There has been a renewed focus on innovation coming from Prime Minister Malcolm Turnbull and Treasurer Scott Morrison. That is, of course, a very good thing. We know innovation is needed to boost productivity and keep our standard of living at the high level we expect.
The real heart of innovation is with small business people doing their own thing in their own way and often without any fanfare or recognition.
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So how do we find these people and support them?
In any support mechanism for innovators what doesn’t work is formulaic approaches. Formulas are an anathema to innovators. Innovation is about developing new formulas, new ways, new products and new ideas.
As a result it is hard to predict who the innovators will be. It may be an owner/driver who thinks of a new way to decrease fuel costs. It may be a specialist retailer who sees an opportunity for a new app or better use of an old app. It might be a couple who have run a business for 15 years and now that the kids have grown up they can attempt something that couldn’t be done while there were family demands.
It may be a startup that happens in someone’s garage or a year 10 school student doing something different on the internet on the weekends.
It is this myriad of innovative people that adds to the economy. From them will emerge the big ticket items, the innovations that capture the attention of big businesses who want to commercialise and monetise someone else’s idea; a win for the big business and hopefully a win for the innovator.
Our MicroEconomic Challenge on December 9 will look at what we can do in our own business communities to foster innovation.
But what are the impediments? The barriers? The stoppers of these people?
I note Jennifer Westacott, chair of the Business Council of Australia (BCA), has recently called for innovation and has claimed that the innovation agenda is being driven by the BCA.
The reality is that many, many organisations focus on innovation and have done for decades. That includes, of course, the Council of Small Business of Australia but also the Australian Chamber, the Australian Industry Group, many sector-focused industry associations and many universities, state governments and think tanks.
Innovation is in trouble when big business thinks they know best. Some do but most don’t. In the end productivity, innovation and a high standard of living will be achieved when governments’ identify and remove the barriers to innovation. Government can provide support and should do, but the removal of barriers is the highest priority.
Three of the biggest impediments to innovation in Australia have been obvious for decades. They are Wesfarmers, Woolworths and Telstra. This places the chair of the BCA in a great position to influence innovation.
Internationally we are noted for having one of the slowest and most expensive telecommunications systems. This has an obvious impact on productivity as slow speed kills opportunity and high cost inhibits growth.
We know that many, if not most, innovations will come from manufacturers, farmers and other producers. But in Australia Coles – owned by Wesfarmers – and Woolworths have such dominance in retail that they can and do dictate what products are manufactured and produced.
If anyone does come up with a new product that is popular with the consumer this duopoly will label it as a “generic brand’ and claim the product as their own.
The compulsory nature of generic labelling means the innovative business cannot develop new products based upon their reputation for quality or price or both. The duopoly has stolen that reputation. We will not ever see another Edgell or Golden Circle, or indeed another Wesfarmers, because innovative businesses will not be permitted to grow.
The fact of this was shown last year when the ACCC under the redoubtable Rod Sims fined Coles many millions of dollars for treatment of suppliers, behaviour that had been going on for decades.
The BCA can fix all this. The chair of the BCA is also the chair of Telstra. The chief executive of the BCA is on the board of Wesfarmers. The chief executive of Wesfarmers is on the board of the BCA.
They are well placed to influence their organisations to change their cultures from one of inhibiting innovation to one of supporting the innovators
The chair of the BCA is in a particularly good position to get Telstra to decrease costs and increase speeds. She can also stop Telstra from inhibiting competition by forcing unfair costs and processes onto rivals as Telstra is also the wholesaler of telecommunications as well as the retailer.
In the end it is up to government to lead the way and encourage partnerships, give real support where needed and remove the barriers to innovation.
Remove the unfair pressure and unnecessary barriers imposed on small business people and innovation will blossom.
Peter Strong is executive director of the Council of Small Business of Australia.
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