of jobs projects that by 2020, 7.1 million jobs are expected to be lost, versus just 2 million gained.

It is not just manual labour and those in routine and semi-routine occupations where machines are likely to outperform humans. Sophisticated computerisation technologies are putting the jobs of administrative workers, technicians and some lower-level service providers and professionals at risk too. Examples include paralegal work being replaced by sophisticated algorithms and law enforcement officers being ousted by cheap and convenient camera sensors.

While there is no room for complacency, there is a positive side to this current wave of technological disruption. New technologies can also bring more flexible workplaces, more engaged workers and new types of work and vital skills that we are yet to imagine or recognise as valuable.

The World Economic Forum report singles out management and leadership skills as enduring ones for survival in this latest industrial revolution. Social skills such as persuasion and emotional intelligence are expected to be in even higher demand than technical skills across many industries. So too are creativity, active listening and critical thinking.

The threat of job losses, especially for particularly vulnerable workers and local communities, is a powerful incentive to find a better solution—whether that is retraining, attracting new investment, enterprises and infrastructure, or creating new jobs and start-ups. In other words, adversity drives innovation. And, particularly important is the kind of innovation where humans consistently add value to the technological advances of robots.

What does this human side of innovation look like? A couple of articles that take a fresh angle offer food for thought.

First, Tom Foremski, the publisher of SiliconValleyWatch.com, argues that while Silicon Valley is a place where start-ups can scale their business, it is no longer the place for sourcing innovative ideas, because of its “self-segregated business park monoculture”.

He contends that Silicon Valley employment practices reduce diversity to simplistic accounting of gender numbers and skin colours, and insulate their people from everyday struggles, resulting in essentially frictionless, predictable living for Silicon Valley creatives.

No original experiences and no real problems means no original ideas.

Foremski contrasts this with the vast urban landscape of New York City, brimming with “a diversity of genders, skin colours, ages, economic backgrounds, national cultures and artistic expression”. It is a place of creativity, quirkiness, multiple sub-cultures, and tough problems. Adversity and diversity combine in a massive incubator of ideas.

The second article by Ron Ashkenas and Markus Spiegel in Harvard Business Review online summarises their research into effective innovation in large global companies. One of their key findings is that the most successful innovation teams were not those that worked like well-oiled machines, but those that resembled more chaotic, but adaptive ant colonies.

The efficient machine-like teams follow highly defined processes and rigid execution plans, but they were the least effective at achieving their goals and coming up with innovations. The successful innovation teams were able to adapt quickly to changes in their environment, because they had a set of simple rules and a clear end goal, allowing them more flexibility and ability to learn along the way.

Ashkenas and Spiegel identify four conditions to make innovation teams more effective:

  1. A powerful central mission and a loose central structure.
  2. Frequent interaction to maximize learning.
  3. Constant experimentation.
  4. Freedom to look for the next horizon.

Perhaps the race between robots and humans still has a way to run.

 

REFERENCES

Jenna McGregor, Davos 2016: robots will steal 5 million jobs by 2020, Sydney Morning Herald, 20 January 2016, http://www.smh.com.au/technology/innovation

Chris Angus, Future workforce trends in NSW: Emerging technologies and their potential impact, Briefing Paper No.13/2015, NSW Parliamentary Research Service, December 2015.

James Manyika et al, Digital America: A tale of the haves and the have-mores, McKinsey Global Institute, December 2015, http://www.mckinsey.com/insights/high_tech_telecoms_internet

Tom Foremski, Silicon Valley Gets on the Same Bus Every Day—Innovation Needs Diversity, 15 January 2016, LinkedIn Pulse.

Ron Ashkenas and Markus Spiegel, Your Innovation Team Shouldn’t Run Like a Well-Oiled Machine, Harvard Business Review online, 28 October 2015, https://hbr.org/2015/10

WHAT’S MISSING FROM AUSTRALIAN INNOVATION?

