Innovation Drives Social and Economic Prosperity

Applying a broad definition of ‘innovation’, new products, processes and services, new uses of known products, processes, services, clever business models and smart business practices can all be innovative.

In the ever expanding globalisation of trade, commerce, information/knowledge transfer and freer movement of people, it is no longer enough to simply make or sell a product cheaper than rival products. Competing on the lowest price is a race to the bottom for most businesses, and anyone can do that.

What is it about your business, product or service offering that would make customers want it over your competition’s equivalent? Nowadays, innovation is recognised as being the big differentiator.   A business that is not innovative will not thrive in today’s climate of freer trade, commoditisation and globalisation.

The same philosophy is true of national economies. Innovation transcends cultural differences, politics and religion. It is a playing field upon which every nation can play and win. We tend to focus on innovation at a product or company level, and sometimes we even step back and view the beneficial effects of innovation on an industry sector – increased efficiency or competitiveness. Take a step further back and we see the game changing effect innovation has on a nation. Now, innovation is the driver of social and national prosperity. It is the differentiator between nations. If a nation is not developing its technology and business offerings, it is going backwards.  For example, countries that do not have vast reserves of natural resources or a significant manufacturing base have to rely on technological innovation and services. Countries with reserves of coal, oil, gas and minerals have to innovate, or adopt innovation to reach deeper or offshore reserves, or to make lower value reserves economic to recover. Manufacturing bases have to be more efficient and cost effective against countries with a lower employment cost base.

Most governments have typically been slow to respond fully to the challenge that supporting innovation presents. It’s not something governments traditionally understand well or are comfortable with. After all, supporting innovation on a national scale generally involves financially supporting the business community rather than receiving tax revenue.  That reticence is perhaps understandable when the short term concern of winning office again can often overshadow a long term national strategy. Even governments need to innovate to overcome entrenched thinking.

There are many, many examples of technological innovation being a game changer for nations:

  • the rapid transition in Great Britain from hand manufacturing to machines during the industrial revolution that followed improvements in water power and harnessing steam power,
  • the rise of steam railways in the early 1800s allowed mass imports and perishable goods to travel inland within a few hours,
  • the mobility of people to travel (Thomas Cook started his travel empire by organising a ladies’ temperance outing to the coast by steam train),
  • in the mid twentieth century, innovation in jet engines, rocket engines and flight control technology obtained from Germany by the USA at the end of WWII enabled US aircraft and space industries, strongly supported by US government, to become dominant in the world,
  • more recently, we have seen nations in Asia come to the fore in high tech innovation, particularly in mobile communications and computing.

Wise governments nurture innovation by providing tangible incentives to business and industry. Grant and tax incentive programs provide financial encouragement. For example, the Australian federal government has a tax incentive program to help offset some of the costs of doing R&D. It is a broad-based entitlement program open to all sizes of firms in all sectors. Focused grant programs are also available in Australia at federal and at state level.

R&D and innovation go hand in hand, and intellectual assets are created at the same time, either as registrable intellectual property rights or as un-registrable rights, such as know-how, trade secrets, confidential information or copyright. To have sustainable game changing innovation, those rights should be harnessed.   In aiming to ensure ‘bang for their buck’ and create long term economic benefit to their national economy, governments are often wise enough to require or encourage formal intellectual property (IP) protection for local and overseas markets.  Authorised use overseas of IP rights, such as through licensing, or an overseas market protected by a patent, trade mark or design right, can generate valuable and significant revenue return. Exporting (protected) knowledge as well as, or instead of tangible products generates major returns and benefits to a national economy.

Do not forget that trading overseas often requires ‘freedom to operate’ checks to be carried out. A new market may not simply be open to a new product or service offering without risking infringing the rights of others. Part of the innovation process involves checking whether that freedom to operate exists.

Innovation is the driver of benefit to society. Innovation can deliver new products and services, provide smarter ways of doing business, help create employment and new businesses (even new industries), and importantly, generate a net financial return to an economy for a sustainable future for all. Innovation is the great enabler for social and economic benefit.