Centre for Innovation and Entrepreneurship (CIE) | CIE Blog

There have been recent critiques about What’s Killing Australian Innovation (see our commentary on a recent talk by ASB Dean Alec Cameron, and related ABC radio interview). At this week’s TiECon Australia, TiE Sydney chapter president Dilip Rao commented that Australia is ranked 18th globally for having a ‘fear of failure’ (first being worst). Based on the GEM Global Report 2010, Australia actually shows up worse, ranked 16th out of 59 countries.While that sounds quite bad, the spread of the scores shows that Australia is nonetheless close to the average, and not that much different to, say, Germany (see figure below). The classic benchmark is the US, which is ranked 47, and still not close to being statistically significantly away from average (assuming a normal distribution).

Fear of Failure: Percentage of 18–64 age group with positive perceived opportunities who indicate that fear of failure would prevent them from setting up a business

Wait a second, but what’s this other variable, called “Entrepreneurial Intention”? Well, it’s defined as the “percentage of 18–64 age group (individuals involved in any stage of entrepreneurial activity excluded) who intend to start a business within three years” (p. 63 in the 2010 GEM report). Australia ranks poorly on this one as well (39/59) if you take the rankings at face value. Interestingly, the US ranks even lower than Australia here (44/59).

What the heck is going on?

My best guess, is that in some countries, entrepreneurship is not a choice, but a way of life. Almost everyone there has to hustle and bustle to feed their family. Meanwhile in the “Innovation-Driven Economies” it’s an optional career choice. So, focusing on the latter, what do we see?

Well, Australia ranks 6/23 on the fear of failure measure, but still very close to average for the group (US ranks 20/23 in this group). Australia also ranks 7/23 on the entrepreneurial intention measure, again still very close to average for the group (US ranks 11 in this group, worse than Australia!).

=> Claims that Australia has a fear of failure are NOT supported by THIS data
Yours truly,
The Centre for Innovation & Entrepreneurship

This post first appeared on the CIE Blog.

Rosemary Howard

There is a widespread misconception among many Australian managers that operational excellence equates to saving dollars. However, focusing just on the bottom-line is not the way to transform organisations.

If a business is doing what it did yesterday, but just doing it a bit more cheaply, that isn’t going to deliver any long-term competitive advantage and it won’t make that business more successful.

Real productivity gains are needed but Australia, weighed down by its own good fortune, could struggle to make them.

The mining boom, the very thing that has kept Australia going while other economies in the world have struggled under the weight of the global financial crisis, is taking the focus off productivity levels, and undermining Australia’s ability to perform well in the long term.

A report from independent public policy think-tank the Grattan Institute has pointed out that according to the broadest measures Australia’s productivity performance has turned negative over the last five years. The authors of Australia’s Productivity Challenge, economist Saul Eslake and research fellow Marcus Walsh, issued a stern warning that the country’s economic performance could decline substantially once the commodity boom runs its course.

Australia is not doing the hard yards on a globally competitive basis.

Last year, only 42% of Australian organisations even measured productivity, down from 49% in 2009, according to The Telstra Productivity Indicator 2010.

If organisations are not measuring productivity, how are they managing it?

Leadership remains a key issue, and this is tied to levels of education. However, Australia has a dangerous disdain for business management methodologies such as Six Sigma. Used strategically, these tools can make a valuable contribution to operational excellence.

The education level of Australia’s workforce generally does not compare well with other advanced economies.

We have half the number of people with Masters degrees or PhDs versus the US or the UK and one-third the level of Germany.

Australia ranks 25th out of 33 Organisation for Economic Co-operation and Development (OECD) nations for public expenditure on education as a percentage of GDP.

And when it comes to collaboration between tertiary institutions and business, Australia is a lowly last among the European Union’s 27 nations.

Australia may take pride in being very ‘school of hard knocks’ competent, but if we don’t know what we don’t know, we won’t learn from leading frameworks and best practice.

Australian managers have plenty of positive points that are widely admired and deliver results. We say what we think and don’t hold back. We listen to each other and engage in reasonably open conversations. We form teams naturally, and global academics comment on the phenomenon of boards operating as real teams in Australia, which is comparatively unusual.

Despite this, we are still complacent about addressing productivity.

When the mining boom ends – and it will – we will rely on strong leadership and management skills, as well as technological innovation, to drive the real productivity performance required to sustain our quality of life.

Rosemary Howard is Executive Director and Conjoint Professor of AGSM Executive Programs at the Australian School of Business, UNSW.

Craig Tapper

Executives, policy makers and commentators across the globe suggest that the capacity to generate significant and sustainable growth or gain major competitive advantage via efficiency and productivity, is reaching its limits, if it hasn’t already passed them.  

In the recent book The Future of Management, author Gary Hamel expresses the point that: “While most executives would willingly attest to the value of initiative, creativity, and passion, they face a worrying conundrum.  They are by temperament, managers.  They are paid to oversee, control, and administer. Yet today the most valuable human capabilities are precisely those that are least manageable.  Whilst the tools of management can compel people to be obedient and diligent, they can’t make the creative and committed.”