Australia has a new impetus to innovate led by Prime Minister Malcolm Turnbull who said:

‘The Australia of the future has to be a nation that is agile, that is innovative, that is creative…. We have to recognise that the disruption that we see driven by technology, the volatility in change is our friend if we are agile and smart enough to take advantage of it.’

This resets Australia’s innovation agenda with a new-found optimism and sense of opportunity. It has galvanised many ideas to address Australia’s economic and social challenges—new ways of doing business, strengthening skills and education, investing and collaborating in leading-edge technology and research. All with the end goal of making Australia’s economy stronger and more resilient and the Australian people better off.

The proposals to make this innovation a reality—from business, the labour movement, financiers, universities and researchers, among others—seem to focus on entrepreneurial start-ups, access to capital, commercialisation of research and technology, partnerships between universities and businesses, and better education in science, technology, engineering and maths.

All good, but something’s missing—a focus on encouraging the vast majority of typical Australian businesses and their workforces to innovate.

Unlike Silicon Valley and other global knowledge hubs, Australian business is not characterised by large numbers of technology producers, high-growth start-ups, or multinational corporations with substantial R&D labs and budgets. To the contrary, Australia is over-represented with small and medium sized enterprises (SMEs), most providing established business offerings predominantly to local not international markets, and whose size brings scale, information and resource constraints.

Typically these Australian businesses are competent and steady performers, not high-growth ‘gazelles’. Their size and stability tends to lock them into ‘tried and true’ business practices, and this limits their appetite and ability to innovate. This picture is reinforced in evidence provided to the recent Senate Inquiry into Australia’s innovation system, which lists among the impediments to innovation the lack of an innovation or risk culture and the lower level of innovative activity in small and medium sized firms compared to larger businesses.

This reality must be the starting point for re-setting Australia’s innovation policy. Rather than giving entrepreneurs, technologists and scientists alone the starring role, mainstream Australian business enterprises must be the centrepiece of innovation action.

So, how do we motivate and enable a critical mass of Australian SMEs to become successful and sustained innovators?

The answer lies in the evidence that innovation can take many forms, not restricted to high tech business offerings or ‘new to the world’ discoveries. The same Senate Inquiry refers to innovation broadly as “ideas successfully applied”. Such innovation goes beyond new products and technologies to innovation in customer experiences and problem solving, workforce management and skills, organisation of supply chains, as well as innovation in the overall recipe for business success by re-designing better ways of doing business and of anticipating and serving customer needs.

The key feature of innovation that drives productivity and prosperity is the transformation of business practices and capabilities that create superior value for customers by doing something new, and earning a premium from doing so.

Australia’s innovation policy must shift its perspective from just increasing the supply of technology and research to actions that boost the demand that makes it attractive for SMEs to gain the knowledge and capacity to innovate, despite the cultural and structural obstacles.

To have maximum effect on the innovation performance of typical Australian businesses, priority should go to actions that:

  • Provide opportunities for enterprises to experiment safely with the different types of innovation best suited to their business. In particular, this means helping them make ‘small bets’ on real-time trials and to pivot away quickly from failures to the next new ideas and offerings.
  • Expose enterprises to diverse and deep sources of subject matter knowledge relevant to their industry, including advances in technology, market intelligence, changing customer behaviours and expectations, potential disruptions and foresighting. Open up the possibilities for collaboration for knowledge sharing and problem-solving with other organisations and clusters.
  • Strengthen the ‘absorptive capacity’ of enterprises, i.e. the ability to identify, assimilate and capitalise on new information, to learn, and to respond in an agile manner to emerging opportunities and threats. Importantly, this includes assisting enterprises to invest in growing the distinctive competitive skills and capabilities of their people.

REFERENCES:

Senate Economics References Committee, (2015), Australia’s Innovation System. Interim Report, August 2015, Commonwealth of Australia.

Tim Mazzarol, Startup nation: the rhetoric and the reality, The Conversation, September 29th 2015.

Don Scott-Kemmis, If we want to promote innovation we need to focus on businesses, The Conversation, October 20th 2015.