Australian industry must shift its narrow approach to innovation

There’s plenty of value between an idea and its commercialisation. Shutterstock

One of the key planks of the government’s new Industry Innovation and Competitiveness Agenda is a desire to boost collaboration between business and industry, the scientific and research communities and the university sector.

According to the government, less than 5% of Australian businesses currently turn to the higher education sector – including scientists and researchers – directly for expertise and ideas.

The Business Council of Australia, in a major report earlier this year, identified collaboration as a weakness holding our businesses back globally.

But addressing these collaboration challenges can only be part of the answer to our stagnating global competitiveness. First, Australian businesses – and entire industry sectors – must rethink what is currently a narrowly focused approach to innovation.

Australian businesses tend towards technology-driven innovation and efficiency-driven innovation, when what is needed in a high-cost business environment is non-technological innovation – rather than relying on new technology or cost cutting, firms should be innovating by introducing new business models.

The collaboration gap is often framed as a cultural mismatch between key stakeholders, particularly when it comes to engagement between small-medium enterprises and universities. However, in conducting research for the Design for Manufacturing Competitiveness Report, released earlier this year, it became clear the issues surrounding collaboration are much broader and linked to a business’s innovation mindset.

This research, mainly with SMEs, suggests that, currently, the main focus of innovation tends to be a business’s product offering: adding a new feature, lifting the level of service or, more commonly, driving efficiencies in production or delivery.

The research and development efforts within these businesses reflect this approach to innovation, resulting in extremely focused collaboration efforts. “Solving” narrowly framed problems is the common model of engagement or collaboration.

This incremental approach to innovation can be valid and has been the foundation of many successful businesses. But it does depend on a relatively stable business environment, where “continuous improvement” in products and services is sufficient. This is not the situation for Australian businesses today. Structural economic shifts, brought about by our declining terms of trade and historically low productivity, have created a more uncertain environment.

In contrast, international research has shown that businesses that shift their competitive positioning from a product- or service-only focus to a deeper and wider focus on their entire business model do outperform their peers.

When a business makes this shift in mindset, the emphasis moves from technological differentiation (product or service features) to non-technological innovation – a clearer understanding of the customer and the meaningful value the organisation as a whole can deliver to that customer.

By getting businesses to widen their focus from products and services to business models, we could open up significant opportunities for new research partnerships, for the collaboration the BCA rightly seeks.

Getting businesses to make this shift is difficult, however, the research shows.

One approach that is starting to achieve traction is design-led innovation, a concept that draws on the understanding of how designers approach complex problems. Designers constantly reframe problems, drawing out the contradictions and constraints, and they recognise there will be multiple answers.

This “design thinking” approach is gaining global attention and has emerged in other nations as a key driver of innovation. Some work has been done in Australia, at the firm level, with extremely positive results.

The next step would be to adopt design-led innovation at the sector level, using this approach to better understand sector-based challenges and frame alternative futures at the macro level.

Through this process, sector-level business models could be envisaged, prototyped and refined, highlighting the sector-level collaborations and underlying research required to drive Australia’s prosperity.

Without this envisaging at a sector level, we risk defaulting to our current, narrowly focused approach to innovation – one where research is disconnected from the business models of the future and collaboration efforts remain strained and impact diluted.