Innovation talk is cheap: Terem Technologies

A study commissioned by Terem Technologies has analysed Australia's top 100 companies and their innovation word count to determine if their claims are backed by tangible results.

When it comes to innovation, shareholders expect more than just a press release with a few buzzwords, according to a study commissioned by Sydney-based software firm Terem Technologies.

In its latest report [PDF], Talk is Cheap: How the sharemarket lost faith in innovation, Terem Technologies analysed Australia's top 100 publicly listed companies to establish whether claims of innovation are more than just lip-service.

Looking into Australian Stock Exchange (ASX)-listed companies and their public innovation infrastructure, Terem Technologies found that less than 41 percent have publicly announced an innovation lab, only 23 percent have a venture fund, and 69 percent account in some way for innovation.

Additionally, over the past five years, mining giant Rio Tinto has used the buzzword "innovation" 657 times in issued press releases, and the Commonwealth Bank 599 times.

The report says the innovation trappings, including an innovation lab, a venture fund, and an innovation-related budget ring-fenced on the balance sheet are not being rewarded by the share market. It also said that companies which communicated a large innovation footprint did not out-perform companies which did not and shareholders are, on the whole, not rewarding the innovation chatter.

"Business is desperate to innovate. Those that can't, don't, or won't innovate see themselves at the edge of an abyss called disruption. Shareholders are aware of this risk to established companies, however they are increasingly sceptical of innovation claims," the report says.

"Notably, the companies most known for producing innovation aren't the ones who talk most about it.

"Companies who want to realise a dividend from innovation before they are able to release a result will have to show that they are doing more than just lip-service."

According to Terem Technologies CEO Scott Middleton, innovation has lost its power as a marketing tool.

"Companies can't talk their way to growth", he said.

"For innovation to have an impact on a company's performance, it must move the company into a significant, growing market. This takes time and commitment. Innovation around process is important but these days it's just table stakes.

"As the hype around innovation continues to grow, the temptation to push an empty innovation barrow increases. Companies begin to fool themselves, though they're clearly not fooling shareholders."

The report also found that on average, top ASX companies had a quarter of their board comprised of those who have studied science, technology, engineering, or mathematics (STEM), despite the likes of Seek and Healthscope not having a single STEM-trained board member.

Speaking at the Knowledge Nation 2016 summit in Sydney last week, Telstra's CTO Vish Nandlall said innovation is a word that is best left in executive circles to talk about the great things people have done.

"We start to confuse the word for the thing itself," he said. "Most practitioners of innovation don't use the word innovation.

"Chances are, if you can't be clear about what innovation is, the odds of you achieving it are pretty low.

"When you speak about innovation, use some words that are clear: What are you looking for? Are you looking to do something new? Something new and good? Something new, good, and profitable? Do you just want to do things faster? You need to be very clear about what you're trying to achieve."