Once every business is doing the same things, using the same equipment and systems, and every process that can be outsourced or off-shored to a country or provider with lower costs, then the potential for competitive advantage or bottom line growth gets more and more minimal. 

So the growth challenge for executive leaders today is not just to get more efficient at doing the same things as everyone else, nor simply extracting more productive output from our assets, but to find new things to do and better ways to satisfy customers and deliver value for stakeholders. 

In IBM’s March 2010 survey of 1,500 CEO’s from around the world, over 70% said that their number one challenge in growing their business in the 21^st century was creative leadership.

So what’s the solution? 

Whilst it can be complex to implement, achieving growth via creativity has a few simple but different rules to achieving growth through productivity. 

Firstly, creativity is non-hierarchical.  Existing managers can often feel threatened when transformational ideas come from relatively junior and often relatively new people. 

Secondly, creativity is unpredictable. It tends to happen when our brains are at rest and our thinking is allowed to be unconstrained rather than when they are narrowly focused on tasks and outcomes. 

Thirdly, creative growth is risky.  It relies on a pipeline of lots and lots of ideas, most of which will turn out to be false trails, but some of which will turn out to be spectacularly successful and repay the investments of time and capital many times over. 

Finally, creative growth is more achievable through collaboration than specialisation.  It fails in the silos and regimented structures and processes that produce productivity and efficiency.  Rather, it thrives when we take the restrictions of structure away.

Creative growth is more likely to come when we cross boundaries and forget hierarchies, when we encourage and reward people based on challenging the traditional and existing views rather than conforming to them, when we allow people freedom and time just to think rather than constraining them to be busy and productive, and in cultures where risk is tolerated and there is an appetite to see and do things in sometimes radically different ways. 

As you can imagine, the rules and practices of management that lead to the massive gains in productivity we saw in the 20^th century are unlikely to generate growth via creativity. 

But it’s not an either/or issue, creative growth is about having both. 

It’s about unleashing creativity and then applying discipline and the lenses of efficiency to extract the maximum value from whatever the creativity unleashes. 

The organisations that will be spectacularly successful in the next century will still use resources efficiently and produce the maximum outputs and outcomes from efficient processes; they will just be different processes and more creative outcomes.     

Craig Tapper is an adjunct lecturer in strategy and management at AGSM Executive Programs at the Australian School of Business

Andrew Kakabadse

Ask what innovation means and you will get a broad cross-section of responses.  Some interpret innovation as invention.  This was the case at a recent high profile European Commission meeting in Brussels.  One of the notables, visibly irritated with the thinking of his colleagues pointedly remarked, “Each week my department gets nothing but bright ideas and inventions, which go no-where!.  What we need is to get ideas to market.  We need structures that engage.  Let’s not mix invention with innovation!”

All knew he was right.  Equally all recognised the political message in his few words.  European public services are highly politicised.  An innovation policy initiative from the European Commission, making its way through the step by step, tiresome European consultation process could find itself derailed at the final hurdle because some local interest group, or politician, has leverage with country governments or Brussels.  In effect, reform is brought to a halt simply because of some partisan interest.

Not that the Europeans are that much different to the Americans or Australians.  Innovation that would have benefitted the majority is marginalised simply because single political interests dominate big administrations.

So aligning big capital with efficient big government requires clear lines of delineation between the layers of government.  This is one form of innovation.

A second and more profound level of innovation is that of how ideas are shaped and become the emergent policy of countries or even whole regions.

Globally, there is a seeming acceptance that the citizen is best served by policies anchored in the free market philosophy.  Why such adherence to shareholder capitalism from both the right and left wing of the political landscape, especially from the Anglo American economies?  One reason is the subtle shaping of mindset occurring ‘behind the scenes’ by global networks, such as the most prominent of all, the Bilderbergs.  Recent study of this trans-Atlantic gathering of business and political grandees, highlights the free market thinking that ouses from the Bilderberg meetings.

Yet rather than religiously pounding this one philosophy, the Bilderberger study interviewees referred to the understanding that arises from attracting a divergence of views.  True, the investigation shows that the demographics of the attendees is broad.  But the question to ask is whether their ontology is comparable and deeply shared?  The evidence suggests it is, of course, in favour of shareholder market economics.

The shaping of mindsets particularly in favour of the free market economy is subtle in its creep.  It has many of the world’s leaders blind to the advantage of socialised capital, the predominant philosophy driving Germany, Scandinavia and China.

Thus, innovation on a global basis is at the crossroad – do we pursue short term, transactional shareholder capitalism or longer term, socialised capital for the purposes of the public good?  The fact that we do not openly and enthusiastically debate this issue is testament to the smart power influence of networks as the Bilderbergs.

In the short term there is likely to be no fundamental shift in the repositioning of capital.  On this basis there is equally likely no change in the structure and functioning of government.  The major governments of the globe operate exactly as the opaque vested interests desire.

No innovation in terms of policy design means we are left with innovation meaning invention.  With innovation at the global crossroad, we can expect a future of many bright ideas but with very few actually reaching the citizen.

Andrew Kakabadse is a consultant and professor of international management development at the Cranfield University School of Management.