AUSTRALIAN INNOVATION IN MANUFACTURING

Innovation - the future of Australian manufacturing

By Cherise Gray

The term 'innovate' can strike fear into the heart of many a manufacturer who is simply struggling to stay alive. Faced with challenges like skills and staff shortages, a lack of much needed infrastructure, onerous Government compliance costs, over-regulation, excessive taxation and fluctuating currency levels, many manufacturers feel they can't cope with the added burden of trying to be innovative. Yet innovation – the ability to apply new ideas to products, processes, organizational practices and business models - is crucially important for the future competitiveness of Australian manufacturing. Innovation is a tool that is able to transform the way a manufacturer does business, enabling it to respond proactively to the problems and/or opportunities presented by an increasingly globalised, knowledge-intensive marketplace.Yet even those manufacturers who feel they engage in innovative practices, particularly in employing production efficiency practices, generally fail to appreciate and employ innovation as a decisive competitive strategy.

These are not unfounded generalisations. These and the other premises in this article are the findings of an international survey on Australian Innovation in Manufacturing undertaken by Professor Mark Dodgson and Dr Peter Innes from the University of Queensland Business School and the independent research think tank, the Australian Business Foundation in 2005. The in-depth survey of a sample of small and medium-sized Australian manufacturers was conducted as part of a larger international study.The survey shows that there is little evidence that Australian manufacturers see innovation as a tool to sharpen their competitiveness. Evidence shows that the proportion of Australian manufacturing businesses that are innovating is, at best, static, and at worst, declining. The Australian Bureau of Statistics shows that in 1991-93, 41.7% of manufacturers innovated, in 1994-97 this was 36.4% and in 2001-03 it was 39.5%. Their European counterparts are two-and-a-half times more likely to consider innovation/technology as an important competitive factor.

What is successful innovation?

Innovation is the process of making improvements by introducing something new - an idea, method or device, to products, processes, organizational practices and business models - resulting in change that creates a new dimension of performance. However, if innovation is to achieve its full potential, all these aspects must be integrated to support the distinctive competitive strategies of an organisation. Competing on the basis of innovation provides an alternative to competing either primarily on high quality, which is now almost universally achieved; or on price, which is easily eroded by low cost suppliers globally.

Innovation in manufacturing: the benefits to our economy

• Although the overall contribution of manufacturing to Australia's GDP is declining relative to the services sector, its absolute contribution is increasing. Manufacturing remains an engine of productivity growth.
• The Productivity Commission estimates that the multifactor productivity growth of 1.6% a year between 1974-5 and 2001-2 represented a productivity dividend to Australians of $400 billion.