The Reality of Innovation Unzipped
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- The Reality of Innovation Unzipped (660 KB PDF)
This joint venture project between Australian Business Foundation and Deloitte aimed to test the appetite for innovation in middle market firms through a series of focus groups with more than 50 businesses in Sydney, Melbourne and Brisbane.
The key findings of this collaborative project demonstrate that these businesses have a strong appreciation that they need to continually innovate to survive, and to compete on knowledge and innovation through business transformation, rather than on cost.
Overview & Comments
Probing beyond the obvious to discover fresh insights is the Australian Business Foundation’s stock in trade. When the Foundation teamed up with Deloitte to look at 50 middle market companies and their experiences of innovation, the result was a number of rare insights into the hidden realities of business innovation in this important and often hard to reach section of the business community.
The majority of businesses examined reported that they had to innovate to survive. It was not a choice but rather a business necessity driven by market and/or customer demands. Competing on knowledge and innovation rather than cost, price and quality has evolved as an alternative competitive strategy which if executed effectively, can create new value for the business either by enabling the company to solve problems better than their competitors or providing some other competitive advantage through greater customer engagement or embedded organisational learning.
The study confirmed that innovation is more than radical, technological advances in products or services. Business leaders acknowledged that it is actually more commonly witnessed in transformed business practices such as changing how business is done in a particular market, reorganising organisational work processes or using alternative channels to reach customers. These less visible forms of innovation have proven to be as effective as radical breakthroughs at creating new value. More imaginative business models have emerged through these transformations which focus on building learning cultures – ie, where experimentation, exploration and taking managed risks are valued. This cultural change process is one of the few times that change motivates and engages employees, and this also creates value for the organisation by retaining and attracting sought after employees.
Innovations of the radical breakthrough kind are often achieved only when businesses keep their product development cards close to their chest, but this study confirmed that innovation actually needs partners. The learnings and insights created from collaboration with customers, suppliers, and even competitors can inform tailored solutions to business problems. The results of the study demonstrated that collaboration with competitors is possible because innovation is highly context specific and depends on understanding the individual business strategy and capabilities.
Above all, creating value from innovation is all in the execution. Innovation will only create value if it is part of a disciplined, structured organisational process, is focused on outcomes and embedded in the day to day operations of the business. Creating the processes that foster innovation requires longer term capability building and business leaders need courage to overcome entrenched more traditional approaches to creating value.The businesses studied were well aware that in order to sustain their productivity and profitability in the future, they need to continue to compete on innovation, creating knowledge within the business and building collaborative partnerships.
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