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Pathways to the financial benefits of innovation

Pathways to the financial benefits of innovation

The CommBank Business Insights Report measures the innovation performance of Australian businesses and quantifies the value of a company’s innovation activity.

We find ourselves at a pivotal moment for Australian businesses as the nation transitions from a mining and resources-led economy to a knowledge and service-led economy.

Businesses are seeking to harness the power of innovation to drive the economic transition, but how do ‘everyday’ businesses embrace innovation and achieve their commercial objectives?

The CommBank Business Insights Report – Unlocking Everyday Innovation, which has just launched, explains innovation in practical ways and demonstrates the value and drivers of innovation for all businesses.

The report measures the innovation performance of businesses across a range of sectors and demographic categories, and uses the Oslo Manual, an OECD recognised framework, for defining and categorising innovation.

Under these guidelines, innovation is defined as introducing something new or making a significant improvement in one or more of four areas across:

1.     Products and services;

2.     Business processes;

3.     Organisational methods, and

4.     Marketing practices.

Innovation performance – moving beyond improvement

Against these critera, we found just 44 per cent of Australian businesses are actually ‘innovation active’, although most (82 per cent) thought they were innovating. The rest were either only making incremental improvements or not even trying to innovate at all.

To better understand the drivers of innovation, the research tested 15 core drivers of innovation across management capability and entrepreneurial behaviour.

Together, these 15 drivers comprise the CommBank Innovation Index, which benchmarks innovation performance on a sale from minus 100 (innovation restrictive) to 100 (disruptive innovation).

The CommBank Innovation Index for Australian businesses stands at 24 nationally, which is on the boundary between improvement and true innovation, which starts at 25 on the scale.

Unlocking financial returns

When asked to estimate the value of innovation, those businesses that had already implemented an innovation cited an average return of $405,000. This equates to a total realised value of $69 billion for the Australian economy through additional revenue or cost savings.

If that same return were to be achieved by all Australian businesses*, it would contribute $215bn to the economy.

To fully assess the potential financial benefit of innovation, the report examines the differences in value created when a business implements innovation across the four areas outlined in the Oslo Manual.

The results show that the average value of innovation increased materially when businesses moved from innovating in one area ($386,000 per company), to innovating in three to four ($763,000 per company).

Moving up the innovation curve

The report also reveals that of the 15 drivers of innovation, some are more impactful than others. The top three include:

  • Process – encouraging employees to ask questions that challenge the status quo;
  • Philosophy – expecting employees to offer creative ideas for improvement; and
  • Adapting – adapting your products and services to make the most of opportunities.

The research also identified commonalities amongst innovation active businesses, including a wiliness to experiment, listening to staff, and adapting the way a business approaches the market.

What’s interesting is that these are not radical disruptive changes, but rather simple ways businesses can seek to move up the innovation curve, and realise the value our research shows it creates for businesses.

To download the full report visit commbank.com.au/canbusiness

Adam Bennett
Adam Bennett

Group Executive, Business and Private Banking

Adam is the Group Executive, Business and Private Banking. He is responsible for providing a comprehensive range of products and services to support our small and medium business clients. Adam has extensive leadership experience and a passion for delivering exceptional customer service.

The CommBank Business Insights Report (the report) has been published solely for information purposes and is not to be consumed as advice or recommendation. The report has been prepared without taking account of the objectives, financial situation and capacity to bear loss, knowledge or experience or needs of any specific person who may receive these insights. The Bank believes that the information in the insights is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in the report. Any opinions, conclusions or recommendations set forth are subject to change without notice. Any projections and forecasts are based on a number of assumptions and estimates and are subject to contingences and uncertainties. Different assumptions and estimates could result in materially different results. The report makes reference to data sourced from an online survey of 2,195 business owners, decision makers and managers conducted on behalf of the Commonwealth Bank by DBM Consultants between August and September 2016. The survey was undertaken by DBM Consultants on behalf of the Commonwealth Bank. All analysis and views of future market conditions are solely those of the Commonwealth Bank. The Commonwealth Bank and DBM Consultants do not accept any liability for loss or damage arising out of the use of all or any part of the Report. Commonwealth Bank of Australia ABN 48 123 123 124.