Australian Innovation in Manufacturing: Results from an international survey

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August 2006

Professor Mark Dodgson, Director, Technology and Innovation Management Centre, University of Queensland, Dr Peter Innes, University of Queensland

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Professor Mark Dodgson and Dr Peter Innes of the University of Queensland Business School conducted an international comparison survey to guage the nature of innovation in small and medium sized manufacturing firms. This paper presents the Australian experience compared to the European findings. Although the survey found that some Australian firms adopted innovation practices for process improvement and cost reduction, overall there was a less strategic approach to innovation for longer term competitive advantage demonstrated by the Australian firms than by their European counterparts. Australian manufacturing firms risk being unable to compete with international competitors who have transformed their businesses to take advantage of market opportunities.

Overview & Comments

The recent research conducted on innovation by and for the Australian Business Foundation confirms a key message about innovation - it is not merely research and development of new products and technologies, but rather the successful application of new ideas in products, processes, organisational practices and business models integrated in such a way to support an organisation's competitive strategy.

This study gained insights into a sample of small and medium sized enterprises in the Australian manufacturing sector. The study identified three particular innovation challenges confronting manufacturers in terms of:

new technologies
new internal organisational and work practices for agility; and
new business relationships and models with customers, suppliers and partners

Overall, they paint a picture of Australian manufacturers investing in innovation to gain operational improvements in existing businesses, rather than preparing to deal with a shifting competitive environment.

The innovative practices most prevalent in this sample of firms focused on reducing the costs in production and assembly and balancing the investments in technology and organisational changes needed to respond to customer demands quickly and effectively. Dodgson and Innes also highlighted the restructuring and redesign of jobs and the encouragement of teamwork and employee consultation as activities conducive to innovation in Australian manufacturing firms.

The key shortcomings by the sample of manufacturing firms were the short term planning horizons and failure to adopt continuous improvement processes that drive sustained innovation as a competitive strategy. They saw little evidence of investment in advanced technologies for product design, techniques for organising new product development, effective linkages with innovation demanding customers, and packaging of services around product offerings.

Unlike their European counterparts, there is little evidence that these manufacturers see innovation as a tool to transform the way they do business or to respond proactively to the problems or the opportunities presented by the increasingly globalised competitive market.

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