What is innovation anyway, and why should you care about it?

Innovation means changing the way you do things. If you’re in business, it might mean producing a new product or service; introducing a new technology or operational process; instigating a new business model; or just changing the way you market your products. It’s a sustainable way to raise productivity and enjoy a higher standard of living.

To understand why innovation is important, it’s helpful to think of a world without it. Imagine we’re back in 18th-century Europe and someone’s decided to stop all new inventions, or ban the conversion of ideas into goods and services. We’d have no electricity, no water piped to houses, and no antibiotics.

Without the discovery of superphosphate and new seed varieties, we’d only be able to feed, say, one billion people out of the current seven. Half our children would die before the age of five. And travel would still mean hopping onto a small wooden boat with dubious navigation.

A barren future

Looking back, it’s easy to see what impact innovation – the creation and deployment of new ideas – has had on our standard of living. But it requires a more philosophical frame of mind to see what we’d miss out on if we become complacent about innovation now.

Childhood cancers and other intractable diseases, including mental illnesses, that currently blight our lives might not be cured. Poor learning outcomes for boys, family violence and intractable social ills arising from intergenerational disadvantage might never disappear. The creeping loss of fertile farmlands and the salination of low-lying lands due to climate change might escalate.

These are just a few of the 21st-century ills that today’s research and development could ameliorate.

But how can we do it? There’s clear evidence that some countries – in some sectors and at some times – are more successful innovators than others. And it’s probably fair to say the default position of most people is to resist change.

Much innovation springs from an attitude of openness to external experiences and people, but it also requires care to capture a reasonable share of the rewards. It takes an amalgam of policies for a country to push ahead where others languish.

Lessons from abroad

Policies aimed at fostering innovation in the United States, Germany, Sweden and Switzerland – to name just a few nations that do innovation well – have been strategic and focused. In the US, for instance, government policies since World War II have pushed and pulled businesses and universities, often with a heavy hand, to interact with each other.

Programs via the defence, energy and health departments have created networks that identify and absorb external information; interpret its meaning; and then support the actions of its members by providing specialised intermediate services. This environment has substantially lowered the risks associated with innovation.

Innovation is a sustainable way of enjoying a higher standard of living.SF Brit/Flickr, CC BY-ND

To become countries that successfully develop and commercialise ideas, these nations have used intellectual property laws and other ways to capture profits to ensure innovating is worthwhile.

And they don’t just rely on home-grown brains. All these countries are active in buying research and development services from other countries. Many of them aggressively recruit the best tertiary students from anywhere in the world and keep them after graduation.

But they do so in a way that ensures they control the distribution of created wealth. In particular, they ensure that they own any resulting patent from research and development programs. This wealth helps these countries buy in and benefit from frontier innovations elsewhere in the world. It’s a virtuous circle; a good national “business” model.

Back home

That’s all good and well for them, but should we care if Australia is innovative or not? Can’t we just “ride on the sheep’s back” or hope that the world will continue to want our minerals? Possibly, but relying on a narrow range of volatile commodities is a risky growth strategy, as recent falls in iron ore and coal prices have illustrated.

Australia has the depth of skills – in research, development, finance, marketing and intellectual property – to be more innovative. But mere exhortation or the small, temporary programs that come and go with each government won’t create an environment that mitigates the risks of innovation and allows it to flourish.

The government’s forthcoming innovation statement should at least include measures that create environments to nurture personal connections and bonds of trust between frontier technology companies. The confidence these networks give an individual business cuts through procrastination born from uncertainty.

We know that just funding public sector science isn’t enough. We know the effect of research and development tax concessions is modest and biased towards a few areas of the economy. We know that merely exhorting the financial sector to invest more in high-tech ventures has a negligible effect.

Let’s hope we get more than this from the innovation statement.

This article is part of our series Why innovation matters. Look out for more articles on the topic in the coming days.

Elizabeth Webster receives funding from the ARC and various Victorian and Australian government departments for research purposes.