Public consultation on improving innovation indicators and its implications for your business

The Australian Government has published the Improving Innovation Indicators Consultation Paper, setting out findings made by the Department of Industry, Innovation and Science (DIIS) from consultations with over 50 innovation system organisations and experts. This feeds into a public consultation that the DIIS has now begun, seeking feedback from a wider range of stakeholders regarding the development of innovation metrics, and is a good prompt for organisations to consider how they measure innovation.

Overall aims of the Innovation Metrics Review

Tracking innovation is crucial given it is "what explains rising life expectancy, levels of education and living standards", according to Australia's Chief Scientist Alan Finkel and DIIS Chief Economist, Mark Cully. Measuring innovation is equally important from a global perspective, with Australia ranking persistently in the bottom half of developed economics on a range of comparative international measures, despite years of consecutive economic growth.

With this in mind, the DIIS, partnering with the Australian Bureau of Statistics, IP Australia and the Australian Academy of Technology and Engineering, embarked on the Innovation Metrics Review in May 2018. The aim is to deliver a report to the Australian Government by June 2019 that recommends appropriate data and measurement infrastructure for capturing innovation metrics.

Along with targeted stakeholder and public consultation, the Review will also feature a literature review, data analysis, metric examination, case studies and workshops. The recently published Consultation Paper summarises findings from the targeted consultation, which was undertaken with stakeholders from government, research and private sectors in the second half of 2018.

Key messages from targeted consultations

1. Why do stakeholders want better innovation data and metrics?

An important theme that emerged was that "innovation is a means to an end". Stakeholders want more innovation because they believe it will lead to higher living standards and productivity, job growth, increased exports and social and environmental benefits.

2. What are some key themes?

The targeted consultations highlighted the following themes relating to the innovation system:

• Macroeconomic approach to innovation metrics: Innovation can be considered in terms of demand and supply. For example, while Australia funds scientific research and development, there is a lack of domestic demand for innovative products and processes once developed.
• Focus on adoption and diffusion: Innovation involves not just invention, but also the adoption of existing innovations and new technologies. Currently, there is disagreement about the relative speed and extent to which Australian businesses are doing this, particularly with innovation from overseas. There is also a need to better understand technology diffusion across different types of businesses.
• Consideration of management capability: Stakeholders highlighted that innovation adoption is often largely dependent on management practices, with some concerned about the lack of appropriate risk taking by Australian directors and managers.
• Measuring investment in intangible assets: Stakeholders pointed out that expenditure in intangible assets, which may indicate innovation in progress, is often not captured in data.

3. How do we improve the current suite of innovation metrics?

Suggestions given to improve the current suite of innovation metrics include:

• Metrics on innovation adaptation and adoption: Stakeholders noted there is minimal information on the rate of diffusion, adaptation and adoption of innovation across different sectors and different types of businesses. For example, it would be useful to have a metric quantifying the lag between a new technology becoming available and being adopted.
• Value of firm-level economic indicators: Stakeholders indicated that they valued standard, firm-level, industrial economic indicators, such as employment numbers, sales growth, productivity growth and profitability, however they also suggested potential problems with the quality of the data underpinning such metrics.
• Improved metrics needed on innovation spill-overs: Stakeholders suggested that existing measurement systems do not measure spill-overs of innovation activity, for example, measuring the impact of innovation precincts, which helps to inform place-based innovation.
• Other areas where better metrics needed: Stakeholders also indicated dissatisfaction with the metrics currently available on managerial quality, workforce skills, innovation impacts, technology and knowledge transfer and publication citations.

4. How effective and accurate are our current data sources?

Issues identified include considerable time lags with policy and program evaluation and design, a lack of existing dataset linkage, data inaccessibility, a lack of comparative domestic data, data not capturing certain industries, different interpretations on "collaboration" and inconsistent information on R&D expenditure. 

Next steps

Public consultation is due to close on 28 March 2019. Following this, the DIIS will make draft findings and recommendations available for public comment in April or May 2019, followed by a final report to Government in June 2019. The Government will consider the Review's recommendations and any funding implications as part of its consideration of the 2020-21 Budget.

The Government has indicated that information gathered from the current consultation will inform the development of the Review's final report and recommendations and that it welcomes input from a broad range of stakeholders. Given the broad scope of the Review, we encourage interested parties to have their say and lodge a submission before consultation closes.

Separately, the Review provides an opportunity for industry participants to develop and evaluate their existing innovation structures and metrics. For example, businesses should consider:

• how they define "innovation" – in particular, what is the goal of innovation for their organisation?;
• who, within their organisation, will champion and promote innovative initiatives – in particular, how will an innovative culture be promoted and how will success be measured? What processes should be in place to support and screen innovative ideas?; and
• what targets should apply for the development and deployment of innovative ideas – in particular, how will "value" be measured?