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Roy Green: Improving Australia's Productivity Performance

By Roy Green January 31, 2013

The Dean of the Business School at the University of Technology Sydney writes that Australia must try new avenues of innovation to make up for declining commodity prices.

As our terms of trade slip back with the leveling off in commodity prices, it is increasingly recognized that Australia must find new sources of growth and productivity to make up for the consequent shortfall in our national income. Not to do so will mean stalled or even declining living standards in the years ahead.

So the finding in GE’s 2013 Global Innovation Barometer survey that Australia has improved its overall innovation ranking from 16th place in 2012 to 13th place this year is encouraging and gives grounds for some much needed optimism for the challenge ahead. According to the Survey, this improvement is largely thanks to the quality of our research and educational institutions, which are leading collaborative efforts with business around new technologies and business models.

The survey finds that Australian businesses are more open than previously to pursuing innovative approaches, with 80 percent of respondents saying that they have been doing so through collaboration.

This is a welcome albeit surprising development given that collaboration, or the lack of it, has been identified as a major area of weakness for Australia by the OECD and by the Government’s own 2012 Australian Innovation Systems Report.

However, the Survey also echoes the findings of a study by the Open Forum for the Society for Knowledge Economics that key impediments to innovation remain ‘short-termism’ in political and business thinking, underinvestment in education and infrastructure and ‘risk-averse’ and ‘insurance driven’ attitudes. More specifically, Survey respondents express concern about the speed of commercialization in Australia, compared with other countries.

In addition, our own research for the Government in the 2009 ‘Management Matters’ report has shown how the challenge of improving productivity performance will depend not just on developing science and technology capability but also on non-technological forms of innovation, particularly the quality of management in our firms and organisations. While Australia has many firms which are well run, particularly those that are large and globalized like GE, it is in areas of management such as ‘instilling a talent mindset’ that we most significantly lag international best practice.

Recently, the Australian Government’s white paper on ‘Australia in the Asian Century’ highlighted the importance of innovation in productivity improvement and noted that, ‘Most of what is required to lift Australia’s productivity is in the hands of individuals, especially managers of businesses. It will emerge through innovation in business processes within firms and more sophisticated relationships among firms, encouraging knowledge transfer and exploiting gains from specialisation.’

With a view to addressing the management capability gap in Australia’s workplaces, the Government has announced a new Centre for Workplace Leadership. It will also shortly release an industry and innovation statement with an expected emphasis on innovation hubs and precincts to promote deeper collaboration between business and universities. These are important and worthwhile initiatives and it is to be hoped that they drive further improvements in Australia’s innovation and productivity performance.

Prof. Green is the Dean of the University of Technology, Sydney, Business School.