Recently when the Reserve Bank hailed 20 years of economic growth, it said the boom had been driven by Australia's domestic economic reforms, which in turn had increased productivity. However it also warned that further improvements are needed if weâre to stop growth fading away.
There is no doubt this should be a priority for the Federal Government as sustained growth is the doorway into rising prosperity. And the key to sustained growth is harnessing innovation.
However in Australia innovation is often overshadowed by entrepreneurship. Innovation is very much about value creation through the application of new ideas, whereas entrepreneurship is much more focused on how to create value through creating new organisations based on new ideas.
Entrepreneurs gain attention from the media because of their role as figureheads within a company. Indeed, entrepreneurs often have a passion for achievement: they want to do well in business and can see new opportunities, creating and delivering new products.
In contrast, innovation can involve many players, and is often created as much by teams within an organisation as by one person on their own. Those who innovate should be given credit, for it is they who can increase productivity, as highlighted by the 2009 Federal Government inquiry into how to raise the level of productivity growth in Australia.
Productivity can roughly be worked out by calculating the difference between what you get out of a process, to what you put in. Itâs still growing in Australia: we are getting more efficient, and processes are getting better, but the sharp increases in productivity we saw twenty or thirty years ago are no longer there. We can turn this around with more innovation.
Innovation can take many forms: from the company that finds a cheaper way of making widgets, to one that that finds a way to make those widgets work better, faster, or more efficiently. Analysis by the Reserve Bank indicates that Australia would be able to produce an extra 1.5 per cent of output a year, simply by using capital and labour more efficiently.
There are plenty of examples of firms around the world that seem to be innovative and produce a continuous stream of new products. They are nimble, pouncing on new opportunities. Innovation for instance has been the hallmark that has enabled a small company, Zip Heaters, to create instant boiling water heaters, and become the world leader in the field, with its products being used by millions of people around the world. It is now a big company; however it has stayed innovative by behaving like a small entrepreneurial venture.
All innovators take risks, just as with any R&D project: youâll have to take a bet on your research working, and for there to be a market for what you make. Innovation therefore has to be tempered with common sense, a reality for getting things right, and a willingness to seek advice, particularly from mentors who may have strode a similar road. And importantly, of course, a passion to overcome failure in the pursuit of achievement.
Within a large organisation, employees need to be empowered to be innovative and take risks, generating the ability for ideas to percolate their way through the organisation. Innovation is a state of mind that is important for all managers to cultivate wherever they happen to work, and instil in their staff. Individual innovators equally need support to ensure their ideas can come to market, and help the countryâs productivity to rise, to create what might be called âthe innovation nationâ.
Innovation drives productivity growth and competitiveness of firms. In short, increasing levels of productivity are essential to the competitiveness of Australia. It can be achieved by nurturing innovation at all levels within the economy. Quite simply, it makes us all more prosperous.
Professor Alec Cameron, Dean, Australian School of Business, UNSW
Michael Crouch AO, Chairman and CEO, Zip Industries (Australia) Pty Limited