As a professor of management at the University of Melbourne, and as an adviser to a number of companies I have witnessed firsthand the rise of innovation in businesses across Australia. It has become a hot topic given that Australia faces challenges in achieving and maintaining global competitiveness in terms of cost, service and quality in the post resources boom.

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

Recently I have been involved in a combined study into innovation in Australian organisations conducted by the University of Melbourne and the Australian Institute of Management, the findings of which highlight the importance of innovation. (see full report here)

We found that innovation pays off, and the benefits are even greater when organisations are systematic about it. The data captured by our large-scale survey confirms that organisations perform better when management embraces a structured and planned approach to innovation.

No single innovation lasts forever, but you can achieve ongoing advantage through the development of what we call ‘systematic innovation capability’.

Systematic innovation capability refers to a sustained form of innovation. Rather than haphazard or unplanned innovation, it is a continuous stream that creates value and a competitive advantage for organisations.

To develop this capability, a holistic and integrated approach to innovation across the entire organisation is required. It is important for organisations to create a workplace culture where everyone feels they have an opportunity to contribute to the innovation process.

We found that firms who embrace innovation as the key focus of their operations tend to achieve an advantage. They are more likely to have higher revenue growth, profitability and productivity.

Leadership is crucial. Effective leaders put in place the right strategies, know that systematic innovation needs to be properly resourced in terms of processes and people skills, and that staff must be incentivised and performance outcomes measured.

The key building blocks for successful innovation include:

  • managers get involved in innovation projects;
  • innovation is prioritised in the business strategy;
  • business strategy and technology are strongly aligned;
  • organisations are willing to take calculated risks;
  • teamwork is emphasised;
  • employees are highly skilled;
  • clearly articulated employee capabilities relate to innovation;
  • innovation involves many stakeholders, including customers (open innovation)
  • employees are rewarded financially for innovation contributions; and
  • competitors are benchmarked.

The study also highlighted that organisations which don’t embrace innovation are not just hurting their bottom line, they are also hurting their chances to attract and retain skilled employees. The lack of growth also limits development pathways for staff.

Innovation capability won’t develop on its own; it needs to be consciously formulated, resourced and driven into place. Some key questions to ask yourself and those in your organisation are:

  • Can your organisation survive and prosper without innovation?
  • Do you have a strategy in place for innovation?
  • Do you have the right resources, skills, and systems in place to achieve systematic innovation?
  • Does your business measurement system include prioritisation of innovation measures?
  • Are staff recognised and rewarded for their contribution to innovation?
  • Do leaders ‘talk and walk’ innovation, and lead innovation by example?

How do you approach innovation in your organisation?

I look forward to hearing your thoughts on our findings.

Professor Danny Samson

Advertisements