Businesses thrive on innovation. Whether the issue at hand is improving product quality, updating processes, cutting costs, or eliminating inefficiencies, success in businesses is nearly always defined by a capacity to identify and implement novel solutions. It’s surprising then, that Harvard University research ranked Australia, an otherwise economically strong country, dead last among OECD countries.
A high level of risk aversion, perceived lack of access to innovative ideas, and a lack of financial resources were found to be the primary issues behind this situation. Reflecting this, another study by StollzNow Research found that only 40 per cent of Australian businesses considered innovation to be a vital part of their business. This arguably indicates a disturbing lack of ambition, and an unwillingness to pursue industry leadership among many business leaders. After all, innovation is essential in rising above mediocrity, and growing to compete against better established enterprises.
Businesses are held back by cultural and financial issues
More than half of businesses in Australia don’t consider innovation to be an essential part of their future survival. While this might seem ignorant at first glance, a closer look reveals that businesses are actually lacking the drive to innovate due to larger cultural and financial barriers. According to the research, 27 per cent of businesses don’t believe that they have the right people in their teams to innovate effectively. Another 22 per cent cite risk aversion by management and staff, while 24 per cent simply lack the financing to implement new ideas.
Businesses need to access their vast untapped potential
While the most commonly cited issue by businesses is a lack of available innovative potential, a number of studies and surveys have indicated otherwise. The recent Idea Spies Employee Innovation survey of 2,000 Australian employees found that 76 per cent have more ideas to contribute than they currently are. That number climbs to 89 per cent among 26-35 year-olds. The issue is that businesses simply aren’t eliciting or using these ideas. Nearly a third of respondents indicated that managers were not open new ideas, while another 30 per cent claimed they were too busy to bring their ideas to the attention of their superiors.
This strongly suggests that all businesses have innovative resources that they aren’t using. The issue isn’t that businesses lack innovative potential, but rather that they aren’t making use of it. While over 80 per cent of businesses claim to discuss innovation within the business, few actively engage lower rung employees in this process. By actively soliciting, and seriously examining the ideas of relevant employees, businesses can easily break through this most significant barrier to innovative progress.
Fighting back against a culture of fear
More than other developed countries, Australia exhibits a great deal of risk aversion. The relatively high cost of failure, resulting from Australia’s regulatory framework as well as cultural factors, acts as a serious deterrent to progress. This represents a serious risk to the long term success of Australian businesses. Businesses who don’t innovate will inevitably be out-competed by those who do. To protect their future in the long term, businesses need to prioritise innovation, and work to develop company cultures that encourage creative problem solving and risk-taking. This means not only working to implement proven concepts, but experimenting with new ideas, and investing in growth opportunities outside of your traditional comfort zone.
Use innovative financing to drive innovation
Businesses who simply don’t have the available funds to invest in themselves might feel that they’re out of options. This, however, isn’t the case. Innovation is essential to driving growth and boosting revenue, and simply deeming it unaffordable is not a way to win in business. A business that lacks the investment or financing to pursue innovative ideas simply needs better financing options.
A great way to free up additional funds is to use supply chain finance. As opposed a debt-based solution such a loan, supply chain finance works by allowing a business to pay its suppliers out of a fund, which is supplied by a financier. The business can broker improved supplier terms and/or extend their payment to the financier. The end to end process can improve margins as well as free up working capital which can be used for other purposes, such as driving growth.
Alternatively, invoice financing is another debt-free finance solution that any business can make use of to generate additional capital on short notice. Effectively, it allows a business to give itself an advance on future revenues. This works by trading in an unpaid invoice to your financier. That financier pays out most of the value of the invoice up front, and goes on to collect payment from the client. Once the client pays, the remainder of the payment is issued.
In order to secure their future, Australian businesses have no choice but to become more innovative than they are. Fortunately, the tools they need to lead their industries, rather than to follow foreign competitors, are already available and waiting to be used.