Aussie Corporate Innovation: Way off the pace !

Who remembers the Winged Keel? What a triumph for Australian innovation and sport!

Bob Hawke our Prime Minister at the time, proudly announced that night after Australia won the America's Cup that any employer that didn't give their people the day off tomorrow was a bum ! Bobby may have had a couple at that stage (which was common for him on any any day finishing with a y), but he loved that we out smarted our very formidable competition with a secret, disruptive and highly innovative differentiator.

Only in Australia would a sporting event justify bringing your entire national economy to a stand still for 24 hours. Anyway, it seems Aussie Corporations took Bobs advice very seriously and have not been back to work since when it comes to home grown corporate produced innovation.

We have some great, but very few examples of corporate driven innovation in this country and we are way behind the rest of the world. We are a country of early adopters of technology but apart from a few industry sector exceptions, our local corporations produce very little in terms of home grown transformational innovation. The reasons are vast, but in essence, Australian corporations are just not set up to innovate at scale.

In 2001, I moved to the UK to help a global telecommunications company establish and run it’s New Ventures and Innovation Program. The program's remit was to create and commercialise innovative, stand alone, sustainable and globally scalable company-owned ventures. In a relatively short period, the program produced a number (more than a dozen) of highly successful businesses of which many still exist today. The program was headed by a highly capable leader who assembled a dynamic and eclectic team of third party consultants, subject matter experts, specialist contractors plus appropriately skilled and engaged full time employees from their core business. The program was sponsored by the Executive and adequately funded. They had already adopted the ‘fail fast’ principle before the phrase was even coined. The program was separated from the main operations, ran it’s own P&L, had it’s own Board and was governed in a more dynamic way from BAU management to help foster an agile, autonomous and concerted effort to produce innovation at scale. By no means was the evolution of the program without it’s challenges and mistakes but, by 2004 it employed more than 200 people across several company-owned start ups and many of them scaled globally. That’s 18 years ago!

In Australia today and almost 20 years later it is still rare to find a Corporation with a truly established and effective innovations program or New Ventures capability. There are a few who are down the path and on the journey but most still think Innovation is Marketing’s job , product cetnric just needs some help from the CIO because Innovation usually means technology and IT know lots about technology right? Wrong !

Knowing lots about technology and having relationships with IT vendors doesn't make you innovative.

Neither of these BAU internal functions have the capacity or capability to produce and scale best practice innovation on behalf of their organisations. Most marketing teams are busy and totally preoccupied with trying to stay relevant to their customers whilst trying to navigate the 5000-odd marketing technology tools now at their disposal. Marketing is usually fully consumed by the challenge associated with customer acquisition and success. They are not in a position to truly drive real innovation. They can help make a few steps forward and can be very creative but they are not actually qualified and trained innovators.

CIOs and IT are not the right people to drive the innovation agenda either as they have enough challenges on their plate trying to keep the ‘lights on’ with a lack of resources and bandwidth. Innovation requires dedicated resources operating within a unique and specialist function that is geared to address and leverage Innovation. The program needs qualified talent, the right structures, well-selected partners, unique processes, agile governance, funding and a culture that encourages risk and failure. That’s not very corporate is it?

Most Australian companies are asleep at the wheel in terms of how to set up to tackle innovation. Everyone is talking digital transformation but few know what that really means or how to plan or execute. Many think Digital Transformation is Innovation but it’s only part of it. Nothing transformational comes from modernising your tech stack and digitising workflows which is what most companies think is digital transformation. Australia also remains a relatively closed-minded culture when it comes to embracing foreign forms of innovation by comparison with other regions.

Some Australian companies feel they are highly advanced and proud to have recently appointed a 'Head of Innovation’ and that person now has a remit to search the globe for good ideas. Hurry up and find some cool stuff asap and we don’t care how or where. This is not innovation and it is a step in the wrong direction if this individual doesn’t know how to set things up for success. Their biggest challenge will be trying to educate themselves and their executive on how to tackle Innovation. I can assure you most of the Executive wont be up for what it really takes. As a result, this recently appointed Head of Innovation or Head of Digital Transformation is on a crash course with the CFO who will be downstairs soon asking weird questions about ROI, business cases, profit margins and write offs.

Placing innovation in the hands of an internal few is a waste of money. Corporate innovation only works when there is cultural shift within your organisation. Innovation has to be organisational and become part of your corporate DNA, otherwise it ends up just being posters in the staff café conveying aspirational values that only serve as light comedy relief during staff coffee breaks. Innovation is priority 1 these days but the gap between ideas and execution at scale is a canyon most can’t cross because of traditional cultures and processes steeped in risk aversion.

Although innovation has rapidly risen up the corporate agenda, most Australian companies are not set up to capitalise. Very few Australian companies have properly set up New Ventures and Innovation programs and most will openly profess to being overwhelmed and blagging it when it comes to knowing how to engage with partners to help them navigate the global innovation ecosystem.

