What’s the rate of innovation amongst Australia’s corporate sector? And what’s driving it? R&D tax incentives? Or more? The Business Council of Australia (BCA) is made up of Australia’s largest corporate entities. In January 2016, 60 members of the BCA responded to a survey on innovation intensity.
The survey showed that innovation is core to their success as companies:
- 78% have a dedicated innovation program.
- 75% invest in translating research and innovation into commercial opportunity.
- 40% invest in pure research.
- 38% say that improved R&D tax incentives would boost their innovation efforts.
But, just what is innovation? How do you define it?
- The Business Council of Australia defines innovation as the application of knowledge and technology to create additional value.
- Innovation can involve the creation of new products and services, improving existing products and services or applying business systems and models in new ways.
- Innovation can be either incremental or transformational. Importantly, innovation implies that value is created. It must create benefits, whether privately through commercialisation or through the creation of public goods.
- Demand for innovation is created from the need to solve problems, whether scientific, social or commercial.”
The BCA survey shows that “innovation is taking place across the spectrum of commercial activity, from new products and services; to advanced manufacturing methods and the introduction of robotics; to digital delivery of services and new logistics processes; to knowledge management systems and collaborative ventures.”
Drivers for innovation are apparently different to each organisation and circumstance.
Let’s see what a couple of high profile leaders say about the strategic and operational platforms in business where innovation should be aiming to create additional value. Richard McCarthy is vice-president and general manager at ramsetreid, an ITW-owned Australasian business with decades of experience in the innovation space.
I asked him whether he thought organisations that failed to innovate, lapse into mediocrity? “My view of innovation is that it is about truly, madly, deeply understanding your target customer. You do this to the extent that you’re able to make their life better in ways that they possibly hadn’t imagined.
Without this focus, businesses rapidly run the risk of not remaining relevant to their core customers and end-markets. In essence, you will cease to have any customers because their problems are evolving faster than you can deliver,” he said.
What about those who pursue innovation? Do they do better?
Richard went on “ramsetreid is in business to develop innovative construction solutions. The ability to invent, envision, and create something new in a way that’s a good fit for our technologies and competitive advantages is key to our longevity and profitable growth.
“When we are developing solutions, we apply the ITW Business Model of customer-back innovation. This process ensures we work alongside our customers to truly understand their pain points and not make assumptions.”
Pursuing focused innovation helps us do better in 3 ways:
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Keeps us closer
To our key customer and end-markets.
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Improves our understanding of the customer
Directly leverages our core competencies and technologies, and hones our own capabilities.
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Translates to improved shareholder returns
For both ourselves and our customers.
Naomi Simson’s take on innovation
Naomi Simson is the founder of RedBalloon and more recently Redii.com and one of Australia’s high profile entrepreneurs with substantial success across a number of sectors.
I asked Naomi what corporate initiatives have to go hand-in hand with innovation initiatives to ensure that success is realised and just as importantly, risk of failure is minimised. “I love a framework,” said Naomi, though I was not sure if she was being serious.
“Yes,” she confirmed. “The difficulty is that no 2 businesses are ever the same; so one must establish what you really want to achieve through innovation and then work to that. Is it growth, customer engagement or corporate culture?.”
“I read extensively to find out what would be best for the businesses that I am involved with – and it mostly came from having a way to listen to customers; then harness what we learned and then putting a plan in place.”
The difficulty is that no 2 businesses are ever the same; so one must establish what you really want to achieve through innovation and then work to that.
“In fact, that is where Redii.com came from. The corporate customers at RedBalloon wanted a points-based system so that they could give recognition regularly and their employees (or customers) could save towards experiences.”
“We created the minimum viable product (MVP) inside RedBalloon before I separated the concept out to be a software-as-a-service-business in its own right. Now just 18 months on, it serves 20,000 people and its growth is considerable. We continue to listen and respond. But often you need a framework to be able to capture the ideas, evaluate them and work out what is the best way forward.”
In my opinion, the innovation framework is critical; but it’s the input that should embed those critical success factors (CSFs) that emerge from customer research. In other words, the factors which customers rate highly as drivers for preferred choice of suppliers. Whilst not a comprehensive list, I’ve seen these CSFs appear often over the years.
Critical success factors include:
- Creating innovative products and services to deliver value that exceeds customers’ expectations
- Engaging priority markets with well-trained people and “easiest-to-deal-with” processes
- Promoting creatively to stand out from the crowd and pull volume through the channels
- Acting pro-actively and competitively for the benefit of customers
Innovation should add value to customers by meeting their needs closer and better than competitors; for example through product and service development. Put the new product development process reporting responsibility on the CEO’s key performance indicator list so that it becomes a Board item and things will start to happen; product development, innovation and momentum builds.
What’s the innovation payoff?
The prize is potentially higher profit ratios, clear market leadership and a bigger share of customers’ wallets.
