Over recent days, I have been reviewing the body of research work produced by the Australian Business Foundation to distil the key messages for business briefings to companies and for advice to politicians in the lead-up to the Federal Election.

Nothing stands out more than the choice facing Australia that was captured in the title of the Australian Business Foundation's inaugural research study by Professor Jane Marceau, Derek Sicklen and Dr Karen Manley, namely The High Road or the Low Road.

This referred to the choice of taking the high skill, high wage, knowledge-intensive road, where we compete on innovation and the quality of our technical know-how and skill. This road leads to more jobs and higher living standards

Or we can choose a low technology, low skill path, where we compete by cutting costs, particularly wages, and by specialising in standardised commodities and products for fragmented markets. This will doom us to going head to head with low wage countries for a decreasing share of world trade and fewer job opportunities.

This is not really a choice. It is a race to the bottom – with severe social as well as economic consequences.

So, innovation is really crucial for Australia. It is at the heart of taking us up the value-added curve, especially in a world of free and fast flows of information, and the reduced shelf-life of ideas, first mover advantage and the product cycles of business.

The High Road or the Low Road pioneered much of the thinking that has resulted in the Howard Government's "Backing Australia's Ability" statement and the Federal Opposition's announcements on the Knowledge Nation.

The High Road or the Low Road concluded that competing on the basis of innovation and know-how creates greater growth and prosperity than a focus on efficiencies and low cost production alone.

But, what does that mean for the average Australian business enterprise?

The short answer is simply for companies to focus on doing clever and smarter things in business. This does not mean just high tech breakthroughs and inventions, but it also involves:

• doing old things more intelligently;
• turning new ideas into businesses;
• adapting and gradually improving the way we work, how we organise, manage people, or operate our supply chains, distribution, logistics, and the like; and
• creating or enhancing products and services in response to customer feedback, problems and failures or emerging consumer demands.

Innovation is not something you do once. It must be done systematically and continually.

This means creating, sharing and transferring knowledge. It also means keeping ahead of the pack; developing novel ideas and capitalising on them early before they can be imitated; and to keep on doing this again and again.

This kind of innovation applies equally to traditional and mature industries, as it does to the dot.coms or biotechnology start-up firms. And size doesn't count. Innovation is equally open to small enterprises as it is to big multinationals.

Innovation, in a nutshell, means reinventing your business offerings as the market changes.

Let me give a couple of examples of ordinary Australian businesses that have done this.

• Firstly, there is the courier business based in Parramatta and servicing clients along the Eastern seaboard. It was just an ordinary freight business, with drivers on the road delivering and collecting packages and equipment like computers and related hardware for business users. With a class piece of lateral thinking, this firm decided that it could add value and create new business activity by training and improving the skills of its drivers to also install the equipment they were delivering. Eventually, this led to these staff also undertaking trouble-shooting and service support, as their product knowledge and skill level was enhanced.

As a result, this firm has seen a fivefold increase in business, an expanded workforce now including computer programmers and trainers, and further new business growth areas in sales, installation and maintenance of smart card point-of-sale terminals, as well as further innovations in the original freighting business by way of fast-call and just-in time delivery systems.

• Another example is a classic of applying Aussie ingenuity to leading edge technology to open up totally new business opportunities and markets, effectively redefining and expanding the industries in which the business operates.

It is the case of a company manufacturing knitted fibres and resins from polyesters and vinyl-based elements. These composite materials are used in diverse applications in industry, one main one being fire-resistant fabrics for firefighters' protective gear and luminous clothing.

In a leap of logic, these innovators have found radical new uses for their composite materials and new export markets at the same time. They completed a contract in Malaysia to manufacture domes for Islamic mosques using their advanced high-strength composite materials, which have a significant weight and cost advantage over traditional building materials used for this purpose.

Such advanced technology and the brainwave that saw it applied to such a different use – textiles to construction – has resulted in new opportunities not only for building work worldwide, but also for the manufacture of fast ferries and similar shipping vessels where stability and weight ratios are crucial.

Many more examples of Australian business innovation and the lessons to be learnt, can be found in a self-help Innovation Kit of videos, CDRom and workbook produced by my parent organisation, Australian Business Limited.

The conclusion all this leads me to is that innovation is Australia's only choice.