This is understandable as the global innovation ecosystem is changing by the day and the proliferation of start ups and innovative ‘scale ups’ around the world is truly breath-taking. This exponential growth and speed of innovation represents risk and opportunity to the corporate. This accelerated level of change in the market is generating heightened demand for new thinking, robust innovation processes and external support to challenge, inspire, guide, connect, execute and scale.

Disruption has rapidly become something of an overused word and yet the reality of many markets is one of rapidly changing dynamics. Companies like Airbnb, Uber and Tesla may be the poster children of disruption but, for many heritage brands, disruptive competition is also coming in the form of multiple small, digitally-enabled, nimble businesses that are attacking specific parts of their product portfolios and core markets. This trend is obvious in many sectors especially IT&T. There are so many examples in Australia now where large vendors are being forced to consider the threat of small emerging players that have totally outsmarted them around innovation and technology. Now these corporates are on the back foot and finding their sheer size which used to be an asset, has become a liability.

“Everyone wants to create the next Airbnb but they don’t understand just how different the model and the thinking are. Corporates rarely have the right internal processes and thinking to support it, so they need help.”

-      Founder, Corporate Accelerator

Despite being overused and misused, disruption is real, here to stay, accelerating and you’re going to need a lot more than a good M&A team to protect yourself and take part. One key element of any successful corporate program is the smart engagement of specialised third parties. You can’t take on Innovation alone. It takes a lot more than bean bags, a VR headset, some funky black T shirts and laying some synthetic grass down in an open plan space. Some Australian companies do a reasonable job of ideation but fall over when it comes to execution and successful commercialisation often because they run the ideas through their current internal governance processes and rely on approvals from BAU leadership. That's a recipe for roadblocks and contention.

The innovation landscape is growing rapidly in vibrancy and sophistication, enabling a greater diversity of partner proposition choice The opportunities have never been greater to work with experienced practitioners to help solve business problems and develop new value in smarter ways. As the innovation partnership landscape grows increasingly diverse, it’s becoming ever more important to understand the key strengths and methodologies of different players in the market, and engage in a fashion that meets your requirements.

Some more advanced Australian-based multinationals are engaging with local Accelerators, Incubators, Universities, Start Up Networks, Digital Agencies, Corporate Venture Builders, Service Design Agencies or the major Management Consultancies. Many are opting to build their own internal digital teams and task them with developing the next ground breaking tech to shake up their industry. These are all worthy and potentially valuable activities for different stages and approaches to innovation. 

Building innovation internally only will fail.

The market is moving too fast and your internal teams can’t possibly have all the best answers not to mention their capacity challenges,

These 3rd party options all have different business models as well which needs to be understood. Retainers, Project Work, Equity and various hybrid models are among the many ways these partners chose to engage. All have their own individual limitations in terms of delivering the best, fastest and right type of outcomes. From my experience, those companies that have taken a considered and global approach to innovation and actively engage specialist innovation players in the market are the ones that are making the most exciting and measurable steps forward. The right solution to a specific corporate challenge. These companies also recognise that innovation must be continuous, not episodic. These companies are learning how to generate and harvest better ideas and turn them into better defined concepts that have the right foundations to be commercialised. These companies all utilise 3rd party partners for various aspects of the Innovation journey. They also rarely wish to build anything themselves. Too slow and often not necessary.

The other benefit of working with a global innovation partner(s) is IP transfer. There is no way your HR team will ever bring these insights and learning opportunities to the table for your employees. Working with partners gives key staff in the organisation the opportunity to learn new ways of working that they can then retain in-house and embed. As time has progressed, knowledge transfer has gone from being a nice-to-have to being a key part of many innovation based engagements, sometimes even defined as a specific outcome and objective. The challenge is that the Australian market is small and lacks the volume and quality of third party innovation partners and programs that can support a corporation, hence the reason partner selection must include solutions that tap into and leverage innovation abroad. This is essential for any corporate anywhere in the world. The best innovation is highly unlikely to be in your back yard at the time that you need it. This issue is magnified in Australia given we are such a small market. The major players in open innovation are also pre occupied in more open, larger and more mature markets. This creates further headwinds and barriers of Australian enterprise wishing to accelerate their innovation activities. Why would a small and specialist player in outsourced innovation resource a market like Australia when they could set up in Brazil and struggle to meet demand.

Driving transformational innovation is usually underpinned by wholesale cultural change. Are Australian corporate cultures more rigid and traditional than others? Yes, in my opinion, and that’s holding the country back when it comes to local Australian corporates producing transformational global innovation at scale.

Or is it a case of ‘out of sight, out of mind'? Is distance and isolation holding us back?

Maybe it’s because we are too far from the action and stuck in our traditional ways in Australia? Why is our market considered by many abroad to be immature in terms of corporate innovation? I recently engaged a prominent Australian Management Consultancy firm which provides innovation advisory services to the health sector. They claimed they get stuck building innovation cases that don’t deliver an ROI. No shit, Sherlock! Your traditional business case approach is a sure way to stop any innovation getting out the door and you’re a large and so called innovation leader advising our corporates.

“No-one is short of ideas. The bigger problem is how you can get an idea through the matrix organization without it being de-risked and dumbed down.”

