Don't get left behind without knowing it; understand innovation

Margaret Paton

Australian leaders, especially those in small business, aren’t very innovative. Ouch. For a small business sector that likes to imagine itself as the more agile, ‘quicker to react’ competitor to big business – that statement will surely pinch. But that’s the upshot from the landmark Study of Australian Leadership released by the Centre for Workplace Leadership at the University of Melbourne in June.

The study was the largest survey of leadership in Australia, including almost 8,000 individuals in 2,703 organisations and more than 2,500 workplaces.

The report says innovation – one of several critical outcomes - leads to productivity growth and competitiveness.

So if these findings strike a chord, perhaps you should go back to basics to make sure you’re not getting left behind.

What is innovation?

“Innovation is what you do every day. It’s just solving a problem in a different way. There are processes you can take to allow you to look at a product or service with a different lens. You’ve got to be comfortable with the process to be more confident as an innovator.”

Meanwhile, serial entrepreneur, Creel Price, of Club Kidpreneur and Investible, says problems with innovation stem from misinterpreting it.

“It’s much more than just technological advancement. It doesn’t need to be limited to digital disruption.”

Innovation is “not nebulous … it’s not a dark art," says Trent Lund, Head of Innovation and Disruption at PwC.

Be careful…there’s more than one type

Jesse Olsen, the leadership report’s co-author, said the results overall were representative of all businesses with five or more employees, but medium-sized businesses were better at radical innovation. That covers game changing and disruption, as opposed to incremental innovation, which is about improving processes, efficiencies and economies of scale.

“Post resources boom … radical innovation will be the key to long-term performance. There needs to be a regular investment up front and you won’t see short-term benefits. That’s tricky for small businesses,” says Olsen.

As for educational qualifications, the report found one in four leaders didn’t go much beyond high school, despite educational qualifications having a positive effect on performance.

“The study showed small businesses did not exhibit good management practices such as setting targets, monitoring KPIs, being proactive with problems and a savvy use of incentives with staff – in short, purpose,” says Olsen.

What do you stand to lose?

Death by a thousand papercuts is a risk, says Lund, as the more innovative businesses fill customer experience gaps their competitors leave – think Uber tapping into customers’ perceived disgruntlement with taxi drivers. But small businesses can be just as nimble to respond to changes in business models and emerging trends and innovate.

Price talks about the less obvious impact on work culture.

“Slow-moving businesses may end up attracting and retaining only the staff that aren’t motivated by working for an innovative company. This can create a downward spiral of inertia. Innovative leadership is required because a small business can stagnate the longer it depends on its original founder.”

What’s the excuse?

The leadership study asked top leaders to spell out their current and future challenges for the next five years. Many cited too much government regulation, a skill shortage and succession issues.

Olsen says: “We found that a lot of senior leaders aren’t looking externally for advice about strategic decisions and that very much goes for small business, too.

“There are so many different sources of advice available: being part of an association, chambers of commerce or visiting an event to ensure you have outsiders on your board … leaders said they went to those sources infrequently.”

This harks back to Lund’s prompt for leaders to look through a different lens for a diversity of ideas and perspectives. Broaden the lens with women and people from culturally and linguistically diverse communities at the helm. However, leaders of small businesses were more likely to be culturally diverse, the study found.

Olsen says: “You have to create opportunities for employees to give you information and for you to tap into their networks outside your organisation. You have to get lots of information, put it together and synthesize it.”

"You can be competitive, but you limit growth if you are not developing unique products and services.”

How to get on top of it

Lund sees collaboration as the way forward. The cost of carrying diverse talent on your payroll is no longer an obstacle. Look at Expert 360 for top strategy, marketing or financial consultants or the many other outsourcing talent pools such as Upwork

While Australian universities rank 33rd in the OECD countries for quality research, there’s little follow-through when it comes to innovative outcomes including patents.

“We’re failing to convert good quality research and academic rigour into commercial outcomes.

“As well … many commercial organisations, small and large, have reduced their investment in research. You can be competitive, but you limit growth if you are not developing unique products and services,” he says.

Businesses working with other businesses is another form of collaboration with Lund saying the market is ideal for solutions in that sector. However, Australia’s lack of a critical mass of early adopters makes it “not the easiest” market for business-to-consumers.

Price depicts the future of innovation: “It will need to become decentralised in this new age of portfolio careers, more contractors and remote working. This will force change that will require more collaboration and fewer whiteboard sessions driven by leaders.”

He has written extensively about the seven deadly sins of innovation and how to overcome them: build a champion team; continuously improve; foster a culture where staff are green and growing; set a daring audacious goal; go for lean and mean to be fast and flexible; balance investments for short and long-term gains; and experiment to fail fast – at least you’ve tried.

Margaret Paton

Former Sunday Age staff journalist, Margaret Paton (formerly Jakovac) has written widely for corporations/government departments and more than 100 online/hard copy mastheads in regional NSW, Sydney, Melbourne and Europe.