Critical funding crunch threatens Australian innovation

Critical funding crunch threatens Australian innovation

COVID-19 is driving an increased focus on innovation at a time when innovation funding is drying up, according to a new report from KPMG Australia.


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Australian business and government leaders surveyed overwhelmingly felt that COVID-19 has increased their organisation’s focus on innovation (73 percent). In contrast, 65 percent of respondents expect that their organisation’s investment in innovation will either be reduced or remain flat (9 percent greatly reduced, 28 percent somewhat reduced, 28 percent no change), according to the KPMG Digital Delta Innovation Trends 2020 Report.

The results varied strikingly by industry. Half (50 percent) of respondents in Defence & Defence industries expect both innovation focus and innovation funding to greatly increase, against just 18 percent for Health & Ageing and 14 percent for Retail & FMCG, 13 percent for Technology, Media and Telecommunications and 9.5 percent for Government, Public Sector and Education.

Perhaps as a result, organisations are now focusing on more incremental/short-term innovation outcomes, including pivoting, than the pursuit of disruptive innovation. The largest decline in innovation activities was reported for disruptive products or services, with 23 percent of larger organisations expecting a decline in the pursuit of disruptive innovation and 15 percent across all respondents. Alongside this, 61 percent of respondents reported an enhanced focus on innovative ideas that create financial impact.

"Many innovation leaders will need to do more with less. Approximately 30 percent of respondents anticipate a reduction in innovation investment while facing an increase or no change to their organisation’s focus on innovation," says Guy Holland, Partner-in-Charge, KPMG Digital Delta.

"While the anticipated tightening of innovation funding is perhaps reflective of carefully managed financing across all functions, this should be seen as an opportunity for savvy innovation leaders. The COVID-19 health and economic crisis has shaken us from complacency and created unprecedented disruption which could, and should, be a significant opportunity for leaders to advance an innovation agenda."

There are also discrepancies between the perception of senior managers versus front-line workers. Owners and founders were the most bullish about ongoing innovation investment, with 83 percent expecting their focus on innovation to increase (54 percent indicating a greatly increased focus). But front-line workers are more likely than other levels to feel that COVID-19 has resulted in a greatly reduced focus on innovation (23 percent).

"This reinforces the importance for boards and senior leaders to regularly communicate the organisational intent to maintain a culture of innovation. More than ever, leaders in organisations, large and small, across a range of sectors, will be expecting more activity and impact from innovation leaders and their teams. It’s vital that innovation imperatives are clearly understood and opportunities are not ignored out of a mistaken belief in their irrelevance within the current climate," Ashley Brown, Director, KPMG Digital Delta, says.

For further information

Ashford Pritchard
0411 020 680

About KPMG Digital Delta

KPMG Digital Delta provides end-to-end digital innovation and transformation services working with clients to re-imagine and re-invent their organisations to become world class digital enterprises using advanced technologies, data and human insights.

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