Innovate or perish

A new survey has found that Australian businesses must get better at transforming themselves to seize new opportunities, rather than focussing their energies on business as usual. 

It's the first survey of its kind to enhance our understanding of dynamic capabilities within Australian businesses.

Dynamic capabilities: How Australian firms can survive and thrive in uncertain times reveals the results of the first broad survey of the dynamic capabilities of Australian companies.

The report was written by Committee for Economic Development of Australia (CEDA) Senior Economist Melissa Wilson, and Dr Renu Agarwal, Dr Wen Helena Li and Dr Christopher Bajada from the University of Technology Sydney (UTS) Business School.

Dr Agarwal said today’s businesses are operating in a volatile, uncertain, complex and ambiguous world in the face of greater environmental, digital and global disruptions.

“Traditional ways of operating will only hamper a business’s ability to succeed. Businesses must step up their dynamic capabilities not just for their own success, but also to effectively manage Australian innovation, growth, and productivity especially during turbulent times,” said Dr Agarwal.

As new opportunities and challenges emerge, the ability to sense, seize and transform is critical to enabling firms to survive and thrive as we move forward during these challenging times. 

“The survey found Australian businesses overall have good dynamic capabilities, but they must get better at transforming, “ said Dr Li. 

The survey also found that a crucial enabler of transformation is having the spare capacity to build dynamic capabilities and to identify and pursue long-term innovation and emerging opportunities. 

“Yet a consistent message is that companies lack bandwidth beyond business as usual,” said Ms Wilson, Senior Economist, CEDA.

“Even amid skills shortages and a tight jobs market, businesses need to find the space to lift their eyes and look to the future to ensure they can survive amid uncertainty,” said CEDA Chief Executive Melinda Cilento.

Comparing the most dynamic 25 per cent of firms with the least dynamic 25 per cent, the survey found: 

• 85 per cent of the top firms had higher net profits after June 2020, compared with 61 per cent of the weakest firms. 
• 63 per cent of top firms had higher productivity, compared with 54 per cent of the weakest firms. 
• 54 per cent of top firms innovated by overhauling their management processes in the first few months of the pandemic, compared with 26 per cent of the weakest firms. 
• Diversity matters – 81 per cent of top performing companies with a board had at least one director that was female, at least one that had science and technology expertise and at least one with international experience, compared with just 26 per cent of the weakest firms. 

“This study is the first of its kind which demonstrates that firms with stronger dynamic capabilities are resilient, productive, profitable and support innovative cultures,” said Dr Bajada.

CEDA surveyed 149 managers of businesses of all sizes in a range of sectors around the country. 

Each respondent rated their business in the categories of sensing opportunities and threats, seizing these opportunities and transforming when they need renewal or change. They were also asked about their performance during the pandemic and a range of business characteristics.