John Menadue. Our innovation-averse business culture

Dec 22, 2015

Malcolm Turnbull’s Innovation statement sounded new, but was it? So much of what he said used to be called industry policy-technology parks, offsets, defense technology, support for inventors, and quality assurance. But Malcolm Turnbull dwelt particularly on the need for cultural change in business.

I think that was new. He said that Australian businesses should be more willing to take risks and less fearful of failure. Many times he said that cultural change in business is essential. He is right.

We do have a risk-averse business culture. And our society is much the same. We want to be comfortable. After all that is what John Howard urged us to become.

In 2008, Dr Terry Cutler produced a Green Paper ‘Adventurous Australia’ for the Rudd Government. Following his disappointment with the Rudd government’s response on innovatio he said

‘Too many of our business owners or manager have what we might describe as a life-style approach to business. Even many of our so-called business success stories look like under-performers when bench-marked globally. This lifestyle model of business strategy imposes a false ceiling on ambition. Success is having the designer car in the garage and a holiday home or two. … At a recent forum, I actually heard people saying they didn’t need to expand or export because they were doing it quite comfortably as things are.’ 

In 2012, David Gruen, Deputy Secretary of Treasury said

‘Management practices in Australia are mid-range. … We are well below top performers like the US, Germany, Sweden, Japan and Canada, but more similar to France, Italy and the UK. … Australia, like some other countries has a somewhat larger tail of companies with relatively poor management performance.’ 

In August last year the Governor of the Reserve Bank told a Parliamentary committee that Australian companies were “too risk averse’ in focusing on sustaining a flow of dividends and returning capital rather than investing in future growth.

We have been told many times about our risk averse business culture. Research and analysis confirm this.

For example, in association with The Conversation, Roy Green, the Dean of UTS Business School and drawing mainly on OECD data, points to the following problems.

  • Australia still has a long way to go to catch up to its regional and global counter-parts in innovation. We trail well behind China, ROK and Singapore.
  • Australia’s pivot to a digital economy has stalled.
  • Venture capital investment has turned around in countries like the US, South Africa and Hungary, but in Australia it fell significantly between 2009 and 2014.
  • Australia has done little in the past ten years to lower barriers to entrepreneurship.
  • Australian businesses lack a high performance innovation culture.
  • Australia performs poorly on collaboration between the business and research sectors.

These problems are highlighted in failure of regional linkages. Despite our heavy economic dependence on our region, our business sector has been very slow to respond. It gives lip service to building Asian expertise. But I have yet to learn or meet a board member or a senior executive of any of our top ASX 200 companies who can fluently speak a language of our region. How can we really cooperate well on innovation or indeed many other business areas with such an impediment! Those 200 companies would have over 3,000 senior executives and board members, but no Asian language expertise. That is quite extraordinary. It tells me a lot about business complacency The white male directors’ club keeps appointing people like themselves. They are comfortable as they are in their Anglo comfort zone. But comfortable people are unlikely to be good at innovation

What is most indicative of the lack of innovation, risk-taking and entrepreneurial flair is the way our Business Council of Australia and other employer groups are invariably pressing governments to change economic policy and industrial relations in their favour. Now they are pressing for reduced company and individual tax and changes in penalty rates. Why don’t they concentrate on managing their own business instead of lobbying governments to fix their problems? They should stick to their knitting.

So much business energy was spent lobbying against a carbon tax or an ETS that we have missed a decade in developing a new economy based on renewable energy. Many of our entrepreneurs in this field have gone overseas.

It is not as if our business executives are poorly paid. They are extremely well paid but too often the salary packages are geared to short-term results rather than medium or long term results. Innovation takes time.

Too often we all become complacent. We acknowledge a problem, take some remedial steps and then go on ‘smoko’ again.

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