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Innovation pays, but only when it’s everyone’s job

Innovation pays, and the benefits are even greater when organisations develop “systematic innovation” capability, according to a recent study by The University of Melbourne and the Australian Institute…

Research shows channeling the best ideas into new products takes a systematic process. atomicShed/Flickr

Innovation pays, and the benefits are even greater when organisations develop “systematic innovation” capability, according to a recent study by The University of Melbourne and the Australian Institute of Management.

This large-scale survey of professional managers across Australia found organisations perform better when management embrace a structured, planned, and organisation-wide approach to innovation.

What is “systematic innovation”?

Systematic innovation equates to sustained innovation, rather than haphazard or unplanned activities, that create value and secure competitive advantage for organisations.

Organisations that successfully undertake systematic innovation generate a series of innovations that deliver business value.

The development of systematic innovation capability requires a holistic and integrated approach to innovation across the entire organisation.

This means managers get involved in innovation projects, and innovation is prioritised in the business strategy, which is strongly aligned with technology.

It also requires organisations to take calculated risks, and for them to involve customers in the innovation process. Finally, it’s essential that employees are rewarded financially for innovation contributions, and competitors are benchmarked.

Innovation can occur as the occasional “lucky break”, but no business should rely on such an approach.

Systematic innovation capability is the ultimate competitive weapon for organisations, as it has no ceiling on it, and can be applied in a broad range of ways, from achieving cost reduction through innovation in process management, to creating new streams of revenue.

Australia faces challenges in achieving and maintaining global competitiveness in terms of cost, service and quality.

As Australia looks to build its future beyond the resources boom, the research findings make it clear innovation is a means of achieving competitive advantage, and a key profit driver for successful organisations.

“We found that firms with proven innovation performance were three times more likely to have higher revenue growth, profitability and productivity. Such firms were also three times more likely to report higher levels of cash flow, cost advantages and long-term competitive advantage,” said Tony Gleeson, CEO of the Victorian and Tasmanian arms of the Australian Institute of Management.

“The findings also confirmed organisations that failed to embrace innovation as a systematic performance tool were likely to be chronic under-achievers. Such under achievement translates into lower levels of growth than innovative competitors, fewer development pathways for employees and greater difficulty in attracting, developing and retaining skilled people.”

The survey showed that revenue growth; profitability, productivity, cash flow, and other elements of business performance were higher for innovation “leaders”. And innovation performance is strongly linked to business performance.

Sustainable and systematic innovation requires a holistic approach across a range of innovation activities in order to maximise innovation performance, from leadership through innovation, strategy and process management.

The survey revealed specific innovation practices that are significant predictors of innovation performance including aspects of strategy and leadership, a strong customer focus, the embracing of risk and change, human resource management and a culture that supports innovation, strong innovation process management and a focus on sustainability.

So who should take responsibility for innovation?

Although 46% of managers surveyed reported that specific responsibility for innovation rested with an assigned individual or group, the development of systematic innovation capability is best served if everyone in the organisation takes responsibility for innovation.

Systems and structures, as well as the organisational culture, should reflect a joint commitment to developing and sustaining innovation throughout the organisation.

It is important for organisations to create a workplace culture where everyone feels they have an opportunity, if not an obligation to contribute to the innovation process.

Therefore, to galvanise the collective brain power of an organisation, the report findings advocate that innovation should be viewed as a shared opportunity for all employees.

This finding has two important implications.

Firstly, all employees can and should be given the skills and incentives to exercise their creativity on opportunities from process innovation to product and service enhancements. And second, organisations should have robust processes in place to evaluate and channel the best creative ideas and inventions to where they can create value: in scaling them up to the marketplace.

Join the conversation

8 Comments sorted by

  1. David Collett
    David Collett is a Friend of The Conversation.

    IT Application Developer at Web Generation

    Hi,

    Nice article!

