Why Australia Gets a C for Innovation

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In 2016, Australia slipped from 17th to 19th on the Global Innovation Index. Although innovation is a national imperative, it seems we are falling behind in the global innovation stakes. According to another measure (the World Economic Forum) Australia lags 22 other countries (out of 140) on innovation. “Despite world-class education and universities, it [Australia] continues to lag behind most advanced economies in innovation”. So, why the sad score, and how do we fix it? Well, here are our ‘C‘s:

Commercialisation of Innovation

In spite of evidence to suggest that two dollars are returned for each dollar put into innovation, Australian businesses earn a relatively low proportion of total income from innovative goods and services, as compared with other countries. When matched against the EU Community Innovation Survey, Australia’s estimated income from new or significantly improved goods and services is 7.2 per cent of total sales (in 2014–15). This places us 20th out of 23 countries in the OECD, with the OECD top five averaging 19 per cent. Our own domestic data also shows that businesses that actively innovate are:

  • 40 per cent more likely to increase sales income and profitability;
  • twice as likely to export;
  • 5 times more likely to increase the number of export markets targeted;
  •  2-3 times more likely to report increased productivity, employment and training;
  • 3 times more likely to increase investment in IT; and
  • almost 5 times more likely to increase the range of goods and services offered, or make social contributions such as donations.

Could this at least partially explain why only 6% of Australian businesses ever exceed $2 million in revenue?

Collaboration

Whilst collaboration with research organisations such as CSIRO and universities has been found to more than triple the likelihood of businesses reporting annual productivity growth and increases in other performance measures, Australian businesses continue to fare poorly on collaboration with research institutions. According to the 2016 Australian Innovation System Report, published by the Department of Industry, Innovation and Science (DIIS), collaboration between Australian businesses and higher education and research institutions is the lowest of 27 OECD countries, both for large businesses and for SMEs.

Australia’s development of industry clusters is also trailing, with us ranking 39th on this Global Innovation Index measure. According to DIIS, “Networking and collaboration activity is essential to a high-performing innovation system. Highly networked innovation systems enable businesses to efficiently share resources, risk and ideas for innovation. Collaborative innovation is associated with more novel innovations that can capture global market shares. Businesses that pursue a culture of both innovation and collaboration, experience compounding benefits across a range of business performance measures.”

Capability

A study completed in 2015 by the Foundation for Young Australians (FYA) found that 60% of students are being trained in jobs that will be radically changed (or eliminated) by automation. The FYA report suggests placing enterprise skills and entrepreneurial thinking at the heart of learning. If we are not able to predict what skills will be required for in the future, it seems that we should at least be skilling our students in competencies that have contemporary demand.

Celebrating Innovation

Can you name 10 Australian innovations that became international game-changers? Or perhaps the 8 Australian businesses that are included in the global Fortune500?

Our own survey of Australian innovation leaders has shown that, when it comes to acknowledging and celebrating innovative and successful Australian businesses, the ‘tall poppy’ syndrome is alive and well. When we fail to call attention to our international innovations and successes, they lose their power to inspire. Making these achievements a source of national aspiration might see us producing a few more businesses that scale?

Your Thoughts, Please?

Crazy Might Work, in partnership with CEB and with the support of the Business Council of Australia, AMP and other iconic Australian and international corporations, have launched an Innovation Nation initiative to better understand these challenges and begin to prototype some business-led solutions.

Through our innovation management consulting, we are aiming to create a vision for Australian business innovation and begin prototyping some initiatives that will make a difference.

Your thoughts are most welcome – Are these the right challenges? And what might some of the solutions be?