New Zealand manufacturers- freezing works, furniture makers or games developers all suffer from similar constraints. Living in New Zealand makes us small and remote (S&R).
Here is a simple, reassuring truth.
Small &Remote applies to many of the world’s economies, not just ours. (But, given there isn’t much commerce goin’ on in Antarctica, we win the most remote status).
But so what?...
The first implication is for manufacturing. I have just written my first feature article for Idealog magazine. It is about creative entrepreneurs Gary Sullivan and Glen Anderson who have created the N-ZO brand of mountain biking apparel. They laboured long and hard under the delusion that it was important to manufacture in New Zealand. From their base in Rotorua they employed a host of part-workers to execute their innovative designs. They proudly touted their cottage industry by promoting the line ‘Made Right Here’. When they finally took advice from one of New Zealand’s most successful garment entrepreneurs to stop even thinking about making clothing in New Zealand on the scale necessary to realize their commercial ambitions it was a revelation. The only way to achieve success was to source manufacturing in China. Not only for its cost efficiency but also for the reliable quality of manufacturing they demanded. This allows the creative team to focus on what they do very well–design and market their brand. (Get the full story in issue 3 of Idealog–out now).
The real value lies in the idea and the efficiency with which it is delivered to market. Giving up New Zealand’s manufacturing base is probably never going to happen, but at the same time, with the exception of food processing (dairy and meat) most manufacturing sectors of the new Zealand economy are stagnant or are in decline (according to the latest figures from statistics new Zealand).
Perhaps a little creative thinking would help ease the situation.
I noted a report in Business Week magazine about how small, craft based industries are dealing with similar situations. Italian furniture makers have a long tradition of handcrafted excellence that has long been admired around the world.
Small artisan manufacturers are being squeezed by low cost, volume producers¬–mainly from China.
According to Business Week, Charme, an Italian luxury goods conglomerate (similar to France’s LMVH) has been investing in these small companies whose annual turnovers are less than a million dollars (US).
By aggregating the companies Charme, led by Luca Cordero di Montezemolo, the chairman of Fiat and Ferrari seeks to create scale efficiencies in purchasing of raw materials like wood and leather and logistics.
This allows the artisan producers to continue to do what they do well, create beautiful, handcrafted masterpieces.
I wonder what lessons there are for New Zealand manufacturers?
Where can efficiencies come from that will reduce the waste in manufacturing processes?Is there any reason to ‘go it alone’ in purchasing of raw materials or in logistics. Are there IT solutions that could provide efficiencies that no one manufacturer could afford to develop alone, but which could accelerate a category? And, surely, there must be cooperative marketing initiatives that could enlist brilliant, experienced (and undoubtedly expensive) minds for the good of all?
When Charme takes a stake in an enterprise it overcomes the petty rivalry factor – which in New Zealand is often expressed by a slightly sad ‘rugged individualism’ and the perennial mistake of making do (No.8 Wire syndrome).
Here’s an idea…
Perhaps a venture fund could be floated for private investors to take a stake in small to medium sized businesses with the potential to grow, but which are stymied by lack of capital and expertise in specialist areas (there are plenty of manufacturing businesses that are very good at making, but hopeless at marketing, for example). This fund would employ a cadre of highly skilled specialists. Investment would require compliance to the management practices of the fund, which in turn would be transparent and up to the minute. Accounting, human relations, marketing, IT, transport and logistics could all be adopted by the fund, leaving the members to do what they are best at doing and for owners to have a small part of something bigger, rather than 100% of a small, struggling enterprise whose light at the end of the tunnel is a large train coming the other way. Innovation and experience could be shared across the group with education and training build into the funds requirements for participation.
Could it happen? I don’t know – but there is a small and remote chance.
What do you think?
:: David MacGregor is a founder and creative director of Idealog.
He teaches at Massey University and consults with a wide variety of client companies.