the SMEs themselves don’ t label these activities as innovation. They use up to date technology to expand their capabilities and to be more productive; but R & D and technology do not drive their innovation ability. Innovation for most SMEs occurs by steady incremental ingenuity in their business strategies, know-how, service and adaptability.
The legitimacy of incremental innovation should not be dismissed. Kelly Smith( 2025) quotes the concept of“ the adjacent possible”, where the most fruitful breakthroughs come not from giant leaps, but from a series of small steps just beyond what we already know. Enterprises innovate by continually expanding the realm of the possible one step at a time.
A broader view of innovation Innovation is bigger than R & D. The failure to pay due regard to non-R & D innovation weakens the chances of Australia succeeding on high-performance measures of economic prosperity and social wellbeing.
To rectify, a broader definition of innovation is needed for a start. Put simply, innovation can be defined as creating and capturing value from doing something new and needed. The definition is technologyneutral. Though part of the picture, it is insufficient to measure innovation primarily by traditional tangible indicators such as research intensity or expenditure, patents, intellectual property, prototypes and other physical assets like buildings or real estate. These are mostly measures of proprietary knowledge.
They are not accompanied by measures of related intangible assets, namely knowledge commons. This is tacit knowledge embedded in routines, standards, lived experience, social norms and work practices, and circulated through relationships, organisational learning, and institutional memory.( Howard, 2025e).
Integrating knowledge commons with traditional metrics reflects the broader view of innovation, which offers more entry points for innovation to be put into practice.
Other intangible factors shape the workings of innovation. They are the‘ human dimensions’, such as:
• Skill at engaging different actors and perspectives for a common cause.
• Supportive intermediaries and honest brokers.
• Insights about needs of users, more than producers of innovation.
• Focus more on technology demand and use, rather than supply.
Innovation is not just a linear commercialisation pathway from mind to market, nor is it the province only of tech giants, scientists and knowledge workers.
Innovation, at its core, is relational and social, not technological and transactional.
Innovation is iterative and experimental, with outcomes of transformational change, not merely novelty. The generation or discovery of something new is not enough. Innovation requires the implementation of novel ideas designed to improve the prospects of the community as a whole.
Howard( 2025b) highlights the human dimensions in the operation of innovation as an adaptive system of multiple actors, interdependent elements, market and strategic expertise, linkages between researchers, businesses and policy makers, and deliberate and well-resourced system integrators and intermediaries who forge connections for collaboration and diffusion of knowledge.
Innovation is not an end in itself. Its aim is satisfying unmet needs and pursuing opportunities or solving problems that matter to businesses, communities and nations.
Consequently, to address the imbalance in the persistent focus on technology and formal R & D, practical programs to boost industry adoption of wider innovation capabilities are a priority. Equally, attention must be paid to innovation capabilities that best drive productivity, prosperity and wellbeing across all sectors and segments of the Australian population.( Kennedy, 2024a).
The task is to understand the key features of this capability-building innovation and to unlock its benefits. Benefits should flow not only to knowledge workers, but to those in the everyday economy providing essential services, and also to those described as the‘ left behind’.( Tomaney et al, 2023).
UNLEASHING HIDDEN INNOVATION There is a wealth of research intelligence on the dynamics of innovation. They find that the active ingredients of R & D differ from those of innovation.( Howard, 2025c). R & D relies on scientific inquiry methods, while innovation management has established itself in the disciplines of the management profession.
Innovation management has been defined as“ the strategies and practices that can be used to improve organisational( and community) benefits from innovation.” Innovation management studies seek to explain how value from innovation is created, captured and deployed.( Dodgson et al, 2013; Dodgson, 2018; Bessant, 2022).
Proficiency in innovation management has been informed by a number of eminent scholars and thought leaders, since Peter Drucker in the 1950s.( Howard, 2025d).
From this scholarship, three priority actions are identified to advance the innovation capabilities and performance not only of Australian business enterprises, but also of non-profits, public policy and service delivery bodies and organisations tasked with solving large complex societal challenges.
These are:
• Learning and capacity to absorb and diffuse knowledge.
• Collaboration skills.
• Management capability and business acumen.
Learning and absorptive capacity Studies of knowledge management and knowledge-based economies demonstrate the vital role of learning, knowledge flows and absorptive capacity in successful innovation. See two collections of papers from the Australian Business Foundation, one by Keith Smith( 2006) and one edited by Carolyn Evans and Tony Spencer-Smith( 2008).
There are many ways of innovating beyond original research and inventions. Central to this is learning— learning by doing; learning by using existing knowledge, new combinations of knowledge or productive technologies; and learning by interacting with others in personnel exchanges, industry groups, communities of practice and with customers and competitors.
Innovation depends on the capacity of enterprises to acquire, assimilate, absorb, apply and diffuse mission-critical knowledge. This does not happen by accident, but requires skilled and qualified people, sound processes and governance, adequate resources and rigorous assessment of outcomes, commercial and otherwise.
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