Study finds money doesn’t buy innovation

Australian organisations have made little progress towards improving their performance on innovation in the past 12 months, according to the Fujitsu Innovation Index 2007. The Index, which was launched today, fell from 64/100 in 2006 to 63/100 in 2007 despite the fact organisations increased spending on innovation by a considerable 37 per cent in the past 12 months.

While the major barriers to innovation continue to be lack of personnel dedicated to innovation (41 per cent) and insufficient budget (38 per cent), resistance to change (13 per cent) and short-term mindsets (10 per cent) increased significantly over 2006.

Tom Dissing, Principal of Consulting, Fujitsu Australia and New Zealand said, “Organisations took on board some of the feedback from last year’s Index by increasing the money they spent on innovation. However the decline in the Index between 2006 and 2007 highlights the fact that innovation is not something which can be bought but which needs to be approached holistically.

“Organisations must provide strong leadership and a business environment in which innovation can flourish if we are to increase our overall innovation performance. The results of this year’s Index also suggest that organisations need to stop thinking about next quarter and instead focus on their long-term future if they are ever to become truly innovative,” said Tom Dissing.
Why is innovation important?

The study found that the two biggest drivers of innovation were the need to meet customer demand (40 per cent) and increase operational efficiency (25 per cent). While these have not changed since 2006, an addition to this year’s study is the inclusion of an innovative organisational culture (22 per cent) as a major driver of innovation.

While many organisations strive for an innovative organisational culture, many are unclear as to how to achieve this. The study found that organisations use a range of structural and process techniques to encourage innovation, such as:

* Process: CEO encouragement; rewards, recognition and incentive programs; an on-line suggestion box; open communication; and embedding innovation in company values; and
* Structure: Formal innovation roles and functions within the organisation; continuous improvement programs; inclusion of innovation topics within team meetings; and formal review sessions.

Tom Dissing said, “We found that the organisations which performed particularly well (the Innovation Leaders and Progressives) were more forward-thinking in their approach to innovation than the Innovation Laggards (who scored below 48 in the Index), who appeared to be driven by a short-term focus on financial gain. As a result, these organisations were less interested in cultivating an innovative culture or achieving best practice.”

Mr Dissing said the research was designed to give organisations a practical view of how companies in Australia and New Zealand are approaching innovation, as well as gain insight into how innovation drives business value and the successful strategies of Innovation Leaders.

“We wanted to build upon the success of the inaugural Fujitsu Innovation Index (which was published in 2006) and gain new perspectives on using innovation to create business value. For example in 2007 companies reported that innovation contributed 29 per cent to increases in key performance measurements such as customer satisfaction (37 per cent) and profit (16 per cent).

“Once again, the Innovation Leaders significantly outperformed the Laggards when it came to using innovation to achieve strategic business outcomes. Our analysis found that the Laggards could improve their employee acquisition and retention by 125 per cent and their profitability per employee by 120 per cent if they implemented the same approach to innovation as the Innovation Leaders,” concluded Tom Dissing.

If you would like a copy of the Fujitsu Innovation Index 2007, please contact Liz Greene at Fujitsu.