CommBank finds few true innovators in Australia

Internet Retailing

24th Oct 2016

While the vast majority of Australian businesses rate themselves as innovators, in reality most are falling short of achieving true innovation, according to ground-breaking new research from Commonwealth Bank.

The inaugural 2016 Business Insights Report – Unlocking Everyday Innovation, to be launched in November, identifies the worth of innovation in Australian businesses and to the economy, and measures the level of innovation across sectors, states and business size.

Preliminary results released today found that while 82 per cent of firms believe they are innovators, or being “innovation active”, only 44 per cent were actually doing it when assessed against an established international standard.

The other 38 per cent were merely making improvements, which while still valuable to a business, does not deliver the same commercial benefits in terms of growth and productivity savings when compared to true innovation. Sixteen per cent of businesses were not innovating at all and two per cent had abandoned their innovation plans.

“Improvements in a business are certainly valuable and worthwhile but what we have found is that as a business heads up the innovation curve, the value increases significantly,” Adam Bennett, group executive of business and private banking, Commonwealth Bank, said.

The report aims to demystify innovation and help businesses better understand how and where innovation benefits a firm, and to provide a snapshot of the status of innovation across a range of demographic categories.

“While businesses are coming to grips with the fact that innovation is not just about technology and disruption, they still need to understand the fundamentals of innovation and seek to move up the innovation curve. It is critically important that businesses understand the evolving expectations of their customers and make significant changes to their products, services and business practices in response to a rapidly changing marketplace,” Bennett said.

The analysis for the report was conducted in accordance with the Oslo Manual, an OECD recognised framework for defining innovation. Under these guidelines, innovation introduces something new or makes a significant improvement in one or more of four areas across: business processes, products and services, organisational structure, and marketing practices. Innovation is assessed as being either new to firm, new to market or new to world.

The research also identified 15 core elements of innovation, a combination of management capabilities and entrepreneurial behaviours, to assess the innovation status quo and look at the drivers and gaps in the business innovation landscape.

The key take-outs from this part of the research is that there are certain primary and secondary drivers that lead to businesses being innovators.

“Businesses are to be applauded for embedding continuous improvement within their operational activities, however there is a need to leverage this foundation to propel them towards true innovation. By doing so, they stand to unlock the real value of innovation, not just in top line revenue growth but also cost savings through productivity gains.”

The research also asked what businesses understood innovation to mean, and found that many businesses equate innovation with improvement (48 per cent), new products and processes (45 per cent), creativity at 13 per cent and just four per cent with technology.

In the product area, 56 per cent of businesses claimed to be innovators but only 15 per cent are actually innovating in this area when assessed against the Oslo criteria. Similarly, in the process category, 55 per cent of businesses claimed to be innovators, whereas this was only true for 19 per cent of these firms. For the marketing category, 40 per cent thought they were innovating but just 15 per cent were, while for organisational structure 44 per cent believed they were innovating but only 13 per cent were.

“The concept of innovation has become ambiguous due to its prolific use in the market, and there’s no one-size-fits-all pathway for businesses to progress their innovation initiatives. This rhetoric is influencing how businesses perceive innovation. Corporate Australia can play an important role partnering with small and medium enterprises to help them better understand innovation and adopt practical measures to realise the benefits of them becoming more innovation active. We hope our new report out later this year will help inform that understanding,” Bennett said.

The research shows that South Australia is leading the nation with 51 per cent of businesses being innovators, jointly followed by NSW/ACT (46 per cent) and Western Australia (46 per cent). Only 41 per cent of businesses are innovators in Queensland.