– MD Corporate Accelerator

I was fortunate enough to recently attend a 'live in' Innovation Executive Program at Harvard University in Boston. An outstanding course with star studded list of attendees and facilitators. Present company excluded. During that course they had us work on a case study (real company) who was at risk and needed to make a decision on how to use innovation to trade its way through a very turbulent period. The conclusion of the case study presents the students with a decision on whether to execute a plan underpinned by bold, highly disruptive, relatively speculative and cutting edge innovation. They use the exact same case study in the Harvard MBA course where the cream of future leaders are assembled in 1 class room. When presented with a vote around the course of action, the MBA students vote unanimously against the innovation pathway. When the same case study is presented to the Innovation Program (the course I attended with 100 business people from all over the world), they vote unanimously for taking the risk and using innovation to solve their financial challenges and most proposed raising capital to expedite the process ! Very interesting and polarised outcomes. The MBA students are trained to identify and analyse risk whilst the Innovation program is mostly entrepreneurial types who would rather break new ground and roll the dice to realise the art of the possible. Not saying who is wrong or right but one things is clear, don’t fill your corporate innovation program with MBA graduates or all the innovation you can expect with be the next round of features on the existing product roadmap. Safe and sound and all wrapped up in a beautifully bound business case with the stamp of approval from your CFO and one of the big 4 Management Consultancies. Boring.

Business cases are designed to find fault, minimise risk and avert failure. They are designed to help you carefully navigate your way to so called risk-free success. Successful innovation programs are designed to embrace risk and deliver high volume failure is a KPI for success. Whilst the corporate advisors are being paid big money to de risk business cases for their clients, agile innovators somewhere on the planet are rapidly building the tech that will disrupt them. This is a global challenge for all corporates but there is no doubt Australia is behind the curve when it comes to corporate innovation. In terms of maturity, I would say that most Australian corporates are at the reactive or standardised stage of their corporate innovation journey (see below).

Why are we falling off the pace?

Should we look to complacency to find the answer?

We have had it too good for too long and perhaps the answer can be found in the book Northern Memoirs by Richard Franck where he first used the proverb ‘Necessity is the mother of all invention’. Australia is rich, comfortable, flat footed and therefore complacent. Africa, South America, India, Vietnam, Thailand and many other emerging economies produce a far higher volume and quality of innovation than Australia. Not surprising that the financial review recently published an article explaining how Australia had dropped to 19th on the Global Innovation Index and continues to slide each year as more innovative countries widen the gap on our great southern land.

Maybe we don’t innovate because we don’t feel need to and those waves won’t surf themselves right? Things are pretty good down under so why rock the boat?

According to Nigel Andrade, Global Lead Partner of Management Consulting firm A.T. Kearney, Australia had a 'tremendous platform' for innovation, but it is not translating to results.

Australia is unlikely to bridge the gap on it's more innovative peers any time soon. Although it's great that Australia recently put aside $1.1b for its Innovation and Science Program, for perspective, Singapore put aside $18.4 billion for the same period with ? of our population, and the UK is investing ￡5 billion and has a vastly more mature innovation ecosystem that cultivates and commercialises some extraordinary corporate driven and funded global technology solutions. You get what you pay for.

According to Mckinsey, there are 3 horizons of Innovation. I believe Australian corporates spend most of their time in Horizon 1 & 2. There is very little organic innovation happening that ‘creates genuine new business' and that is where true transformation is delivered.

So there are many factors as to why we are a global back water for corporate innovation. Our Executives need to look abroad to markets like the US, UK, Scandinavia and even the 3rd world for thought leadership and best practice. We must become more internationalist in our approach to Innovation and engage 3rd parties who can help access and leverage the global start up ecosystem. We need to look beyond our current suppliers, local market and industry sector for solutions to our biggest innovation challenges. Forget the open plan workplace and funky furniture. This may impress some visitors but real innovation requires a strategy, a structure, a Board that get’s it, unique processes, specialist capability, dedicated funding, strategic partners, a different pace from BAU, appropriate leadership and serious cultural change.

There’s some great stuff happening in Australia to help corporations become more innovative but don’t leave it in the hands of the few to solve your corporate innovation challenges. You also can’t rely on an international head office to drive innovation across a diverse global footprint. Many Australian companies will say “innovation gets driven out of the US, UK, EU etc". If that’s you’re only answer to innovation then you’re in trouble. Australian based corporations often have the autonomy and budgets the run their own innovation agenda but they do not have a sound strategy, plan or structure. As a result, Australian corporations are more susceptible to risk than ever before.

Facts- You have not hired the smartest people on the planet, your M&A team can’t possibly keep pace, your IT and Marketing teams don’t have all the answers, skills or capacity and your leadership team don’t really have the innovation experience they need and your back yard is very small.

You need only review your last 2-3 years in terms of what you have produced that is truly innovative to recognise that you need to get a move on and establish a formidable and highly productive Innovation capability.

You can’t do it yourself and you must think global.

Then again, you could just appoint a Head of Innovation and let them take care of it right?

Knock! Knock! “Who’s there?”…..”It’s the CFO”