Building Innovative CapabilityRoy Green, MGSM

University of Adelaide, October 14 2008

NIS review: Why, what and how of innovation

Can public policy translate this to innovative capability and performance at the enterprise level?

TCF review: Policy prototype for capability building

Venturous Australiabuilding strength in innovation

Report and overview

available online at

www.innovation.gov.au/innovationreview

“Ultimately, the purpose of a national innovation system is to transform knowledge and resources into dynamic capabilities at the level of firms and organisations, which are then better placed to contribute to the innovation performance of the economy as a whole”

Business Council of Australia/SKE, New Pathways to Prosperity, 2006

Global ranking dashboard

Components of Growth in Australian Living Standards

Trends in productivity and GDP growth

Why innovation

• Innovation drives productivity growth and competitiveness of firms

• Innovation promotes social inclusion through expanded opportunities

• Innovation will contribute to achieving environmental sustainability

What drives innovation

• Innovation might mean new products or processes, or new organisational or business models

• But the key to successful innovation in companies is investment in knowledge and innovative capability

Australian government support for science and innovation

Government spending on R&D (OECD)

Investment in Knowledge (R&D, Higher Education, Software), % of GDP, 2004

0

1

2

3

4

5

6

7

Australia

Canada

Denmark

Finland

Sweden

The world is not flat (Tom Friedman)

… it’s ‘spiky’ (Richard Florida)

“Knowledge creation and diffusion are at the core of economic activity. Knowledge is embodied in people, and it is the quality of the human resources that will determine the success or otherwise of firms and economies in the years ahead.”

Enterprise Strategy Group, Ahead of the Curve, 2004

Share of high and medium high technology industries in manufacturing exports (%)

0

1020

3040

5060

7080

90

Ireland UnitedStates

OECD Finland Australia

%

High-tech industries Medium-high-tech industries

Source: OECD

ICT trade balance (%)

-20

-15

-10

-5

0

5

10

15

20

25

Ireland Finland OECD UnitedStates

Australia

Source: OECD

• EU Lisbon strategy: “the most competitive and dynamic knowledge-based economy in the world by 2010”

• US: “Rising above the Gathering Storm”

• UK: “Race to the Top”

• Canada: “Benchmarking against Global Best”

Broad approach to innovation Non-linear with multiple sources

More than science and technology

Incremental as well as breakthrough

Low tech and high tech industries

Driven by collaboration not silos But…

“The problem is… that the Lisbon strategy has become too broad to be understood as an interconnected narrative. Lisbon is about everything and thus about nothing. Everybody is responsible and thus no one. The end result of the strategy has sometimes been lost. An ambitious and broad reform agenda needs a clear narrative…”

High Level Group, Facing the Challenge, 2004

A key objective of Ire land's national innovation system is to translatenational innovation capacity to the level o f the enterprise and w orkplace .

.

Enterprise-level partnership

Socia l partnership

W orkplace of the future

C lustering and netw orks

Investm ent attraction

Technology transfer

R esearch and education

N ationa l Inn ovatio n System

Findings of the NIS review Australia's innovation system will require:

– greater international engagement

– a more open and collaborative approach

– a substantial increase in investment (private and public)

– a more coherent and strategic ‘whole of government’ approach

Recommendations 1: research• Increase funding for PFRAs and the

university research system (to 93/94 levels)• Full funding of university research• Increase stipend for PhD students• Substantial infrastructure funding - NCRIS

successor• Open access to research and collections

Recommendations 2: business• New innovation support programs – Competitive

Innovation Grants Program, Linkage Voucher Scheme, Knowledge Connections

• Continue existing programs – IIF, PSF and COMET• Single interface for accessing program information

across Australia• Standard program design principles• Innovation Australia to be central delivery agency

for business programs

Recommendations 3: taxation• Replace the system of R&D tax concession with an R&D

Tax Credit• Firms < $50million turnover – 50% credit• Firms > $50million turnover – 40% credit

• Current 125% concession provides an effective benefit of 7.5 c/$• A 40% credit for large firms = 10c /$• A 50% credit for small firms = 20 c/$

• The 175% premium tax concession and the tax offset would be abolished

• Definitions to be tightened

Recommendations 4: governance• Replace PMSEIC with a National Innovation

Council• New Office of Innovation Assessment• New Research Coordination Council• Minister for Innovation to be joint signatory on all

innovation Cabinet proposals• New National Centre for Innovation Research• Framework of principles for innovation

interventions as basis for COAG process

Proposed governance framework

Setting priorities for innovation1. Leveraging Australia’s natural endowments or

competitive strengths2. Identifying areas with Australian solutions to

globally relevant challenges or markets3. Creating scope to transform or reinvent existing

industries and service delivery4. Internationalising Australia’s innovation system

through global integration and supply chains5. Investing in innovation capabilities and

supporting infrastructure at all levels

Workplace of the future (TCF)• new products and services, drawing on sources of

knowledge within and outside the enterprise• new operational processes, including relationships

in global supply chains• new business models within the firm and in the

‘extended enterprise’ of networks and clusters• new approaches to marketing and sales as part of

strategic repositioning• new work organisation, with high performance

work and management systems

Australia’s emerging narrative

• Shift from ‘structural adjustment’ to the development of innovative capability at the level of the firm and workplace

• “In the 21st century, innovation policy is industry policy” – Minister Kim Carr

• But innovation policy is also a leadership and organisation strategy, requiring deep cultural change.