According to the Ministry of Economic Development, there’s a 'wedge' that stops us appropriating as much value from our innovation effort as similar European Union (EU) countries. Our businesses and nation do not generate as much value as EU and many other countries do from the same amount of innovation effort. We do as much innovation but we don’t do it as well.

We think about innovation too narrowly
Innovation theory falls into two schools, economics (resources) and sociology (cognition, behaviour). Often they are viewed as mutually exclusive. They are in fact complementary or synergistic -- two sides of the same coin.

The former, which is dominant in New Zealand, argues that national differences in innovation are the result of industrial structure, societal wealth, research and development infrastructure, resource endowments, and country size. The sociological school on the other hand argues that human dynamics and culture play a major role and that creativity and innovation are culturally moderated responses to environmental stimuli.

In practice, it seems probable that the results of innovation effort and therefore economic performance are a result of the dynamic between the way people behave and think around innovation and the utilisation of the resources at their disposal. If we balance what we know about resources with more knowledge about the way we use those resources we will discover new and highly valuable ways of creating profit and shareholder value.

It is how we think and behave, not how much resource we have that limits the profit and value we create. People often disagree with us when we make this claim. And truth be, we’re inviting them to do so. After all, most if not all of the research shows that things like capital intensity are the limiting factor. That’s not surprising because the answers are determined by the questions. We have never looked at how we think and behave limits our achievements. And frankly it’s not very comfortable to do so!

When we suggest that it’s our thinking and behaviour rather than resources that are the limiting factor on the results we achieve from our innovation effort we are by no means dismissing the role or importance of resources. We do need to have access to resources above some minimum threshold. But, with the right thinking, even under some resource constraint, success is still possible. And even in conditions of unlimited resources, success will be constrained in the absence of the right thinking. We suggest that most iconic business successes have been achieved under conditions of resource constraint. The key to success has been the quality of the thinking and behaviour. And that thinking and behaviour is for us as a nation, statistically significantly skewed in favour of the earlier initiation stage and away from the later accumulation of profit and wealth/implementation phase.

We cling to lots of myths about innovation
They make us feel good … but they get in the road of clear thinking.

Three of the most damaging are:

• We’re the most innovative country in the world. Aren’t we? It’s hard to tell because no one is certain how to measure innovativeness. But the UK, Australia, Canada and the USA share that same belief. About themselves! We are highly inventive … but that won’t make us rich. The Industrial Revolution is an object lesson. Most of the inventions occurred in France, but the implementation and value accumulation occurred in the UK because of culture and attitudes and capital markets underpinned by the scientific spirit pervading the national culture at the time. This is New Zealand’s story in reverse!
• Number 8 gauge wire mentality proves we’re innovative. Actually it is a metaphor for our resourcefulness and practicality, and that’s not the same as being inventive or innovative. It represents our ability to go out into the garden shed and knock up something useful from of makeshift resources for our own use. More likely than not “borrowing” someone else’s IP. That used to be a nation defining competitive advantage. It’s still important but unless we can transform it into a 21st century version it risks becoming a millstone around our necks.
• Everyone else is just like us. Thinks like us. Wants the same things. Surely? That leads us to substitute our own thinking for that of our customers and that makes them think we don’t listen and we certainly aren’t good at tailoring our products to the demands of people in our markets.
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