Half of Australian Businesses Underspend on Innovation

Most of us accept that innovation is imperative to business. It fuels competitiveness, profitability and feeds our entrepreneurial spirit. Unfortunately, though good intentions aren’t enough and the fact is that more than half of business owners spend less on innovation than they do on their annual grocery bill.  That’s not very innovative!

“If you have always done it that way, it is probably wrong”

~ Charles Kettering


Many projects end up losing money, frustrating employees and heading into the abyss. Yet, large corporations spend billions of dollars annually in pursuing innovation.

Authors from the Harvard Business Review believe that innovation projects fail as a result of resources being spent on the wrong type of innovation. Too much money is being spent on attention-grabbing activities that are straightforward to do such as outrageous PR stunts and shocking videos, procuring new technologies and buying more facilities. However, innovation lies in changing the design of a current service system, introducing new customer service experiences, or a much better business model.

At Board Associates, we like to distinguish between “capital I” innovation and “little i” innovation.  Not all innovation needs to be the big bang approach.  In fact, following the advice of Jim Collin’s we actually recommend against it in the first instance until your innovation is proved (see “firing bullets and then cannonballs” in his book “Great by Choice”).


The real question is, for a successful innovative idea to take off, how much should we as business owners be spending?

The Australian Bureau of Statistics has recorded that half of Australian business owners spend less than $25,000 on innovation activities.  That’s less than the average family grocery bill. It’s less than your spending on keeping the lights on (electricity) and probably less than you’re spending on toilet paper and stationery.

We accept that we need to invest in marketing to grow our business.  Why don’t we apply this same thinking to innovation?


We’d challenge you to think of it like this:  “how much is an appropriate investment in your growth?” If you believe there’s opportunity to grow from $10m to $50m, surely that’s worth a little focus and a little cash.


 The problem with innovation implementation and success is a lack of strategy. A strategy is nothing more than a commitment to a set of coherent, mutually reinforcing policies or behaviours aimed at achieving a specific objective and competitive goal.

Great strategies promote alignment among diverse groups within an organisation, explain objectives and priorities and help centre efforts around them.

Companies regularly define their overall business strategy (their scope and positioning) and identify how various functions; such as marketing, operations, finance, and particularly R&D – will support it. However, firms rarely communicate their strategies to align their innovation efforts with their business strategies.

Without an innovation strategy, innovation improvement efforts can easily become a grab bag of proclaimed best practices: dividing R&D into localised autonomous teams, generating internal entrepreneurial ventures, setting up corporate venture-capital arms, pursuing external associations, embracing open innovation, collaborating with customers and implementing rapid prototyping, just to name a few.

A company without an innovation strategy won’t be able to make trade-off decisions and choose all the elements of the innovation system.


Board Associates innovation experts, Justin Cloete and Peter How regularly run innovation and ideation workshops for clients.  If you’ d like to find out more, contact us here