Friday 23 July 2010
Innovation rests on engaging multiple stakeholders across the value chain
Problems and opportunities drive innovation, not just technological developments, and addressing these topics should be the antecedent of any economic development initiative.
It is well recognised that businesses, particularly small to medium enterprises (SMEs), are the engine room of the Australian economy. For SMEs to grow their profitability and create a sustainable competitive advantage in the global market, they need to access or adopt business innovation capability.
The Australian Institute for Commercialisation (AIC) argues that although governments should continue to focus their funding, support and development programs at the individual entrepreneur or firm, considerable impact can also occur by targeting development programs at the industry level – to build and strengthen value chains, enhance collaboration and increase business innovation – in areas where Australia can achieve a global comparative advantage.
The AIC has supported and assisted thousands of businesses since it was first formed in 2002. We’ve found the two main topics that businesses generally have at the top of their agendas are:
• The issues and problems they are trying to address.
• The new opportunities on which they are trying to capitalise.
Problems and opportunities drive innovation in firms, not just technological developments. Therefore, addressing these two topics should be the antecedent of any economic development initiative. However, not all businesses have the same capacity to strategically solve their problems or seize their opportunities, and it is here that innovation support programs must differentiate.
From the AIC’s experience, businesses can generally be segmented into three broad categories, as shown in Figure 1:
• the new entrants or low innovators (status quo businesses);
• medium innovators or ‘Rising Stars’ who are innovating but lack a particular capability or resource; and
• the high innovators or ‘Stars’ who are successfully innovating and creating a competitive advantage.
Consequently, assistance, support, funding and incentive programs should be segmented accordingly to create the greatest impact for the particular business segment (Figure 1).
Moreover, the new entrants or status quo businesses – which may be under-resourced and struggling – can place a considerable burden on the innovation ecosystem of an economy. A number of factors contribute to their predicament, including lack of early-stage risk funding or follow-on funding, operating in competitive market segments, inability to access or attract experienced human resources, or lack of operating infrastructure.
For many of these businesses “fast failure” or considerable business model transformation might be the only options available.
The AIC – through its delivery of a number of innovation programs on behalf of the Australian and state governments, and its own innovation and commercialisation programs that are focused on addressing immediate issues and opportunities facing businesses – is advocating a new approach for ‘status quo’ businesses to access and adopt new knowledge, improve collaboration and enhance business innovation capability.
The new approach we are successfully pursuing in a number of sectors is our ‘Industry Innovation Framework’ (Figure 2), which drives innovation and collaboration in industry, and is focused on development across new or emerging industry opportunities.
The AIC Industry Innovation Framework engages multiple stakeholders across the value chain to develop specific industry sectors that can strengthen the nation’s economy by:
• adopting new knowledge or technology;
• enhancing collaboration activities;
• building new value chains; and
• increasing innovation capability.
The core components of the Industry Innovation Framework are the process of Value Chain Mapping and our Technology Clinics (or TechClinic™).
Value chain mapping determines the activities, participants, and capabilities that a particular industry needs to develop so that it can build industry sectors.
For example, in order to establish a viable algae-based biofuels industry in Australia a large-scale algae production and oil extraction capability needs to be established. Australia currently has the research, development, processing, refining and end-user capability for this industry sector, but lacks adequate scale in algae production and oil extraction.
However, algae production and extraction integrate between the development and processing activities of the value chain (Figure 3) and therefore are integral to the building of a viable algae based biofuels industry in Australia.
The TechClinic™ is a forum that brings together multiple stakeholders (research organisations, industry, government and end users) across the value chain to interact and engage in collaborative activities. The TechClinic™ strengthens an industry sector that is fragmented and dispersed, and allows organisations and firms to identify the opportunities and overcome issues.
Government stakeholders who participate in the TechClinic™ forums are informed of the issues and opportunities, but also the specific needs required to build industry level capability in established or emerging economic sectors.
The TechClinic™ facilitates and encourages low innovating firms (status quo businesses), but also innovating firms, to collaborate with other stakeholders across the value chain to promote awareness of solutions available, provide networking opportunities with end-users and larger corporations, facilitate collaborative opportunities with researchers and other firms, improve uptake of technology, and increase industry and innovation capability.
To remain competitive in specific industry sectors, Australia must change its mindset, assume new paradigms of thinking and adopt novel globally leading programs to develop its industry capabilities.
Government funding, support and incentive programs must be aligned with the needs of industry sectors to build value chains and strengthen the organisations that operate across these value chains, in addition to specifically targeting the different categories of businesses and their needs.
Ultimately, it is the aim of the AIC’s novel Industry Innovation Framework to build value chains and develop industry sectors where individual entrepreneurs and firms can flourish and drive economic development for the benefit of the nation.
Author: Dr John Kapeleris, Deputy CEO, Australian Institute for Commercialisation. To read more AIC-authored articles please click here.
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