    I was wondering, what is meant by "innovation"?
    Is it different to "improvement", or "doing your job better or "using less resources to do the same work"?

    And can I innovate without information technology?

    report
    1. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to David Collett

      I don't know what definition of innovation was used in this study, but the OECD's Oslo manual of guidelines for collecting and Interpreting innovation data define innovation as: 'the implementation of a new or significantly improved product (good or service), a new process, a new marketing method, or a new organizational method in business practices, workplace organization, or external relations'.

      http://www.oecd.org/innovation/inno/oslomanualguidelinesforcollectingandinterpretinginnovationdata3rdedition.htm

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  2. Paul Richards

    integral operating system

    From this worldview 'systematic innovation' has great potential. However the values used applying the principles can mean this is just a new weasel word for efficiency and austerity.
    "It is important for organisations to create a workplace culture where everyone feels they have an opportunity, ... an obligation to contribute to the innovation process"; the authors wrote. Interesting keywords 'feel' 'create and 'culture'. It is a fairly empty culture for an employee to just feel they have an opportunity while they have an employment contract. While knowing they have an obligation to increase efficiency, with the probability they will make others redundant in the process. With a high probability when the efficiency or systematic innovation cycle starts again they face redundancy. From this altitude this not a very robust and efficient process of culture building.

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  3. Dale Bloom

    Analyst

    When can innovation thrive in a work environment characterised by “unpredictable pay, inferior rights and entitlements, limited or no access to paid leave, irregular or unpredictable working hours, uncertainty over the length of a job, and a lack of input on wages, conditions and work organisation.”

    http://www.abc.net.au/news/2013-10-18/heap-australias-second-class-of-insecure-workers/5029022

    Put simply, innovation won’t thrive (or even occur at all) in such a work environment, and about 2 million workers in Australia are now in such a work environment.

    report
  4. Gerard Dean

    Managing Director

    The article above is very good, which is something I rarely say when commenting on articles on The Conversation.

    Some points I would make that are covered above but we use simpler language at work:

    - Innovation is everyone's job. No matter what you do, if you think of a better way of doing it, do it. Sure, it might stuff up, but if you don't try you will never know.
    - Every product should be better than the last one. It worked for the Japanese motorcycle industry.
    - 50% of all R&D effort…

    Read more
  5. Jack Arnold

    Polymath

    Uhm ... this article appears to state the obvious; that Australian management in general is lazy, underwhelming and happy to stagnate into the 19th century. At least 20 years ago the Japanese car industry has a system where everybody was encouraged to innovate, especially on the production floor where the profits were made.

    Well, it made sense; the workers were considered smart enough to work out the best way to do their job and were given the autonomy, encouragement and opportunity to do so. This starkly compares with the US model that considers workers mere automatons only capable of following directions.

    So, the present refusal or unwillingness by Australian management to spend on R&D is consigning the Australian economy to becoming mere shopkeepers for other people's innovation.

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  6. Craig Myatt

    Industrial Designer / R&D

    While I am not an expert in innovation, I do see 'innovation' as a concept as hard for people to assimilate. We, as industrial designers, see ourselves as fundamental innovators, always doing 'something new', and innovation is, simply put, the successful implementation of a new idea. I think a simple definition of innovation assists the application and roll out of processes for it.

    On the other hand, while the benefits of innovation are clear, there is a darker side to it, for those who understand…

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  7. greg rzesniowiecki

    being and doing

    Hmm. What about this. Planned obsolescence;

    http://topdocumentaryfilms.com/light-bulb-conspiracy/

    The same truth may be applying in motor vehicles in terms of fuel efficiency.

    We may well have been able to satisfy material needs with great productivity and low labour inputs. Look now how many are real workers in the manufacturing and productive economy versus the service sector.

    This offering by review of Andre Gorz' 'Critique of Economic Reason' is interesting;

    http://itself.wordpress.com/2011/04/29/a-recommendation-critique-of-economic-reason-by-andre-gorz

    Read more