Innovation can often be confused with invention, as Bill Bennett explains.

People often confuse innovation with invention. The two are similar, not the same. Invention might take a moment and involves a step change. Innovation happens in a more measured way.

IP lawyer Anton Gibson leads the life science practice at AJ Park's Auckland office. Gibson says: "Innovation can happen in a eureka moment. More often it's about developing a fresh idea and taking it to market. It doesn't have to be a breakthrough."

He uses social media site Facebook as an example of an innovation that's not an invention.

"Technology underpins social media, but the innovative part lies more in social application than in the technology."


In New Zealand's life sciences sector the biggest innovation areas are food and beverages.

Gibson says often innovation here is more about an improved user experience than coming up with ways of processing food.

"Take My Food Bag. It delivers great, tasty meals that are cost- efficient and quick. The meals are wholesome and varied, there's a new one each night." He says there's little about My Food Bag that is a technical breakthrough. By thinking about meals in a new way, the company came up with something innovative.

Gibson says without a deliberate purpose innovation is meaningless.

"Innovators work with an eye on their end game and that almost always means getting a product to market."

We often think of innovation as being something that happens with start-up businesses. Gibson says while many large companies are as good at innovating, they go about it differently.

"In a small company it is usually about one good idea. In a larger company innovation is a planned process which moves from milestone to milestone with tests along the way to check the project is worth continuing. In most cases large companies focus on incremental changes."

If large companies take a more cautious approach to innovation, it's because they are answerable. Shareholders expect to see a fast return on their investment in research and development.


Small companies have the advantage of lurching from idea to idea, Gibson says.

If they fail - and many more projects fail than succeed - they can wrap up the business and the founders move on to start again elsewhere.

Xero chief executive Rod Drury says innovation is about taking existing technology and applying it in new and better ways.

"Then making it disruptive," he says. "So much technology is now available, it's a question of using it to change the world."

Drury says New Zealand has a national innovation to-do list.

"We've mandatory innovation we need to get on with in climate change and dairy production. We also need to innovate on boring infrastructure matters," he says.

"We can use technology to get over being the country that is furthest away from everyone else."

Xero has already innovated and disrupted. It moved small business accounting to the cloud. The company processes some $300 billion in transactions each month.

Drury says doing that was only the start. "We're not doing much with all that data at the moment. But if we look at it behind the scenes we can do some quite magical things," he says.

The first stage is to use aggregated data on a large scale to spot economic and business trends.

This is much the same as the reports telling us the record-breaking volume of electronic transactions on the days leading up to Christmas. Xero might notice the financial effect of, say, a drought in rural New Zealand before anyone else.

Drury says digging into the data starts to get exciting when it becomes personalised.

"We've made a huge investment in elastic computing. There are large banks of servers working remotely as your own agent.

"They can help automate your processes. One way is by looking for patterns in the data."

Take classifying transactions - that's where you go line-by-line through your accounts coding this transaction from a stationery store as an office expense and that transaction from a service station as a vehicle expense.

Xero knows how everyone else processes the same transaction, Drury says.

"Instead of waiting for you to enter the code, it can make a suggestion based on what 90 per cent of Xero users do," he says.

This would be a big productivity boost for business owners and accounts staff.

Drury says this next wave of software innovation is near. Software will be able to watch what you're doing, spot something that matches a pattern then ask questions like: "Here's something we need to ask you about."

Tomorrow: Hoisting the NZ tech flag in San Francisco.

Business Innovation Series sponsored by AJ Park.