Almost 80% of businesses intend to increase or maintain their investment in innovation over the next two years, according to new research, but a risk-adverse culture is a major barrier to developing new ideas.
A study by the Australian Institute of Management and the University of Melbourne has found innovation in businesses is lagging under lengthy development times, a risk adverse-culture and lack of reward.
The 2,025 respondents ranked lengthy development times as the biggest barrier to innovation, while “not enough new ideas” was the least likely issue to be a major challenge.
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Businesses with a proven innovation record were almost ten times as likely to place an importance on team work in the company, six times as likely to rank creating new value for customers as a business priority and were almost five times more likely to have a risk management strategy.
AIM Victorian branch chief executive Tony Gleeson told SmartCompany the best organisations have a “systemic innovation capability”.
“There are six or seven steps I think managers need to follow to develop this type of innovation. The first is leaders need to have a hands on approach, they can’t expect the innovation to happen naturally, the leaders have to be willing to drive it,” he says.
“The second one is to really have a focus strategy, a strategy that knows what it wants to achieve. You also need to have calculated the risks. You need to calculate whether or not the risk is worth taking.”
Gleeson says businesses also need to have a change management strategy to help businesses adapt to new innovations. They need to have clear decision points in place which will determine the fate of new projects, have a clear plan on how to achieve investment funding, and have an encouraging workplace culture which fosters innovation.
The survey found 70% of respondents said their innovation in the past two years had been “incremental” rather than “radical”.
Gleeson says incremental innovation is what evolves from a more systematic approach to innovation, but can still lead to radical changes.
“The issue is if you go for radical innovation from the outset, then the organisation itself ends up being dramatically changed and jerked around,” he says.
“You might be in a business which makes bicycles, but imagine if you one day just decided to change and make buses, the only thing in common there is they both have wheels.”
The report identified nine key “building blocks” for innovation:
- Managers getting involved in innovation projects
- Innovation prioritised in the business strategy
- Business strategy and technology is strongly aligned
- Willingness to take calculated risks
- Teamwork is emphasised
- Employees are highly skilled
- Clearly articulated employee capabilities relate to innovation
- Employees are rewarded financially for innovation contributions
- Competitors are benchmarked
The report found the top 375 innovative businesses also had a person or group whose role who were the “innovation leaders”. These leaders also invested far more heavily in R&D than the “innovation lagers” (businesses in the bottom 25%).
Gleeson says it doesn’t matter if the business is small or large, both were equally capable of being innovative.
“You don’t have to be a large organisation to do this well,” he says.
“The fact more businesses are looking to increase their investment in innovation shows they recognise its importance, particularly when government incentives over the past two years have not been strong.”