Study says companies cannot buy innovation

But local spending on innovation has increased 37 percent in last 12 months

Australian organisations have made little progress towards improving their performance on innovation in the past 12 months, according to the Fujitsu Innovation Index 2007.

The Index, which was launched today, ranked Australia 64/100 in 2006 but in 2007 fell to 63/100.

This is despite organisations increasing spending on innovation by a whopping 37 per cent in the past 12 months.

Major barriers to innovation continue to be lack of personnel dedicated to innovation (41 per cent) and insufficient budget (38 per cent), resistance to change (13 per cent) and short-term mindsets (10 per cent).

Fujitsu consulting principal, Tom Dissing, said organisations had taken on board some of the feedback from last year's Index by increasing the money they spent on innovation.

However the decline in the Index between 2006 and 2007 highlights the fact that innovation is not something which can be bought but needs to be approached holistically.

"Organisations must provide strong leadership and a business environment in which innovation can flourish if we are to increase our overall innovation performance," Dissing said.

"The results of this year's Index also suggest that organisations need to stop thinking about next quarter and instead focus on their long-term future if they are ever to become truly innovative."

The study found that the two biggest drivers of innovation are the need to meet customer demand (40 per cent) and to increase operational efficiency (25 per cent). While these have not changed since 2006, an addition to this year's study is the inclusion of an innovative organisational culture (22 per cent) as a major driver of innovation.

While many organisations strive for an innovative organisational culture, many are unclear as to how to achieve this. The study found that organisations use a range of structural and process techniques to encourage innovation, such as incentive programs and embedding innovation in company values.

Dissing said organisations which performed particularly well (the Innovation Leaders and Progressives) were more forward-thinking in their approach to innovation than the innovation laggards (who scored below 48 in the Index).

The laggards are driven by a short-term focus on financial gain. As a result, these organisations were less interested in cultivating an innovative culture or achieving best practice.

Dissing said the research was designed to give organisations a practical view of how companies in Australia and New Zealand are approaching innovation, as well as gain insight into how innovation drives business value.

For example, the study found the laggards could improve their employee acquisition and retention by 125 per cent and their profitability per employee by 120 per cent if they implemented the same approach to innovation as the innovation leaders.

Humana CIO, Bruce Goodman, said companies that want to have innovative IT departments have to be prepared to take risks with technology and accept some failures.

"A culture supportive of trial and error is necessary, because a lot of things are not going to work," Goodman said.

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