Cut red tape to help innovation

| May 29, 2012

Medium and small businesses are the heart of innovation in Australia however, they can be restricted by competition policy, contract law and compliance demands.  Peter Strong believes cutting Red Tape can help these businesses to thrive.

The world is stumbling around an economic meltdown and the way out of that will be found through small business, hard work and innovation. 

Continuous innovation has become an essential part of any economy.  Technology and processes are changing so quickly that we must innovate constantly to keep in touch, or take advantage of someone else’s innovation or create jobs to replace those lost due to innovation. 

Small and medium business and the self employed are the great innovators, so how do we help them? 

The self employed are people who are not fettered by the rules and regulations of big organisations and they can use their imagination and their skills to achieve new and unexpected outcomes.  Many, probably most, will not always succeed in their innovation, especially at the first try, but without them trying, without them taking a risk, we would have no breakthrough innovation at all.

It is safe to assume that innovators will not emerge in large numbers from larger businesses.  Big business is good at making what they do better or taking someone else’s innovation and converting it into a great product or process.  The truly great innovators will work by themselves, they will not countenance interference or direction or rules. 

So we need a large and broad base of small business from which the innovators can emerge.  The next innovator could be a man driving his own truck who has an idea about saving petrol, or a woman in a café who identifies a new process for making coffee, one that saves power.  It may be a retailer, a motor mechanic, a doctor, a solicitor, a young entrepreneur still at school or a woman on a farm.

The best big businesses know this and they go out to the community and seek partnerships with innovative small business people.  They do not interfere but support, they do not direct but fund, they do not stress but foster. They do not try to push these people onto a particular pathway, they let the innovative person find their own way, make their own mistakes and seek the support they want and need. They remove impediments for that person and then if the innovation works everyone wins. 

So what stops people from innovating?  Many governments have excellent programs of support for those who wish to innovate but we still need to identify what stops people from innovating in the first place.  There are many things but what governments mainly do wrong is around competition policy, contract law and compliance demands.

We need to make sure poor policy does not inhibit people, we must allow our innovators to emerge from the pack.  We need a lot of people in their own businesses across all sectors of the economy.  We need to make sure we do not ask them to do what is not possible.  They are the heart of innovation, the backbone of the economy.  They are not to be treated as slaves doing the work of government for no reward or allow them to be the prey of unethical big business practices. 

We understand that the GST and the associated BAS are here to stay, GST is essential for the country to function.  But it should be recognised that the small business person does not get paid for collecting the GST or other taxes, everybody else in the tax system gets paid for their work, pay clerks and employees of big business, public servants, accountants and tax experts.  The small business person does not get paid and we will get fined if we get it wrong and that is the small business persons’ contribution to Australia – our time and/or our money spent on collecting tax for the government.  But the small business person should not be asked to do any other work such as collecting superannuation or being the pay clerk for paid parental leave.

Competition policy has also inhibited innovation.  It has ignored the effects of urban planning on competition and as a result those with economic power have been allowed to swallow up town centres and, in partnership with the large retailers, force poor choice onto consumer markets. These companies have created local retail monopolies that force innovative small businesses out of the market.  Recently the Minister for Innovation acknowledged that the domination of Coles and Woolworths is having a negative impact on innovation, it is about time that someone opened their eyes and figured out that good policy isn’t about protection of small business but freeing up of choice and opportunity.

Contract law is also an area where innovation is stifled.  At the present time negotiation between a small business person and a large multi national organisation is considered equal.  That obvious imbalance of power allows the very large landlords, most franchisors and many other large businesses to use their corporate muscle and money to force the small business person into situation where they are struggling to survive and cannot focus on growth and innovation.

A healthy economy relies upon innovation and innovation relies upon small business.  Now is the time to show them that we value them, now is the time to remove red tape and unfairness.  We need to: change competition policy to guarantee fairness; ensure that urban planning is healthy for all business, change contract law to remove unfairness and enshrine ‘good faith bargaining” in contract negotiations between small business and large business.  We also need to consider other polices that detract from the small business person’s capacity to concentrate on their business, we should also: make workplace laws friendly for small workplaces; remove business from the collection of superannuation; do not ask small business people to be pay clerks for paid parental leave; and compensate small business people when asked to do any work for government. 

If we give them back their time then innovation will happen spontaneously.

Peter Strong is the CEO of the Council of Small Business Australia (COSBOA).  He has spent much of the last 30 years in change management at the business, community and national level.  He has worked for the Australian Government and with NGOs, as well as consultancies with the World Bank and the United Nations.  Peter has worked on national small business and employment policy and internationally on projects aimed at assisting countries and regions experiencing substantial economic and social change.  Peter was instrumental in setting up business incubators and small business support services in various countries and throughout Australia.  This includes the first women’s business incubator in China. Peter participates in various advisory groups to the Australian government including with the Australian Tax Office, the ACCC, ASIC, Treasury and the Department of Innovation.

Would you like to have your say on Red Tape? We ask you click through to the Red Tape Consultation area on our sister site Open Forum and share your experiences by answering the following questions. We welcome you to provide anecdotal evidence and any supporting material to explain your circumstances.

The online consultation closes at 5pm AEST on Friday, 15 June 2012.