Business leaders play an important role in establishing innovation within the culture of their companies, according to a new NAB report.
Released yesterday, the latest NAB Labs Australian Business Innovation Index report revealed a link between organisation leaders’ encouragement of innovation and the level of innovation in the company.
“Clearly, when innovation is encouraged from the top, more innovation behaviours follow,” the report said.
The index, released every year, measures Australian business’ innovation across three ‘innovation behaviours’ of doing things ‘differently’, ‘more quickly’ and ‘more efficiently’, surveying approximately 1,500 Australian businesses across various sectors and sizes.
Across the index overall, business leaders were found to be only “moderately” encouraging of innovation.
However, those who voted that their business leaders were “highly” encouraging were from more innovative companies.
Commenting on the survey results, NAB chief economist Alan Oster told InvestorDaily that companies demonstrated they were responsive to business leaders if they ascribed importance to innovation.
“In those firms that said their leaders ‘extensively’ encouraged innovation (i.e. scored 9-10 points), innovation was much higher (73.3 points vs 59.8),” according to the report.
Mr Oster said, “It is telling us that business leaders encourage innovation because of the value it can create in higher productivity, new processes, competitive advantage, adaptation to changing circumstances and differentiation.”
However, the index revealed that across the board, innovation this year had slipped 7.8 points since last year, falling to 59.8 points from 67.6 points in Q2 2016.
Notably, business perception of innovation remained largely unchanged since last year, despite the drop in actual innovation behaviour.
“There is a bit of a ‘perception v reality’ disconnect, in terms of what we think we’re doing to innovate and what we’re actually doing when we measure behaviours and outputs,” Mr Oster said.
“It’s hard to pin-point why that disconnect may be occurring, but perhaps it’s reflective of a less conducive economic environment over the past year and more cautious business behaviours.”
Overall, ‘cost efficiency’ was the biggest driver of innovation, followed closely by ‘doing things differently’.
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