Industry needs to take the innovation wheel

As a small open economy, Australia’s future prosperity will always be dependent on our collective ability to compete in intensively competitive global markets.

More than ever our ability to do so will be driven by our capacity to innovate – a fact Prime Minister Malcom Turnbull has gone to great lengths to emphasise. But the evidence suggests many if not most Australian businesses do not have the necessary skills to innovate.

"Evidence suggests many if not most Australian businesses do not have the necessary skills to innovate."
Max Theilacker & Professor Peter Gahan, Research Project Manager & Professor, University of Melbourne

The annual Global Innovation Index shows Australia is an inefficient innovator when compared with many industrialised economies – we often develop new inventions with potential to transform industry and generate great profits but have not been so effective in taking these new inventions through to commercial application.

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A new report released this week by the Australian Council of Learned Academies (ACOLA) confirms one important reason why this occurs: many businesses do not have access to the skills required to support innovation activity.

Much of course has been made of the growing need for STEM based skills – science, technology, engineering and mathematics.  These skills are critical for innovation activity – especially where it involves the working with many of the new technologies now available for developing new inventions. 

In what is likely to be a surprise for many, however, the report shows STEM skills are only part of the story.  Skills and capabilities for Australian Enterprise Innovation shows where STEM skills are blended with business and creative skills – sometimes referred to as HASS skills (humanities, arts and social sciences) – businesses are in fact able to generate more usable innovations that allow them to create and commercialise new products and services.

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Skills mixing, not just STEM, is the new black.


A big challenge for many businesses is to find ways to access the types of skills and capabilities they need to innovate. As the report shows there is much government and universities need to do to ensure we have these skills.

Ensuring universities and other education providers have the right courses teaching the skills and knowledge relevant for today is critical. Opportunities for work-integrated and problem-based learning have to be made more widely available to students irrespective of the discipline or degree they are learning.

Traditional technical programs also need to change to enable students to learn commercial and non-technical skills critical to the modern workplace setting.

But the evidence demonstrates much is in the hands of Australia’s industry leaders and individual businesses. Drawing on rich case study evidence from leading innovators across diverse sectors of the economy, the report demonstrates it is possible, even within the system as it stands.

These include Envato, which runs one of the world’s largest digital media marketplaces; Animal Logic, the digital animation studio responsible for the Lego Movie; and Keech, a regional heavy manufacturer that operate Australia’s largest 3D printer to make high-precision tools.

But for every Envato, Animal Logic or Keech, there are literally thousands of Australian businesses that struggle to innovate. How do these high innovators make it happen? 

Skills and capabilities for Australian Enterprise Innovation shows highly innovative enterprises invest heavily in skills and learning. They think carefully about how to mix different technical and non-technical skills. They show when businesses are more proactive in working with education institutions and governments they can get the skill mix right.

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For industry to have job-ready employees available they also need to work closely with universities and education providers to create opportunities to develop job-based skills as part of degree and certificate level training. Highly innovative enterprises are active players in this space.

Putting individuals with a mix of skills or even different skills in the same workplace and expecting them to innovate is not enough. Innovative enterprises invest in their managers and leaders to make skill mixing work.

A consistent finding in the research over the last couple of decades – as far back as the Karpin report in the mid 90s – shows many Australian businesses simply do not have the management and leadership capability to harness employee skills and talents to create innovative enterprises. 

This is most recently confirmed in the Study of Australian Leadership released this year.

Skill mixing does not imply we need to train everyone to do all things. Nor does it imply organisations need to create or even employ all the skills they need to cover all aspects of their innovation activities from technical invention to commercialisation.

But they do need to be prepared to do what experts refer to as ‘third-generation innovation thinking’ – they need to think about how their own enterprise fits within a broader ‘innovation ecosystem’ in which they “car share” and collaborate with other businesses that have complementary skills and capabilities that will enable both of them to become more innovative.

While a highly competitive environment would suggest many of these suggestions are difficult or even counter-intuitive, the international evidence suggests not doing so can lead to only one outcome: less innovation.

Without some change on this front, Australian industry - and our national economy – will face a continued pattern which has plagued our past: entrepreneurs with the creative spirit to come up with world-beating ideas but too many Australian businesses which simply do not have the skills and capabilities to turn them into world class products and services.

Max Theilacker is a ‎Research Project Manager at the Centre for Workplace Leadership, University of Melbourne.

Professor Peter Gahan is Professor of Management and Director of the Centre for Workplace Leadership at the University of Melbourne. 

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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