Australia is at the international frontier of innovation in business but much of our achievements go unrecognised because the fundamental concept of innovation is misunderstood, the Business Council of Australia said in a major report on innovation released today.

Chair of the BCA’s Education, Skills and Innovation Task Force and Managing Director of Microsoft Australia Mr Steve Vamos said: “The report shows that an entirely new concept of business innovation needs to be embedded into the national culture – in government, economic policy, business strategy, workplaces and the community.”

“Innovation, particularly at the enterprise level, takes in a broader range of activities than has been generally acknowledged.”

Mr Vamos said the BCA’s New Concepts in Innovation report – which is backed by 19 comprehensive case studies that examine what makes new ideas tick in organisations – underlined the extent to which human capital is the driving force behind innovation today and will continue to be into the future.

“To assess Australia’s performance on the basis of an OECD comparison of our research and development spend alone is to miss the point.”

“There needs to be a consensus across government that public and private investment in our human capital is not only desirable but essential if Australia is to still be a clever and wealthy country in the decades ahead.”

Companies profiled in the report range from those in full or partial public ownership to large corporations in the banking, business and legal services, manufacturing, information technology and communications and retail sectors.

The report argues for a realistic definition – and recognition – of the nature and value of Australian innovation. Such an understanding will have fundamental implications for the nation’s economic reform agenda as innovation is the foundation stone of continuing productivity growth, competitiveness and prosperity.

Mr Vamos said business innovation had to be a primary ambition for all government industry policy and needed to be incorporated in ongoing reform in priority areas such as taxation, workplace relations, infrastructure and regulation.

“Likewise, businesses must have a front-of-mind awareness and active strategies in place to create the environment that cultivates innovation in the workplace.”

One of the main findings of the report was that customers are driving the need for – and the nature of – business innovation, which involves the commercial application of old or new knowledge to create additional value and wealth.

It calls for a broader concept of innovation, extending beyond just R&D-based activities, to be embraced and integrated into education and training systems so that capabilities for innovation success can be better developed within the workforce.

Education and training systems need to be focused on not only the development of strong technical and applied capabilities but also employability skills such as communication, teamwork, problem solving, ongoing learning, creativity, cultural understanding, entrepreneurship and leadership.

“Our economy has been transformed over two decades towards services and customer-focused industries, which creates the need for original thinking about the nature of innovation and how it will underpin our future,” Mr Vamos said.

“Advances are achieved by the new ideas, practices and processes that emerge day-by-day in Australian organisations and workplaces at all levels.

“They don’t necessarily make headlines in the scientific journals or lead to patent applications or win a Nobel Prize. But they add incalculable value to our economic performance and our capability to perform at the level of world’s best practice.”

The New Concepts in Innovation report builds on the BCA’s 2004 survey, Research and Development Investment by Australia's Leading Businesses, which promoted acceptance of the concept of innovation as a practical issue for Australian business.

New Concepts in Innovation found that businesses in Australia will tend to innovate in ways other than through traditional R&D, and that innovation does not necessarily occur in business research units, but that it extends across all parts of a business.

“The ongoing success of business is achieved through continually enhancing the value of products and services to customers. “Often this has more to do with applying and managing the skills of people in the workplace than it does with technology or product invention.

Mr Vamos said the future work of the BCA in the area of innovation would aim at achieving four main priorities:

• Building an understanding of the nature of business innovation and an awareness of the value of human capital development.
• Advocating the significance of the BCA’s reform agenda to underpin a culture of innovation.
• Advocating the centrality of education and training in delivering the capabilities for innovation and translating that into successful outcomes.
• Creating the environment for leading-edge innovation in Australian workplaces.

New Concepts in Innovation: The Keys to a Growing Australia