Purpose: This article outlines the emergence of programme teams in the Australian dairy farm sector as a response to counter weaknesses in the institutional environment for agricultural innovation which favours technology adoption/diffusion approaches. Design/methodology/approach: The strengths, weaknesses and risks of different approaches to innovation in the Australian dairy sector RD&E system are analysed and key features of an emerging programme team approach defined. The programme team approach is compared and contrasted with the features of innovation capacity from international literature. An analysis of the relative investment in this innovation capacity in different topics or domains of dairy innovation is provided. Findings: The programme team approach to innovation involves groups of researchers, extension people, public and private organisations, farmers, community groups, and policy and service groups brought together to progress innovation and change in a topic area or domain. Leadership of the process is provided by an area expert or champion. The team takes responsibility for: (a) understanding the businesses of key players who have an influence in the innovation or domain; (b) deciding the nature of the desired change that all stakeholders can align to; (c) identifying features of the enabling environment to establish what capacity is needed; (d) designing a "route to change" strategy (in contrast to traditional route-to-market thinking); and (e) piloting and refining the approach within the target populations. The group manages emerging risks and keeps on top of issues, as well as identifies any knowledge gaps for research that are preventing innovation and change. Conclusions/practical implications: The programme team approach provides a semi-formal governance mechanism for innovation to develop, despite an institutional environment that favours technology adoption. Further, the activities of programme teams consist of practices which integrate research-led and demand-pull approaches. Currently, investment in such innovation capacity is relatively low and highly variable across different topic domains. Added value: The article provides tangible activities that managers of agricultural RD&E programmes can invest in to progress systemic approaches to innovation and is a guide for agricultural education and extension practitioners to proceed in their innovation work. (Contains 3 tables and 2 figures.)