The Australian Business Foundation recently celebrated its fifth birthday as an independent, business-sponsored, not for profit research think-tank. The Australian Business Foundation was founded with a single mission – to conduct and disseminate groundbreaking research that advances knowledge and fosters new thinking and best practice on Australia's business competitiveness, prosperity and jobs.

So, it is timely to take stock of what we've learnt from our body of research to date on innovation, emerging business models and new forms of competitiveness in a knowledge-based economy.

AFR BOSS readers can examine the Foundation's research first hand by visiting our website at www.abfoundation.com.au, but let me share with you some of the key insights.

If I had to crystallise a single piece of intelligence from the Australian Business Foundation's research, it is this:

•  Fundamentally different competitive strategies, based on innovation and knowledge, are vital in the face of an increasingly volatile and globalised business environment.
  

A seachange has taken place in the environment facing Australian enterprises, both big and small. It transcends meaningless distinctions between the so-called 'old' and 'new' economies. The new economy is exactly like the old economy – only faster, more interconnected and knowledge-driven.

Business competitiveness is being profoundly affected by potent trends and forces for change like:

• globalisation in the form of free and fast flows of information, skills, ideas and capital worldwide that increase the ease and speed of business imitations;
• the truly revolutionary way online technologies are transforming how business is being done and increasing the power of consumers in production decisions; and
• the greater significance of intangible assets, like knowledge and relationships, to where money can be made in a business and value delivered to customers.

In the face of such factors, innovation – for firms and for nations - is a survival strategy. Competing on the basis of innovation and know-how creates greater growth and prosperity, than a focus on efficiencies and low-cost production alone.

Innovation goes beyond technological advances and inventing new products. It means doing business more intelligently and reinventing business offerings in response to market changes. Innovative enterprises are adept at creating or enhancing products and services in response to customer feedback, advances by competitors, emerging technologies or new consumer demands and preferences.

Successful firms compete by recognising, creating and mobilising their own distinctive sources of know-how.

Such assets are often intangible ones, like market intelligence, skills, tacit knowledge, experience, technical know-how, customer relationships and the learning gathered from past mistakes or failures. The challenge remains to harness and manage this knowledge so that it can be turned into new competitive capabilities for the enterprise.

The most prized business skills in this new, volatile and customer-focused business environment are the twin arts of inspiring and retaining talented people and effective working teams, and collaborating strategically with changing webs of partners and stakeholders over successive business cycles and projects.

There are lessons for Australia's public policy here too, if the key to Australia's future competitiveness lies with business enterprises being continually innovative, nimble, close to customers and globally-connected.

Government policies, regulations and institutions have a critical role to play in creating the environment that allows businesses to take risks, access new opportunities and global markets and capitalise on technological advances, knowledge and innovation.

In the past, industry policies have been about debates on protection and tariffs and interventionist approaches by government like tax breaks, decentralisation incentives and business bail-outs. But, modern industry policy is about economic growth, business competitiveness, productivity and distinctive competitive advantage.

These are not achieved just by sound economic management and freeing up or reforming markets, but by deliberate actions to foster business innovation, market development and clusters of world class capability here in Australia.

On many counts, Australia is punching above its weight, as shown by our recent sound economic performance and by examples of resurgent Australian enterprises competing through innovative business strategies both at home and abroad. But, there are warning signs too – in our relatively low levels of business R&D, too few exporters and seeming inability to reverse the research and technology brain drain or to commercialise new ideas.

The Australian Business Foundation's future research efforts are being geared to combating the Aussie tendency towards 'She'll Be Right' complacency.