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John Findley Blog

John Findley is a China specialist having lived, off and on, in China for around 30 years. He now lives in Newcastle. He is a highly experienced senior executive and now runs his own migration business (a genuine independent contractor) supporting high-end executives to work in Australia.

The reality of SME innovation

Friday, August 24, 2012

As an old engineer with decades of experience in Australian manufacturing, in large and small enterprises (before I pursued a career offshore), I feel that it is impossible for SMEs to introduce technological innovation, or at least the opportunities for technological innovation are extremely limited.
Recently the Prime Minister received a report 'Smarter Manufacturing for a Smarter Australia'.  The 5 key points made in the report are too rarefied to be actionable.

The report misses the point again, examining innovation at government levels has been around for decades.
Here is a working definition from the report "Innovation in Manufacturing 1996-97" ABS 8116.0
‘...comprise implemented technologically new products and processes and significant technological improvements in products and processes. An innovation has been implemented if it has been introduced on the market (product innovation) or used within a production process (process innovation). Innovations therefore involve a series of scientific, technological, organisational, financial and commercial activities. An innovating business
is one that has implemented technologically new or significantly technologically improved products or processes during the period under review’.
The manual indicates that technological innovation can comprise any of
  • design;
  • research and development;
  •  acquisition of technology in the form of patents, licences and trademarks;
  • acquisition of technology in the form of machinery and equipment;
  • tooling-up and industrial engineering;
  • manufacturing start-up and pre-production development;
  • training; and
  • marketing for new products.
Just how can the SME participate in that rarefied atmosphere?  In an enterprise of 4 or 5 persons, where is the design capacity? Where is the R&D capacity? Whose business is large enough to purchase patent rights? Who has the time and spare cash to have a product development department?
The researchers just do not get it. They do not get out of their offices and actually visit the SME base of employment.  One notable exception seems to be Tony Abbot. He is constantly seen in small manufacturing operations.  I wish other senior figures were also there.
Here is a practical example of the limitations of technological innovation for the SME; I had a couple of tradies work on my house last month.  They brought their ladders and hand tools and did the job.  I saw no way that technology was going to assist these guys; except for the method of payment.  On completion of the work, the tradies gave my wife a hand written invoice, and asked for a cheque.  My wife advised we no longer use a cheque book, but offered to transfer the money to their account electronically. And the money went out of my account at the speed of light.
That is an efficiency gain for the tradies. It saved them time in getting the cheque to the bank and waiting for the clearance.   What else could technology do for them?  They had to visit my home to measure up, provide samples that I could visualise and approve, they had to provide a quotation in writing (that's the law) and wait for my response.
We would not have purchased the service from a webpage. We would not have looked for the service by web search.  We looked in the local newspaper for suitable, local trades persons. And besides, SMEs are serving a very localised market and the costs and resource input required to position a website so it is found by the search engines is out of all proportion to the sales generated.
And in the check list (above) of what constitutes innovation, banking is not mentioned.  I suppose that the technological innovation of online banking arose and became embedded into our lives in the decade since the 96-97 report.
I suspect that the bulk of employment in Australian SME's would be in businesses similar to the tradies who did a small job for me.  How is technology and electronic transmission of design data going to assist the guy around the corner building box-trailers?  How is technology going to assist and make more internationally competitive any SME?
The ONLY innovation that will be effective for SMEs is a radical relaxation in the burdens of the industrial relations regime.  The SME must be permitted to hire and fire to meet the demands of the business, without penalising the business.  I know many SME operators who will not grow their business because that entails employing staff and that brings the baggage of the onerous termination provisions.  The unions claims of providing "employment security" for workers has created a very significant barrier to employment.
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