Dividends ‘jeopardising Aust innovation’

Business People and Creativity Concept

By Stuart Condie
(Australian Associated Press)

Australian companies risk falling behind their overseas rivals because investors’ demands for large dividends stymies investment in innovation.

A global survey of chief executives shows 75 per cent of Australian bosses are more confident of growth over the next three years than they were in 2014, but that they are focused on sweating existing assets instead of growing their businesses through innovation.

Budgets are the most commonly cited reason for not investing in innovation, KPMG Australia chairman Peter Nash says, with companies instead directing their cash to shareholders.

“Our market has not quite calibrated around lower return expectations,” Mr Nash said.

“We’re probably still looking for investment returns and yields that belong to a different era.

“We probably need to recalibrate some of our thinking.”

KPMG’s Global CEO Outlook shows 21 per cent of Australian executives cite so-called disruptive technologies – technology, such as smartphones, that revolutionises an industry – as the biggest issue facing their company.

Globally, that rises to 34 per cent, suggesting that Australian executives have not fully grasped the pace of change facing their businesses.

Woolworths Holdings Limited Chief Executive Ian Moir said last week that the South African company bought David Jones in 2014 in part due to the huge amount of unexploited value it saw due to the retailer’s failure to innovate through technology.

KPMG’s Head of Innovation Services James Mabbott said there was a huge risk to companies that stay still.

“New entrants built on fast, scalable and pervasive technology platforms can win customer hearts and minds by delivering a better customer experience from anywhere in the world,” Mr Mabbott said.

Mr Nash agreed that some Australian CEOs had not woken up to the risk that more innovative, nimble competitors pose.

“We’re almost trying to push back against the tide here a little bit by saying `maybe it’s not going to happen, maybe we don’t need to embrace it’,” Mr Nash said.

“And our risk is that, whilst we are saying that, lots of others are embracing it.”

There were plenty of positives in the report, however.

Only 25 per cent of Australian CEOs, compared to 45 per cent globally, cited red tape as their biggest concern, and 85 per cent expect to increase their organisation’s headcount over the next three years.


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