As it approaches $1Tn in assets, the Australian superannuation industry is leading the world in maturing its investment practices.
Their “passive” portfolio spread appropriate for a 2% shareholding of five years ago is giving way to an active share ownership approach appropriate for the 12-15% interest in companies they are holding today. As active shareholders they are communicating their interest in sustainable success over longer, retirement income timeframes – not just this afternoon’s share price.
To value companies on this basis, they are measuring an organisation’s engagement – at executive and board level – with future-oriented volatility issues.
So the vitally important question becomes – how well does your organisation engage with the issues of operating in a volatile global digital economy?
The better you are at developing an organisational capacity for innovation, the more successful you will be in the current market, and the more highly valued you will be by Australia’s largest investors.
As the super portfolio continues to grow they will increasingly be looking for these sustainable innovative behaviours from a broader portfolio of ASX listed companies, private growth companies, and international equities.
This is a tectonic shift in the way that listed and private companies are financed and what types of corporate behaviours are most highly valued. And, it will result in a tectonic shift in how organisations are managed.
One of the key executives at the centre of this thinking within the super industry has been telling his kids that this will have a more significant impact on the future than the development of the iPhone. It’s not clear if they believe him yet.
In this world, instead of innovation being a diversion, it becomes a required core competency.
Dr Matthew Kiernan of US based $1bn Innovation Investment fund suggests that 75% of a company’s value is “below the waterline” – and cannot be captured by traditional financial analysis. It does not appear in the P&L or the balance sheet – and cannot be read from a sporadic series of project business cases.
He says “Complexity and velocity of change in companies’ competitive environments are accelerating dramatically. New skills, capabilities and mindsets will be required to compete successfully.” He goes on to say “There will be an unprecedented premium for the most innovative, agile and forward-looking companies”.
In my experience, Australian companies have already discovered that they cannot simply ape the innovation practices of Google, Apple or garage based start-ups to succeed.
They are already rejecting simplistic experimentation with individual creativity and skunkworks innovation practices. In isolation, these have proven to be un-sustainable and un-scalable within the local context.
Australian companies instead need to be looking to enhance their core strengths in matured governance practices and effective control cultures. There are leading examples from Australia and around the world on how these practices can be enhanced to operate at digital speed – rather than be thrown away.
It is vital that organisations’ managers, executives and boards are able to ask and address the core future fiduciary question “Are we appropriately invested in our own future?”.
It is time that managers look closely at turbo-tuning the engine-room of performance in their organisations. Not just looking at individual new ideas, but looking at the structures and disciplines by which the organisation engages in strategic and innovative thinking. Specifically looking at lifting their organisational capacity for innovation as a core competency.
Danny Davis of Vandis Advisory is a global thought leader in Innovation Aware Governance practices and how they impact on business performance in mature-stage Australian organisations. He is a frequent keynote speaker, conference chair, workshop facilitator, board advisor and innovation coach.
A successful entrepreneur in his own right, he is on the Board of the La Trobe University faculty of business, economics and law, contributes to Standards Australia’s development of international IT Governance Standards, and is director of several mid-sized organisations.