Innovation is more than just the invention of the next big thing. Today's managers must think of ways to harness innovative creativity for better goods, processes and services. By Cameron Cooper

When in need of great business concepts, Remo Giuffre does not turn to his management team or staff, he simply sends an email to his army of customers around the world.

The founder of cult retail brand REMO General Store, Giuffre unashamedly takes his cues from his customers through real-time feedback courtesy of the cyber world.

Buyers are invited to vote on potential products, designs, images and colours. In return, they get loyalty points for their feedback and purchases. The side effect is that this customer focus "binds" loyalty and clients "evangelise" the brand.

"The unique take that we've had is tapping our customers as a source of ideas for the business, recognising that the customers are the people who are most likely to be able to innovate on behalf of the business," Giuffre says.

As innovative leaders go, few think outside the square like Giuffre, whose fashion store earned rare loyalty from customers when it opened in Darlinghurst, Sydney, in 1988. The store developed an international following via a popular 100,000 subscriber-strong mail-order catalogue selling distinctive wares that included a swimming cap emblazoned with a bright yellow light bulb and an own-brand "stripy thing" T-shirt. Then things fell apart and, amid a capital shortfall, Giuffre closed his doors and went off to the US to consult to the likes of Honda and Motorola.

Now, four years into a rebirth through an online-driven model, the REMO business has won over old and new devotees and sells products to about 100 countries. REMO sits high on respected international branding website Lovemarks's list of the world's most-loved trademarks, up there with Google and Coca-Cola.

Giuffre says being a small, nimble business has helped its innovation credentials, while the internet has been a godsend for his customer-centric business model. "With the internet it's an architectural [tool], and once you've set the structure up, the ideas will come; then it just becomes a matter of editing them."

Not just invention

Australians pride themselves on being an inventive lot: the Hills hoist, the bionic ear, the black box flight recorder system, penicillin...

The dilemma, some analysts believe, is that innovation is too commonly associated only with the creation of something new, such as the latest IT gadget or a groundbreaking software program.

Peter Westfield, a director of Adair Innovation, which promotes entrepreneurship through its role as organiser of the Australian Innovation Festival, believes the concept of innovation in Australia needs "a jolt". It is time, he says, for the discussion to move on from a preoccupation with science and technology initiatives.

"In fact, innovation is really about individuals and smaller companies looking at new ways of doing things and then being given the opportunity to make those happen," he says.

Westfield adds that systems-driven larger corporations often lack the flexibility to be truly creative. "It really is the smaller and middle-ranking companies that bring in the new ideas - that really drive not just innovation but business opportunities for the whole economy." To engender innovation in an organisation, Westfield advocates the four Cs - creativity, connections, collaboration and commercialisation.

The final point is especially critical. A think-tank, conducted by the Australian Business Foundation, observed that Australia has a historically poor record of commercialising public sector research. The ABF's study suggests the nation's drive for innovation will stall unless links improve between public and private sector research and development. The report compares Finland, Sweden and Australia and identifies the latter's "commercialisation gap'' as a serious issue that requires fixing. It concludes that many small businesses eschew truly innovative ideas for reasons ranging from the inability to diversify risk to a fear of high capital costs.

Managing for innovation

Through its Innovation Policy, the Federal Government is trying to drive greater business creativity, with the aim of transferring ideas into saleable goods, processes and services.

The government agrees that innovation is more than just invention, rather, it is about new ideas, responding to trends and finetuning existing products and services. In its policy outline, businesses wishing to become more innovative are urged to follow these ideas:

• listen to customers
• get the input of all staff
• create a culture that is not afraid of risk-taking
• allow employees time to come up with ideas
• treat money spent on ideas generation as an investment rather than an expense
• encourage an environment of continuous learning through training.

Peter Newman, Managing Director of the Applied Innovation Centre, wants governments and institutions to focus on developing an environment in which innovation can thrive.

"We should be putting our money into fostering a culture of innovation in every company in the country," he says. And that requires accepting new ideas from staff, rather than "kicking them in the guts" if one brainwave does not succeed, Newman believes.

An Applied Innovation Centre survey of senior managers reveals that all managers pinpoint innovation as an important part of their strategy, but only 3 per cent have a structured approach to promoting innovation.

