Australia and New Zealand score a mediocre 64/100 in inaugural Innovation Index

Australian and New Zealand organisations scored an average of 64/100 in the inaugural Fujitsu Innovation Index, a new study which measures the innovation performance of Australian and New Zealand organisations. While the mean score across Australian and New Zealand organisations was 64/100, Australian companies (65/100) edged out New Zealand companies (61/100) by a narrow margin.

The Fujitsu Innovation Index is an in-depth analysis of the local innovation landscape which measures the business impact of innovation and critical success factors for success. The Index was derived from an in-depth survey of more than 175 organisations in Australia and New Zealand conducted by ACA Research on behalf of Fujitsu.

“With an average score of 64/100 on the Innovation Index, there is plenty of room for improvement if Australian and New Zealand organisations are to succeed in the increasingly competitive world economy,” said Tom Dissing, Principal, Fujitsu Consulting.

“While there are some organisations creating an environment for innovation to prosper, Australian and New Zealand organisations tend to be incremental rather than radical in their approach to innovation. According to our survey, only eight per cent of respondents are focused on radical innovation, compared to 33 per cent who are focused on incremental. The remaining 59 per cent sit somewhere in the middle,” said Tom Dissing.

The survey also found the need for innovation in organisations is driven by a number of key business outcomes including: meeting customer demands (46 per cent), increasing operational efficiency (35 per cent), developing new products and services (20 per cent), growing revenues or profit margins (20 per cent), countering competitive activity (19 per cent) and differentiating products and services (15 per cent).

The major barriers to successful innovation are insufficient budget (38 per cent) and a lack of personnel or time dedicated to innovation (30 per cent). While collaboration is often cited as one of the major drivers of innovation, only three per cent of respondents who admitted their companies had poor innovation performance said the lack of a collaborative environment was to blame for this.

From an industry sector perspective, the highest ranking industry in the Index was IT and business services (69/100), followed closely by financial services (67/100) and communications and essential services (65/100). The production and distribution sectors (both on 61/100) fared worst. While the variation in industry performance was not considerable, there was greater disparity between companies in the BRW Fast 100 (72/100), and the other organisations surveyed (63/100).

The survey also found that when it comes to measuring innovation success, those companies that measure innovation believe that it has contributed 33 per cent of any increase in customer satisfaction and 30 per cent of any increase in profitability over the past 12 months.

“There is a close connection between effective innovation and sustained value creation,” said Tom Dissing. “While many organisations are not yet measuring the impact of innovation, these results suggest that unless some organisations improve their innovation performance, their competitors, who are innovating, are going to increase customer satisfaction and profits and potentially steal significant market share.

“Central to innovation success is organisational culture and leadership. To create a culture which is conducive to innovation, organisations should seek to empower their employees, gain executive endorsement, communicate with key stakeholders and be willing to take risks beyond their day-to-day roles,” said Tom Dissing.

While the study showed that effective leadership (48 per cent) has the greatest impact on innovation performance, having the right processes (29 per cent) and adequate resources (23 per cent) in place to drive innovation is also important.

“Processes that allow organisations to identify market gaps and develop innovative products or services to fill those gaps are crucial elements in driving innovation performance. And while strong leadership is essential, if innovation is to succeed, appropriate levels of resourcing must also be dedicated to it,” said Tom Dissing.

If you would like a copy of the Fujitsu Innovation Index 2006– Igniting Innovation Performance, please contact Liz Greene below.