Australia an innovation laggard: Where we went wrong

Australia’s innovation is stalling, at least according to Harvard Business Review in a report comparing the digital direction and progress of 50 separate countries.

The study features a Digital Evolution Index (DEI) – created by the Fletcher School at Tufts University – identifying how countries stack up in terms of readiness for a digital economy, with consideration for supply- and demand-side factors, innovations and institutions.

Based on the performance of Australia from 2008 to 2013, we were firmly labelled as a ‘stall out’ nation, a category for countries that have achieved a high level of evolution in the past, but are losing momentum and risk falling behind. The index clearly shows Australia as ‘slowly receding'.

Innovation laggards

The report was widely discussed at an event hosted by Pegasystems last month to determine how best to drive success in the digital economy.

Mark Uncles, deputy dean (education) at the University of New South Wales' Business School, said the research was misleading about the state of many forwarding-thinking companies in Australia and in truth, it's a "mixed bag."

“I don’t think it’s a lack of imagination or lack of awareness. It’s not as if Australian consumers are not tech-savvy or Australians have their head in the sand and they’re unaware of what’s happening in the rest of the world," Uncles said.

“When we drill down, my sense is that the skillset in Australia is varied. So we have pockets of expertise, with examples of where things are cutting edge, but then there are these other areas where the capabilities haven’t been developed.”

Uncles cited the skills shortage in data analysis as a good example of where our capabilities have seemingly not kept pace with the rest of the world.

Education

To help fill these gaps and create a more innovative next generation, digital literacy must be taught from a young age, said Uncles. He added that Australia needs to help young people 'step by step' through the education process.

There’s no shortage of passion from university students either, according to Steven Burdon, professor of strategic management and technology at the University of Technology in Sydney (UTS). In fact, universities are “scrambling to keep up” with the imminent digital tsunami.

“I haven’t seen a change like this for 32 years. The subjects we teach, how we teach – everything – has to change,” he said. According to Professor Burdon, 27 per cent of students currently enrolled in the UTS Business Technology Masters claim they want to found a startup business.

“We have new buildings, hubs and incubators. We’re getting vendors and industry groups to help out; we have project groups and mentoring systems to support this, but we’re still scrambling to catch up with it.

“We now use adjunct teachers - industry people as speakers - and we’re beginning to design subjects in collaboration with companies. Telstra helps us on our software changing industry, and I’m working with HP to redesign two of our subjects. Mostly, companies are happy to help.”

Digital should be a part of education syllabuses, not just at school and universities, but also in the workplace, Karen Scott Davie, digital consultant and member of the CIO Executive Council advisory board, told CIO.

“Yes, we can train young people to do these things, but training people in the workplace should be a part of research and development. We invest in developing products but we need to develop people.

“If you give people the skills you can work with them on the product ideas and creation.”

Stuck in the mud

While the education sector must mould future innovators, today’s businesses still need to up the ante if they hope to keep up with our foreign peers.

Gavin Heaton, digital consultant and founder of the <i>Disruptor’s Handbook</i> believes there is a great inertia around innovation affecting several large-scale business.

“Obviously there are great examples like Telstra and the Commonwealth Bank who are leading the way but there are hundreds of other large-scale businesses in Australia that are not really dealing with that change. When that filters down to mid-tier, suddenly there’s a whole lot more to be done,” Heaton told CIO.

“[Australian enterprises] didn't have the technology in place but they’re starting to get there now - but then even if they have the technology they don’t have the right people, skills and processes to back that up. It's not really about the silver bullet, it’s organisation-wide.”

Whether it’s a product or process, the drive to innovate has been stymied so far by a lack of competitive intensity driving change, said Uncles, with most organisations settling for what’s necessary as opposed to going above and beyond.

“It has a lot has to do with the structure of industry in Australia and perhaps that shows that we’re still living in the old world. But that old world doesn't exist anymore,” said Uncles.

Risk, time and agility

The issue remains that the Australian business community is fairly risk averse and as such, breaking into new ground is often shied away from.

Fergus Watts, digital consultant and CEO of Bastion Group, told CIO that if the issue of risk aversion were to melt away, companies may still lack the time and the drive to innovate.

“All I keep hearing about is how time poor everyone is. It seems to be a badge of honour these days not to have any time. If you’re so time poor and slightly risk averse, then you won’t do the relevant research into an investment or into a new way of working.”

Another reason for lack of commitment to innovation, said Watts, is the heightened churn rate of modern workers.

“The fact that we only stay in jobs three to four years now could affect our ability to take risk, put ourselves on the line and set the company up for long-term prosperity. Because really, do you care? You're gone three years later anyway.”

