WHEN we think of the term ‘innovation’, high technology industries, massive R&D budgets and frontier developments often come to mind.
However, real innovation doesn’t always have to equate to scientific breakthroughs. A recent ABS Innovation Survey shows that 35% of firms have introduced new products, processes or forms of business organisation in the last three years.
According to Narelle Kennedy, CEO of the Australian Business Foundation (ABF), these companies aren’t necessarily the high fliers, but include traditional industries in manufacturing.
“It’s not the high technology, emerging industries or frontier areas like biotech where the real action is. While those things are important in most OECD economies, in reality they only account for around 3% of GDP.
“It’s the industries in manufacturing and services that we don’t normally think of as innovators that are rapidly growing,” said Kennedy.
Innovation
The question remains, how does innovation occur in traditional, low to medium technology industries?
Kennedy talks about innovation in terms of a ‘knowledge economy’, where “what and who you know is more important than what you own and use”.
“We’re starting to see a pattern where traditional industries are using knowledge in clever ways. It’s not about building a better mousetrap, but using your brains and your know-how.
“This smart application of knowledge is a decisive factor for generating value, both in individual businesses and in driving long-term economic growth and productivity for this nation,” she told Manufacturers’ Monthly.
Prof. Keith Smith from the Australian Innovation Research Centre at the University of Tasmania elaborates on the concept of the knowledge economy in his 2004 paper, The Knowledge Economy in the Australian Context (written for ABF).
Within it, he comments that innovation in low and medium technology industries in Australia is not based on R&D, but “painstaking development of new product concepts”. This includes the use of more practical resources, such as design skills, market exploration, engineering development, in house training and operational skills. While research does play a part, it occurs indirectly through universities, research institutes and industry organisations.
“Industries rarely or never innovate on the basis of scientific or technological breakthroughs emerging from a research process. Rather, firms seek to develop new product concepts on the basis of their interactions with consumers and their conjectures about likely patterns of demand.
“In this framework, the implementation of a new product concept is a problem solving process, in which existing technologies may be combined in new ways and new technologies created,” said Smith.
Meeting niche markets
One company which demonstrates this is Emergency Transport Technology (ETT) - an arm of the Byron group which manufactures emergency equipment and vehicles in Revesby, Sydney.
ETT’s success in addressing niche markets is not achieved through extensive R&D, but its ability to provide new solutions to problem areas faced by its customers.
An example is the use of a composite type of material on new police general duties vehicles – a concept which provides sturdy material that doesn’t compromise the base vehicle due to excessive weight.
According to Tony Nelson, marketing manager at ETT, the company engineered a layered material of plastic and aluminium to enable the new police vehicles to be designed around the Volkswagen T5 - applying the problem solving process mentioned in Smith’s paper.
“The T5 is a great vehicle to drive, but it wouldn’t have been able to carry the weight of a normal cell, particularly over the rear axle and so far back. By using this material, we’re able to provide a unit that weighs about 75kg but is incredibly strong,” said Nelson.
“However, it has been a challenge to work with laminate material because the material doesn’t fold or bend as easily as single sheet aluminium.
“We overcame that by using heat, plus we created radius corners rather than sharp angle bends,” he said.
These innovations show that industry is translating knowledge into new capabilities and solutions which better meet the market’s needs. Kennedy believes that contrary to popular belief, manufacturing is not flailing or in decline, but transforming itself to meet the challenges of a new knowledge economy.
“The key message here is that business transformation and learning is the key to effective innovation,” she said.