A few decades ago "innovation" barely rated a whisper in Australian business. Today the message carried by this seemingly simple word is echoing across the country.

Yet few agree on what it means. Government and big business talk about a fresh mentality that fosters renewal. Researchers and inventors say it is about discovering or making something new. While those at the coalface - entrepreneurs - believe it means bringing those ideas to the market.

By all accounts, however, innovation is vital. A wave of blogs, podcasts and books have traced the rise of what has been hailed as the industrial religion of the 21st century, most recently including the Stanford University professor Hayagreeva Rao's book Market Rebels that explores how collective action promotes business innovation.

The Federal Government even examined the issue last year as part of a national innovation review. The conclusion? Australian innovation desperately needs an overhaul and the country is a weak global competitor.

Industry innovation centres are also cropping up around the country to promote areas such as clean energy, creative industries, mining and defence.

The general manager of the government agency Enterprise Connect, John Dean, says the centres will offer specialist advice and services such as technology matching, business reviews, problem solving and networking activities.

"We feel there's a great opportunity to . . . bring the resources of universities and CSIRO and those sorts of organisations to bear on smaller firms on a national basis so they're not just confined to what they know locally," he says.

Dean interprets innovation as anything that improves a firm's performance.

"Without it we'd have no change and the economy stagnates," he says.

"Innovation is the energy that drives economic development.

"Technology or business processes, operations, marketing capability or management - all those things are part of what allows a firm to innovate."

Research at Queensland University of Technology reveals some of the characteristics of innovative firms. Associate professor Paul Steffens and his team are tracking 1200 emerging and young firms and have so far found those identified as "high potential" tend to be more team-based, male- dominated and globally focused than regular firms. They also take much longer to get up and running and, surprisingly, few seek venture capital.

"By comparison with the US, Australian firms were at least equal on all dimensions and superior on many which is quite counter to the general perception of emerging and young firms," Steffens says.

But for businesses overall, research from the Global Entrepreneurship Monitor suggests few Australian firms perceive themselves as innovative, particularly when compared with the US. The study asked business owners about the use of new technologies, whether they differed from competitors and how new their products were.

An academic director at the Entrepreneurship, Commercialisation and Innovation Centre at the University of Adelaide, Allan O'Connor, says very few companies report newness or high-end innovation on those three criteria.

"That's particularly the case for established firms, though younger firms tend to be gung-ho. But, as they mature, the perceived level of innovation declines."

O'Connor encourages businesses to link with universities, saying high-growth, innovative companies contribute greatly towards employment and the economy.

"You need to get many different ideas and perspectives to come up with something new and original," he says. "Then you have to turn around and protect that and build it into a business venture. You turn from collaborative to competitive."

Steve Brady from Cre8biz, a specialist service that helps entrepreneurs and inventors commercialise their ideas, is sceptical. He welcomes the rhetoric but believes governments, universities and big business still miss the mark while research and development often results in inventive yet futile "white elephants" that fail commercially.

"They beaver away and produce technology that doesn't work effectively or missed its time slot or people don't want," he says.

Brady believes small and solo players are usually the best innovators, often coming up with their best ideas across the kitchen table.

"Innovation . . . is about providing a solution to a problem, not spending a lot of time and money to produce a potential solution to a problem that doesn't exist," he says.

"Little R plus medium D plus big C [commercialisation] is the equation for innovation. Without the C , the R&D stays where it was.

"This story is - unknowingly to most Australians - the most important issue that our economy faces. That is, if we don't innovate away from depending on the resource sector and move towards developing a globally competitive 'service economy', we'll become a tourist destination."

A lecturer in entrepreneurship and innovation at the University of Sydney, Richard Seymour, says market upheaval gives rise to new ideas. He traces the idea of disruptive change to the late Joseph Schumpeter's theory of "creative destruction".

"His view of the entrepreneur is the person who destroys existing industry structures," he says. "They don't leave a wasteland - the way they destroy is by creating a new business model. In some ways the destruction is happening around us and, from that, creative opportunities will spring.

"That's a very harsh way of looking at it . . . but this idea of resilience is important because what you'll find is a lot of small businesses seeing a lot of opportunity."

The downturn is also forcing businesses to be more reflective, says Christopher Witt, the director of the Centre for Innovation and Entrepreneurship at the Australian School of Business."Introspection brings with it a lot more listening," he says. "People are getting honest and doing it quickly."

Sharpen up

Christopher Witt's tips:

If you are "so busy sawing you're not sharpening your saw", it's time to take stock of your business.

Assess what you are doing and who you are doing it with so you do not inherit or perpetuate mediocrity.

• Attend business talks and meetings for "intellectual powerhouse experiences".
• Streamline your business "so you can make snap decisions". Consider automating processes for payment collections, customer communication and online options.
• Prune intelligently. "Poorly performing parts of the business are just dragging down the rest."
  

http://smallbusiness.smh.com.au/starting/finance/think-outside-the-box-618060580.html