I often hear people asserting that New Zealand’s economy is resting on two main supports – the dairy sector, and tourism. “We need a third leg of the stool” they say.
After an intense couple of months acting as a judge for both the New Zealand Innovation awards, and the New Zealand International Business Awards, I can confidently tell you the stool is well supported with a third leg – the tech sector. The idea that we as a nation are overly dependent on dairy and/or tourism is outdated – for two key reasons: 1) the economy is diversified, and rapidly becoming more so; and 2) even in the traditional areas of tourism and the primary sector, we have smart, value adding, knowledge-intensive companies who are really demonstrating how to go up the fabled value chain. There are a few clouds on the horizon (more on those later), but the idea that we are a two-trick pony (or a two-legged stool) is not one of them.
Using the lens of the 50th ANZ New Zealand International Business Awards to delve into these topics: we saw a significant number of entries from diverse industries – yes, large primary sector companies in the dairy sector - but also high tech manufacturers (Timely, Cubic Defence, Stabicraft), ICT / digital companies (Wherescape, Timely, Orion, Kiwa Digital), and some IP rich firms (NZ Mint, Volpara, 90 seconds). Across the 25 finalist firms, over half were technology based, from small to large, from start-up to experienced international businesses. The judges (there were nine of us) felt like we were getting an insight into a rich ecosystem of New Zealand business where clever entrepreneurs, business leaders, technicians are ignoring the conventional approaches and carving out significant and exciting niches in global business, from right here in Aotearoa.
As an amateur (wannabe) economist, I was delighted to see real world examples of things like ‘adjacent product spaces’ and ‘spill overs’, and even the exotic sounding ‘positive externalities’. Wellington health technology company Volpara use advanced image processing techniques to detect breast cancer in women, looking for areas of increased tissue density. Why Wellington? Well, thanks to Weta Digital, there are a number of experienced and skilled image processing experts living and working there. Fantastic – a spillover! A live example of how getting good – really good – in one area of technology can lead to new ideas, new companies, global opportunities for new products.
This trend towards new products wasn’t just happening in the ‘exotic’ tech sector either; the other two legs of the stool are doing well too. We had a number of large, so-called traditional businesses present to us – Westland Dairy, GMP Pharmaceuticals, Prolife, NIG Nutraceuticals. Far from being lumbering dinosaurs, shoving out bags of unprocessed commodities and taking any price on the world market, these companies are adding value to the volume they create, and generating different product categories – and higher margins – as a result. The traditional industries are working at creating and owning product categories in high value, differentiated niches. My internal amateur economist is almost bursting with enthusiasm – it’s like a textbook come to life!
We even had a few entries from the tourism sector, and the finalists (Haka tours, Ngai Tahu Tourism, Hobbiton) showed that smart business is being added to the opportunities created by the clean green spaces of New Zealand. These are companies dragging in low value tourists and sending all the profits back with them, they are smart collaborative companies, looking to sustainable grow these sectors in non-traditional markets and in non-traditional times of the year, to maximise the value this sector offers.
So what about those clouds on the horizon? Well, the best of the best are doing well, as the finalists show us – but we could do more to drive some of the same thinking through into other companies and sectors. We know that we are still poor as a nation at commercialising innovation, and at funding the research and development that will lead to even more companies like these ones. Private sector funding of R&D is one of the worst in the OECD. And while I celebrate the sector and industry diversity of the finalists, I was somewhat dismayed not to see more female leaders amongst the entrants – something we at NZTE (who arrange the awards) will be working to understand and address in future.
But to finish with more evidence that the stool is appropriately-legged; here is further evidence of the change in New Zealand’s economy. Next week sees the launch of the latest TIN100 report, and I am reliable informed that the report will tell us that gap between Dairy and Tech exports has more than halved since the Dairy price peak of 2014 (although granted that’s a story of two halves). The Tech sector is on track to hit $10 billion imminently, (slightly under in 2016), and this year’s growth will be by far the largest yet. Exciting times.
The 50th ANZ New Zealand International Business Awards will be awarded on 24 November and I hope the stories of the finalists will become part of the new folklore of New Zealand – a country that is ingenious, diverse, rich in natural assets and clever in adding and extracting value – and solidly resting on a multitude of legs.