Building Australia’s Innovation System: Article by Jennifer Westacott in The Australian

This opinion article by the Chief Executive of the Business Council of Australia, Jennifer Westacott, was published in The Australian on 4 October 2014 under the title ‘Growth Must Be innovation-led: So What Are We Doing About It?’

If the Australian economy is to continue growing and living standards are to continue to rise, we must embrace innovation as a national imperative.

This week, the Business Council of Australia made a submission to the Senate inquiry into Australia’s innovation system. We see the success of this inquiry resting on whether it comes to grips with the critical importance of innovation in realising Australia’s comparative advantages and increasing our global competitiveness.

For too long, successive governments have approached innovation narrowly, with endless inquiries and redefinition of what it means.

Innovation is broader than invention and research and development. It’s the application of knowledge and technology to create value through new products and services, improving existing products and services, and applying business systems and models in new ways. We’ve been operating under a fundamental misconception in Australia that having an innovation policy is enough, when the real task is to unlock the innovation capability of the whole economy.

Innovation isn’t a program that can be delivered. It is the result of a thoughtfully designed system that supports people’s capacity to innovate and encourages the demand for innovation as a vehicle to solve different types of problems.

Innovation is the key to improving productivity in a high-cost environment such as Australia; the only way to keep us competitive, create jobs and improve living standards. The best analysis we have shows that almost two-thirds of productivity growth is driven by innovation. It allows us to diversify the economy and value-add in existing industry sectors.

This is why the Business Council of Australia asserts that the next decade of economic growth must be innovation-led. So what’s to be done and who is responsible?

People innovate and workplaces create the culture of innovation to allow that to happen. But governments control many of the levers and much of the infrastructure that contribute to an innovation system.

In our submission, the BCA offers three sets of actions. Firstly, we want the inquiry to promote a broad definition of innovation and the system that underpins it. Mobilising that system requires us to focus on building our capacity to innovate and increasing the demand for innovation.

Secondly, we highlight the significance of macro-economic settings – a competitive tax system and a workplace relations system that encourages collaboration and recognises the need for businesses to be agile and flexible in the way people work.

But macro-economic reform is not enough to mobilise an innovation system, and we have identified five elements of change to achieve this:

  • Creating an environment and culture that incentivises innovation and enables risk-taking, for example by amending the tax treatment of employee share schemes so that the point of taxation is when the share or rights are exercised.
  • Vastly improving collaboration, for example by changing the criteria used to allocate funding to research institutions to incentivise collaboration with industry.
  • Ensuring we have appropriately skilled human capital, for example by recognising software capability as a foundation skill and introducing computer coding as a compulsory subject in the national curriculum.
  • Building and nurturing our knowledge infrastructure, for example by concentrating support for research and development on sectors where it can contribute most effectively to our national interest.
  • Using regulation to stimulate rather than inhibit innovation, for example by amending the federal Competition and Consumer Act to take account of the global dimension of markets.

Given the substantial footprint of government in the Australian economy, government itself needs to innovate to improve the effectiveness and value of service delivery. It also has a responsibility to demand innovation in the massive amount of products and services it procures.

Our submission is not directed at people who work in laboratories. And it’s not a signal for governments to come up with interventionist programs for telling business what to do.

Ultimately, what we’re asking the inquiry to aim for is a mindset change that sees all kinds of Australians thinking about how to innovate in our schools, our workplaces and our government departments. We are asking for a cohesive strategy to unlock the creativity of people to do things differently, to do things smarter and to create new forms of value.

Australia prides itself on being a pioneering nation. We’ve been at the forefront of significant global innovations. This shouldn’t be the exception, the isolated moment, the remarkable Australian achievement.

The time for re-prosecuting outdated arguments about innovation has passed. The challenge now is recognising the complex interconnection of policies involved in getting innovation happening across our economy and across the community. And having the courage to take action.