"People don't know how to make the jump from having it in their vision statements to making it operational," Newman says.

Factors Newman thinks are crucial to increase innovation include understanding environmental and cultural factors in business, planning, recruiting the right people and formulating better corporate processes. Leadership from senior management is also essential. "If you don't have that it's very hard to take it forward," says Newman. "If you want to take a culture of innovation throughout your organisation you've got to have your leadership group walking and talking the language."

The Business Council of Australia (BCA) shares the view that a rethink is required on innovation throughout the country. In its report, titled New Concepts in Innovation, the BCA argues that many companies view innovation primarily as the development of new gadgets through research and development spending. Yet in a knowledge-based economy, it says, the key to progress is the quality of human capital.

The BCA champions "organisational innovation" and recommends ways to foster a more advanced business environment: a greater commitment to staff development; heightened awareness of the impact on innovation of stifling tax, regulatory and workplace relations policy settings; creation of superior capabilities through training; and education about the importance of innovation. Workplace skills such as communication, teamwork, problem solving, creativity, entrepreneurship and leadership must come to the fore.

Learning from failure

Think of some of the best business leaders that Australia and the world have seen: Henry Ford of auto manufacturing fame, Virgin's Richard Branson and Australians such as Rupert Murdoch, Dick Smith and Gerry Harvey. All, like Remo Giuffre, have had troubles at some point in their business careers, and all have been able to adapt and change their business models as markets shifted around them.

According to Adair's Westfield , businesspeople who learn from their failures stand a better chance of being innovative: "and we don't really have that culture of acceptance of failure the way the US does".

Westfield says innovative CEOs start with a vision and, while being entrepreneurial, do not lose sight of where they are going.

He also contends that the publicly listed business model, in fact, inhibits innovation because companies trading on the share market "have to deal with analysts that are looking at your company on a quarterly or monthly basis".

"That's one of the deficiencies of a public company: that you always have to be able to respond to the wishes of the market. They have to think short term."

A growing appetite

The appetite for innovation seems to be growing. A recent survey by STW Communications Group for its new research study, The Australian Report, found that three in four respondents like to try new products, 60 per cent say they would pay a premium price for an innovative product or service, and one in two want brands to be more innovative. Some sectors seem ripe for new ways of doing business, including the senior healthcare sector. With Australia 's ageing population, finding creative ways of running aged homes represents an opportunity for smart businesses.

TriCare, a Queensland-based manager of aged-care facilities, is one business showing the way. Its model emphasises the importance of human relations and people, rather than the sector's traditional concentration on managing buildings efficiently.

CEO Jim Toohey says the HR point of difference has been crucial to TriCare.

"Our product isn't actually the lovely place you drive past that looks like a beautiful new hotel," he says. "Our 'product' is the old lady in the shower getting bathed. It's an enormously confronting experience for her.

So where I think we're innovative is we've had an approach to the delivery of those services that says we really have to bring to the health sector a customer focus. How is it impacting on the person I'm helping go to the toilet? What about privacy? What about dignity?"

In fact, Toohey believes innovation is vital for the future of aged care.

"If we are to move from a government-regulated convalescent home mentality to a vibrant, export-focused service sector, the innovation in terms of human resource management and information technology is just absolutely critical. Innovation is going to be the single factor that determines the successes from the non-successes."

At REMO General Store, Giuffre says quality and passion will continue to be at the heart of the business's innovative business model. They may seem like old-fashioned values for such a progressive business thinker, but Giuffre says "those notions are timeless, and everything old is new again."

He admits that the internet has been a godsend for the new incarnation of his company, allowing the REMO business to tap into the minds of customers in real-time.
"It has the added benefit that regardless of how much you use the reservoirs of customer creativity, the fact that you're setting yourself to do so communicates a very positive message to the customer network," Giuffre says.

He agrees that risk-taking is essential for innovation to flourish, saying: "It's part of the culture of the business to make decisions intuitively, often times in the face of conventional wisdom."

Giuffre has a warning, though, that businesses must not "deify" the ideas people within an organisation to the detriment of business-driven management and client-service teams. "You've got to be careful to balance that encouragement of creativity with respect for the bean counters."