Innovation, according to the Economist magazine’s Intelligence Unit which periodically ranks the world’s most innovative countries, is the novel “application of knowledge” for economic benefit. Companies universally consider innovation an important competitive tool while government policy makers see it as fuelling economic growth.
There’s undoubtedly some truth in these seemingly self-evident beliefs. But can New Zealand enterprise embrace the call to innovate more fervently? Is innovative activity above and beyond what we already accomplish panacea for our commercial and economic ills? And do Kiwi managers think they are up to the job?
Here’s how the world ranks New Zealand’s existing innovative efforts. The Economist Intelligence Unit ranks us at 23 of 82 surveyed countries. The ranking is based on each nation’s innovative capacity as measured by the number of patents granted by offices in the United States, Europe and Japan. The index also considers factors that help or hinder enterprise to innovate, such as the amount of research and development (R&D) undertaken and the technical skills of the workforce.
The European-based business school INSEAD ranks New Zealand 10 places higher at number number 13 on its 141 nation Global Innovation Index. It ranks us just three places behind the United States which the Economist ranks as the world’s fourth most innovative country.
And another study of 110 countries compiled by America’s Boston Consulting Group and the National Association of Manufacturers places us at number 26. It’s reasonable, I think, to assume that while these global analysts differ on rankings, they generally rate New Zealand’s innovation efforts.
The stance these analysts take on innovation is similar. They think it helps both economic and commercial performance, but consider its impact “more visible at the microeconomic than the macroeconomic level”.
The Economist’s study suggests that innovative companies tend to outperform their peers; that firms connected to high tech clusters also outperform their peers; that technical skills in IT and telecommunications are critical to innovation; that small countries have an advantage; and, that the return on investment (ROI) is higher in middle-income nations than in rich ones.
The surveys all agree that size doesn’t hinder innovative performance and that in fact, the smaller the economy the better. Switzerland, for example, ranks in the top three of each index. The other big performing small nation innovators include Singapore, Finland, the Netherlands, Sweden and Denmark. The BCG index ranks Iceland as its fourth best innovator. Conclusion? New Zealand has size on its side.
But Kiwi managers’ personal confidence in their ability to innovate doesn’t exactly square with outsiders’ observations. According to the latest Management Capability Index (MCI) compiled and released last month by the New Zealand Institute of Management, our managers rank “innovation – products and services” second to bottom of the 10 criteria the MCI uses to determine management capability.
The MCI measures and evaluates management performance across range of key factors, including encouraging continuous innovation in products and services to create new value for organisations. But survey respondents, mostly chief executives and other senior level managers, were decidedly negative about their enterprises’ commitment to innovative practices and processes.
For example, from possible score of 100 they ranked “management and employees practise innovation to expand the market and increase market share” at just 61.2, the lowest of any subcategory result in the entire survey. In summary and despite what global analysts read into our performance statistics, managers don’t think New Zealand organisations practise being innovative much at all.
Some of this apparent contradiction might be explained by the findings of international consultancy PricewaterhouseCoopers’ worldwide survey of 1200 chief executives which uncovered what it calls some “misconceptions” about innovation.
Innovation can’t be delegated, according to PwC’s research. The drive to innovate begins at the top and if CEOs don’t protect and reward the process, it fails. According to US Forbes’ magazine ideas, innovation and globalisation contributor Bill Fisher, many CEOs just “don’t get innovation” or can’t get past their finance-focused mindsets.
Now here’s an interesting thing. New Zealand managers rate “financial management” their second highest competency. They rate their financial management skills even higher than do their Australian, Indian, Singaporean and Malaysian managers who compile their own MCI surveys. Our managers rank themselves highest on “integrity and corporate governance” with financial management close behind.
The PwC survey also suggests managers, particularly middle managers, are not “natural champions” of innovation. Managers tend to reject new ideas in favour of efficiency. Fisher suggests that’s because managers are “incentivised” to be efficient and so opt to repeat processes which are already working well. Organisations unwittingly build in resistance to innovate.
New Zealand Institute of Management CEO Kevin Gaunt thinks the inhibitors to innovation run little deeper than in New Zealand. “Most of our businesses are small,” he says. “They are de facto, driven by individuals who see little point, in other words have no incentive, to build enterprises that provide more than comfortable level of personal life style satisfaction.” His point is referred to in the Government sponsored Management Matters study released in April 2010.
The PwC survey also found that organisational culture, not money paid to employees, determines whether or not an enterprise is committed to innovation and creativity. “A culture that embeds innovation in the organisation attracts and retains creative talent,” says Fisher. “Most employees don’t believe that they are looked to for innovation.” And innovation doesn’t happen by accident, it results from disciplined process that sorts through many ideas.
Encouraging New Zealand companies to make stronger commitment to innovation isn’t easy, says Gaunt. “Our global rankings suggest that, intentionally or otherwise, New Zealand enterprise is intuitively innovative. But there seem to be innate or environmental reasons why we don’t try harder. To change attitudes on scale seen in say Finland, which is rapidly rising to the top of every global ranking, won’t be easy.
“The current static state of the economy doesn’t help either,” says Gaunt. “That said, there are some key points managers should focus on to lift their organisation’s innovative performance.”
Gaunt believes companies must create stimulating work environment, attract and retain the best possible people, build stable workforce, empower and encourage people with good ideas to share them, make innovation strategic priority and develop an innovation culture within the enterprise.
“Innovation isn’t easy but New
Zealand has all the raw material necessary to perform even better than we do. It’s the will, not the way, that’s missing,” says Gaunt. M
Reg Birchfield Life FNZIM is writer on leadership, governance and management. [email protected]
