Stronger business leadership needed for innovation: report

A failure of business leadership is acting as a drag on workplace innovation and business profitability, a comprehensive study of Australian industry has determined.

The survey of 2,400 business professionals from all sections of industry and government — conducted by the University of Melbourne and the Australian Institute of Management — finds poor leadership is the main reason organisations fail to innovate.

The three main obstacles to innovation are all leadership related, the report Innovation: The New Imperative finds. These include:

• Organisations being too risk adverse
• Employees not being rewarded for innovating
• The exceptionally long lead time it takes to develop ideas

The survey found firms with proven innovation performance are three times more likely to have higher revenue growth, profitability, productivity and to report higher levels of cash flow, cost advantages and long-term competitive advantage.

Lead researcher Professor Danny Samson, from the University’s Faculty of Business and Economics said leadership is “crucial” for innovation.

“Effective leaders put in place the right strategies. They know that systematic innovation needs to be properly resourced in terms of processes and people skills, and they recognise staff must be properly encouraged,” he said.

The Australian Institute of Management’s Vic & Tas Chief Executive, Tony Gleeson FAIM, said current economic conditions demand innovation.

“The end of the resources boom means our nation’s future wealth ambitions are dependent on leaders and managers becoming champions for innovation,” he said.

“We need to look to countries that haven’t had the advantage of our abundant natural resources — countries like Japan and Germany — and recognise innovation in those countries is entrenched and underpins their high living standards.”

The report was written by Professor Samson and Dr Marianne Gloet from the University of Melbourne in collaboration with the Australian Institute of Management. Most of the participants in the study were members of the Australian Institute of Management.

Download the Innovation: The New Imperative research report [PDF] or highlights from the study [PDF].