The current rate of innovation also calls for project delivery to become far more agile. Speaking at the event last month, Don Schuerman, CTO of Pegasystems, said the budgeting process and ROI requirements of many large businesses need to adapt, or run the risk of wasting time and money.

“Large organisations can’t run agile projects because their budgeting process requires a waterfall model. The world is moving so fast that any projection of ROI you build for a two-year waterfall project is going to be completely invalid by the time you get the project done,” Schuerman said.

“The systems inside these companies are built to prevent the type of agile development that’s exactly what the disruptive competitors are doing.”

Culture

To tackle the many digital trials before us, all sources agree an overhaul of corporate culture will be a crucial defence. But to ensure success, Heaton recommends baby steps.

“Culture will eat your innovation as quickly as it can … our focus is really on the small things you can do, following the example of the startup culture,” he said.

“If you can find a way of starting change somewhere small, like the edge of a group, and then building it out in a lean and agile way, then you’re able to find footholds within the organisation where you can accelerate this.”

A key point raised by Heaton and Scott Davie is the need not only to create an innovative culture, but also to share ideas. According to Heaton, there’s a shift away from what he calls an ‘intrapreneurial’ role with an inward focus, to a more market- and customer-driven, external focus.

“There’s a certain amount of internal entrepreneurship required, but also you’re doing a lot more customer-facing and market-facing work with the innovation that you do, so you’re also selling outside your business,” he said.

“People need to realise that next year, technology will employ more people than mining,” added Scott Davie.

“We need to be far more aggressive about export revenue, so if you've got technology that you've created in-house, don't just hide it internally.

"Consider how we can use it to export or generate revenue for exporting, because there's so many people engaged in Australia and so much digital intelligence that we can use that to our advantage if we're clever about it.”

At last month's event, Robert Tas, CMO for Pegasystems, spoke about the need to instill more of an experimental, risk-taking culture in Australian businesses where not everything is done by the manual, individuals can shift between roles and departments, and be taught that it’s “okay to fail”.

“The companies that want to be customer-centric, brand-centric and innovation-centric will start to make the right changes, but boy it’s hard,” said Tas.

“It’s not just a pretty PowerPoint you send out, it’s actually changing process, changing organisational values, and compensation models, and that’s hard. But I think we’re on that journey and yes the digital natives have a little advantage - but the big companies have got to figure it out fast.”

Enabling innovation

CIOs are expected to be enablers of innovation by helping to create new products or processes quickly and consistently, while ensuring a commercial return wrapped around each. This is made easier by developing a strong business dynamic with marketing and finance, in addition to always keeping one eye on the latest products and services.

“The CIO can contribute different ideas, whether it be their own original ideas or pointing to a whole lot of different product ideas out there in the marketplace, keeping aware of some of the things that are coming out of that tech startup space,” said Scott Davie.

CIOs can keep up-to-date by sourcing information and publications about what’s going on in particular tech startup spaces. Scott Davie recommends maintaining some startup contacts, which can provide a direct route to the latest products in development.

“If the business deals with aviation, for example, there are whole businesses that are looking at aviation management, including the way we process aviation information, and they’re doing it on a low budget and with quite streamlined processes,” she explained.

“It might be a matter of partnering with a particular group or buying their products; helping them grow and supporting them by investing 10 per cent to help them develop a product that’s going to deliver within the aviation industry.”

Embracing our own

Support for startups wouldn’t simply help maintain your company’s position when it comes to the latest innovations, it would also help to encourage entrepreneurs to set up shop in Australia, rather than take their ideas elsewhere during cuts to government funding.

“If you're a young person founding a tech startup here, you’re not getting your funding in Australia, so you’re going over to America or to Asia, that’s where you’ll get your cash,” said Watts.

Watts believes the inability to fund tech startups properly in Australia is negatively affecting businesses ability to be early adopters of new and innovative technologies.

“Business startups can sell their products for less, they’re willing to partner with other organisations and they’re willing to grow and evolve with the market and that makes it easier for businesses to go pick those things up.

“But all that’s happening somewhere else, not here. So it’s no surprise we’re lagging.”

While acknowledging our greater challenges, Scott Davie still believes Australia is doing well for its size and global status, and that we will be able to draw on our strengths, moving forward.

“Our digital economy is growing - we're in the top 20 in the world, and that’s fantastic for our size, with 22 million people here versus 300 million in the US.

“Our biggest strength in Australia is our development - our great program developers which are poached from all over the world. We get a lot done in Australia thanks to them. Our local developer community is huge and it’s growing,” Scott Davie said.