Resources in Australia are depleting

Resources in Australia are depleting.

Australia wants to renew its economy. Where to start? Dutch innovation guru Han Gerrits travelled to Australia, showed the path to innovation and blogs about the high ambitions down under. ‘They’re dead serious about innovation.’

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Australia needs to innovate. With this wakeup call, the newly-installed Australian prime minister, Malcolm Turnbull, surprised down under on Monday 4 December 2015. His sights are set on no less than an ‘ideas boom’. ‘There has never been a more exciting time to be Australian’, the PM added. And Turnbull’s words immediately created a problem. Innovation – how does it work exactly?

Corporates, authorities, institutions, all are turning to the Australian branch of KPMG and, before I knew it, I was on the plane to Melbourne, Sydney and the capital, Canberra, to explain how innovation works. Later this year it will be Perth’s turn and before I returned to the Netherlands, I got an invitation from Auckland. New Zealand, bitten by the innovation bug, also wants to know how to innovate.

The ideas boom can continue forever, it is limited only by our imagination

Australia has not had a recession for more than twenty years and is in good health. Not innovating will not hurt tomorrow or the day after. But in Australia they’re looking at the long term. The minerals from the mines that have for decades formed the backbone of prosperity are running out. Competition from other economies is on the increase. Multimillionaire, ex-banker and now PM Malcolm Turnbull wants to find a new economy. They know how to face a challenge and see opportunities before risks. Turnbull: ‘The ideas boom can continue forever, it is limited only by our imagination.’ An inspiring example for countries that face similar problems, you can say.

How innovation works

In 25 sessions in five days I explained to civil servants, scientists and CEOs in Australia how innovation works. Their questions are similar to the questions of all senior managers: what exactly is innovation, how do I organise it, how do I measure success? I explained to them that a truly innovative company has four distinctive qualities.

 

  1. Innovative leadership
    Belief at the top is the springboard for innovation. The management has to take innovation seriously, which means daring to experiment and allowing staff the time and the resources to innovate. Is something not turning out as hoped? Don’t hold demotion above their heads, but encourage people to think further. Of the ten innovations they initiate, perhaps one is successful. A good bellwether for innovative leadership is the innovation department. Do staff think a position as innovation manager is not such a clever career move? Then there’s work to be done.

  2. Clear innovation strategy
    You can’t innovate on all fronts. The trick is to give direction and to focus on a small number of domains. A useful criterion? Improve what’s working. For example: excellent technology, strong positioning in the market, the best staff. If you know the direction, the next step is to formulate the goal: where are we now and where do we want to be in, say, 2025? Both now and the future you have to translate into capabilities (what we can) and assets (what we need). This helps to decide what the business has to develop or acquire and what it needs to sell because it’s no longer needed.

  3. Room for ideas
    Innovation starts with ideas, so make sure that staff, every one of them, come up with ideas. Think of it as internal crowdsourcing for ideas. How do you initiate this? You can use brainstorm sessions, but there is a risk. When somebody is in the car on the way home, they could get a better idea. Inviting online ideas prevents that. Moreover, offering ideas online has a lower threshold, certainly in combination with a reward. But the crux is in something else. Our pilot projects have a participation ratio of at least 50 per cent. The reason? We make a very big thing of the whole process. This means that the budget is sufficient; the organisation has the right mix of people; the senior manager sets the right example and the senior manager gives feedback: ‘Good idea’. Last but not least there has to be enough time, because sometimes an idea has to go on the backburner for a while so it can be perfected later on. Only the right mix of ingredients helps creativity and knowledge flourish in your business.

  4. Innovation management
    The assumptions in innovation are huge: it’s a good product, it costs 15 euros to make, we’re going to sell for close to 25 euro and we’re going to sell a hundred thousand. The secret is to take small steps and to test assumptions after each step. Funnel management. Perhaps you may have some thirty innovation projects going at the start, but at each assessment, some projects don’t make it because the assumptions didn’t add up. Gradually you eliminate uncertainties. Therefore, make money available per phase: phase 1 costs five man-days, phase 2, 25 man-days. What we also frequently do, is set up a dashboard for innovation. The dashboard shows whether the project in on track, what the input and output are, what the new products earn. Keep in mind some ideas are better suited to start-ups because they’re always quicker. Corporates have to focus on innovations that are in step with their strengths. For example: financial power, a large network, client confidence and trust.

A new economy

Australia started out right. They’re dead serious about innovation. There will be tax breaks, more flexible regulations and a budget of one billion Australian dollars (almost 700 million euros). Innovation is a must, the PM says. And everybody – corporates, government, science – has to join in. Why?

Australia has not had a recession for more than twenty years and is in good health. Not innovating will not hurt tomorrow or the day after. But in Australia they’re looking at the long term. The minerals from the mines that have for decades formed the backbone of prosperity are running out. Competition from other economies is on the increase. Multimillionaire, ex-banker and now PM Malcolm Turnbull wants to find a new economy. They know how to face a challenge and see opportunities before risks. Turnbull: ‘The ideas boom can continue forever, it is limited only by our imagination.’ An inspiring example for countries that face similar problems, you can say.

 

Author: Han Gerrits, partner KPMG/Founder Innovation Factory

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