CEOs urged to lift business innovation

A new report reveals CEOs in the manufacturing, services and construction industries must lift business innovation across a range of areas in order to differentiate themselves in the market.

The report, compiled by the Australian Industry Group in conjunction with Deloitte, surveyed 530 CEOs across the aforementioned industries, revealing sharp differences between the various sectors’ expectations for the year ahead.

The report reveals 93% of manufacturing CEOs see their exports as uncompetitive as a result of the dollar being at parity with its US counterpart, compared with 87% in the services sector and 82% in construction.

The survey also found 100% of services and construction businesses – and 96% of manufacturers – say their products are now uncompetitive because of the strength of the dollar.

According to the report, manufacturers expect difficult conditions as sales and exports are anticipated to improve only marginally in 2011, citing expected falls in capital investment and employment in addition to minimal growth in research and development expenditure.

The services sector anticipates gains across all economic indicators except for capital investment, and research and development expenditure.

This sector also expects activity to pick up, predicting consumers will resume spending amidst wages growth and a stronger labour market.

Meanwhile, the construction sector expects to perform more strongly in 2011 on the back of the resources boom and built-up demand.

With regard to employment, manufacturers expect this figure to decline by 1.2%. Employment in the services sector is expected to increase by 6.4%, while the construction sector is also anticipating an increase of 1.2%.

According to AIG chief executive Heather Ridout, manufacturers are facing a high exchange rate, competition for resources from the mining sector, higher interest rates, and the cumulative impact of slow productivity growth over the past decade.

Ridout says there are also broader risks including the “ongoing burden” of government regulation.

“It is only with concerted policy action from governments, and cooperation with the business community to raise productivity and competiveness, that these impediments can be tackled,” Ridout says.

“This will require concerted action to… lift business innovation, including through a research and development tax incentive that provides genuine encouragement to experimental development; invest in productivity-enhancing infrastructure; improve the competiveness of our taxation systems; and build business capabilities.”

Deloitte Manufacturing partner Damon Cantwell says businesses need to focus on product development and process innovation to achieve their growth forecasts.

“Finding innovative ways to improve competitive positioning will separate the successful companies from the rest. Also, training staff needs to be a priority in order to counteract any potential skills shortage,” Cantwell says.

“Winning companies in 2011 will be those who look at innovative ways to develop and retain their best people, focus on the quality of their products and services so they can differentiate themselves in the marketplace, and improve the skill sets of their people.”