Below trend growth to continue
Australia will rely on its schools to grow the next generation of innovators and entrepreneurs. But to what extent do they innovate themselves?
A company with a host of patents to its name is undoubtedly innovative. But business as usual can hide a more understated, evolutionary, version of innovation, which should not be ignored, says NAB economist Dean Pearson, adding that Australian schools are at the forefront.
It is generally agreed that Australia’s next phase of growth must be driven by a culture of entrepreneurship and innovation. To achieve this, however, our education system has to play a central role.
But are our schools up to the challenge? To what extent do they innovate in their own day-to-day business?
Dean Pearson, Head of Behavioural & Industry Economics at NAB, argues that Australia’s independent schools are certainly innovative.
He points to a recent report he co-authored with NAB Group Chief Economist Alan Oster and other senior economists at the bank, NAB Independent Schools & Innovation Survey Q3’16, which finds that independent schools are on a par with business in this regard.
“Despite operating in a highly regulated and scrutinised environment, innovation in Australia’s independent schools compares favourably to Australian businesses in general,” says the report, “even though the barriers to innovate are greater.”
This may come as something of a surprise. But Pearson, who has over 20 years’ experience in analysing the economy and assessing its implications both in Australia and globally, believes this is because we underestimate
the true level of innovation in our country.
The reason for this, he says, is that traditional metrics tend to focus on research and development (R&D), patents and the like when assessing innovation. While this “resonates strongly with large businesses” it can be less relevant to smaller businesses, and schools in particular. “I think a traditional approach of looking at R&D and patents won’t really bring forward just how innovative schools are being.”
Yet many businesses, both big and small, innovate continuously to survive and prosper, says Pearson, and schools are no different in this regard. Rather than recognising it as innovation, however, they may talk of ‘improvements’ and ‘changes’ to everyday processes.
The NAB Labs Business Innovation Index, introduced for the first time in July 2016, captures this version of innovation by instead choosing to measure it based on what a business does ‘differently’, ‘more quickly’, and ‘more cost efficiently’. It is this methodology which NAB used to measure 45 independent schools in 2016.
The findings underscore the idea that our independent schools are indeed open to innovation. Those reviewed compared favourably to broader industry groups, achieving 67.8 points for innovation (100 points equating to extensive innovation), slightly above the NAB Labs measure for the broader economy which sat at 67.6 points.
Furthermore, independent schools ranked second highest across all industries for doing things ‘differently’ (after Transport & Storage), underlining the important role this plays in driving innovation for schools.
In fact, this was the most important driver for independent schools and noticeably more so than for the broader economy.
In contrast, independent schools were visibly less innovative when it came to doing things ‘more quickly’ while, in terms of innovation driven by doing things ‘more cost efficiently’, they were broadly on par with the wider economy.
The biggest barrier to innovation facing independent schools, according to the report, was not having enough time or resources to turns ideas into reality (one in two firms across the economy were of a similar mindset).
Meanwhile, a lack of government funding was not only detracting from business conditions, said the independent schools, but was a ‘major’ constraint to growth or teaching effectiveness, according to 41 per cent of them. Other major growth constraints included local student demand (25 per cent), the availability of finance or working capital (23 per cent) and the cost of suitable staff (20 per cent).
Concludes Pearson, “You’d struggle to find a structure more rigid than the school system – in terms of funding and the curriculum – but even within those parameters, they’re innovating. If they’re innovating within those confines, just imagine what they could do if we gave them more latitude.”
 NAB Independent Schools & Innovation Survey Q316  See NAB’s Special Report, ‘NAB Labs Business Innovation Index: A new approach to measuring innovation in Australia in NAB’, 2016  NAB, NAB Independent Schools & Innovation Survey Q316
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