The Australian Financial Review


By Steve Vamos
Chairman
Managing Director
Microsoft Australia

Australia needs a new national debate on innovation policy, and not just because of the potential gains innovation can contribute to growth and productivity when the nation’s productivity levels are lagging.

In many areas, Australian businesses are world leaders in the way they go about driving innovation at the enterprise level.

Yet, if we equated innovation with research and development and how much we spend on it, Australia would be at the low end on the global league table.

This is why the Business Council of Australia has this week released a report on how 19 major businesses, including Australia Post, Woodside, Qantas, Foster's and Woolworths, go about the innovation process.

The report shows that the stereotype of innovation - R&D by technology experts developing gadgets - is just that, a stereotype.

The key message that emerges is that in a knowledge-based, service-oriented economy, innovation is highly dependent on the quality of our human capital.

Innovation can include the development and marketing of a new design for an existing product. It can also be a new internal process that when implemented allows people to work together more effectively and results in a better performance by the business.

As the report demonstrates, technology is seen by business as not the end point of the innovation process. In the age of the internet, the knowledge economy and global interconnectivity, technology becomes the means to the end.

This is why attempts to compare Australia's performance on the basis of Organisation for Economic Co-operation and Development figures on research and development alone are not complete and can divert attention from the broad range of activities innovation covers.

The BCA report concludes that an entirely new concept of business innovation needs to be accepted and understood, encompassing the government sector and the framing of economic and education policy, business strategy, workplaces and the community.

First, there needs to be a better understanding of the nature of business innovation and an awareness of the value of developing human capital. An important start would be to agree on a definition of innovation that informs public policy settings.

Second, greater awareness needs to emerge of the impact of wider policy settings on innovation, including the impact of taxation policy, the regulatory environment and workplace relations requirements on innovation.

Third, Australia needs to build the best possible innovation capabilities through our education and training system. This reflects the central finding of the BCA's research that people are key to achieving innovation.

Above all, the way to become a more innovative nation is through greater education, not only in the formal setting of our education and training system, but in the education of ourselves and our organisations about the nature and importance of innovation.