Tuesday, 26th February, 2013

As the CEO of an organisation with global reach whose network of relationships embraces all levels and types of business - from multi-nationals to small-medium and sole traders (SMEs) and everything in between - I am struck by how difficult it has been for New Zealand businesses to successfully innovate to meet the opportunities of the ever-changing international market place.

What exactly is "innovation"?

A simple definition is to say innovation is to make (something) new or to do something in a new way. But a business innovation definition also has to include the concept of improvement; to innovate in business is not just to do something differently, but to do or make something better.

Innovation differs from invention in that it refers to the use of a better and, as a result, novel idea or method; invention refers more directly to the creation of the idea or method itself.

Innovation differs from improvement in that it refers to the notion of doing something different rather than doing the same thing better.

A good business innovation definition, then, would be: It involves developing new products or improving existing technologies, processes, designs and marketing to solve problems and reach new customers.

Innovation has long been viewed a problem in New Zealand. For instance, a 2006 OECD report put New Zealand in the top three of countries with innovative ideas, but near the bottom in terms of converting innovation into commercial success.

Successive governments stretching back almost five decades have grappled with trying to connect our lagging productivity growth with our sub-par efforts to innovate a range of value-added products and move our export dependency beyond reliance on commodities.

As I have been saying recently with increasing urgency, to move beyond this limitation I believe we need a new mindset - a change of culture that places innovation at the top of the Government's agenda and features in the business plan of every businesses.

At government level, the tier of new Free Trade Agreements has a lot of focus on provisions that will help our large commodity exporters break into new markets, such as China.

But I see little evidence of FTA clauses designed to link up SMEs and/or team up business organisations, universities and technical agencies in respective countries with the aim of innovating new products and services for each other's markets. So my first key point is a call to Government to extend the opportunities created by negotiating FTAs to a broader base of interests than simply the traditional areas such as dairy, meat, wool, forestry and tourism and export education - as important as these are. I see countries like Korea, Israel, Italy and others negotiating bilateral arrangements that bring together respective business organisations, incubators and investors with the specific purpose of applying innovation to grow new products in each other's markets. To keep up, we must too.

My second point relates to what businesses can do better for themselves, or more accurately what we can do to help businesses do better to commercialise innovation in a crowded global market. Of course, the greatest source of innovation will always be business leaders with a passionate commitment to doing things better and a willingness to seize opportunities - but first business leaders have to adjust their mindsets.

It is not simply a cliche that companies of all sizes - especially our SMEs - must understand their company's competitiveness depends on their capacity to innovate and to adjust their investment decisions accordingly. Embrace risk-taking and aim higher. Business growth centres like the Auckland-based Icehouse are doing excellent work to link up business gurus with SMEs, and are extending their incubator programmes into a number of regions with local partners including the Chambers of Commerce.

However, there is an even more fundamental change of culture required if we are to tap our full potential to be an innovation-led nation. We need a conversation that recognises the trigger points that unless/until you are prepared to make a change of behaviour there is little chance of getting a different result. It is the change of behaviour and breaking free from set ways of doing things that enables innovation to flourish.

The challenge is to shape a nationwide conversation that reaches to the many thousands of business leaders and SME owners with the potential to grow the performance of their business but who currently are reluctant to do so, for whatever reason.

A first start is for every business to put a definition of innovation to their firm's business plan. Just doing that can be the start of change. The reason a definition of innovation is so important at company level, is that a definition signals intention, commitment, direction and importance.

What a CEO or SME owner says about innovation matters, in terms of the commitment of the rest of the organisation, in terms of direction, in terms of investment, in terms of strategy. The starting point for any successful initiative or venture in any business is a clearly articulated goal, definition or strategy, which is then backed by deep commitment. If we can't define innovation well, how can we possibly be committed to its success?

There is a national interest agenda in encouraging innovation at the coal face of every business. The reality is that the only things that create jobs anywhere in the world are successful businesses. When you look at economies - national, local and regional - that have successfully incorporated a culture of innovation through their society, countries like Israel and Korea and some parts of Britain and the United States, two points stand out.

There is a strong buy-in from business organisations and government alike.

The big funder of incubator organisations tasked to convert innovation into commercial success is government, and the big driver to ensure success is business.

For more information contact Michael Barnett, mobile: 0275 631 150.
Michael Barnett, Chief Executive, Auckland Chamber of Commerce.