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R&D won’t set us free

A radical reshaping of New Zealand’s fortunes requires us not just to keep hold of the developmental end of our scaled up enterprises, but to own the lot, says DNA kaumatua Noel Brown.

“Research and development funding is not the economic elixir it used to be and New Zealand needs urgently to move beyond that thinking. This country is struggling to turn filed patents into commercial successes but throwing more R&D money into the problem – or pigheadedly trying to commercialise products that lack a supporting ecosystem – will get us nowhere fast.” – associate professor Suvi Nenonen and professor Kaj Storbacka University of Auckland Business School’s Graduate School of Management, in the New Zealand Herald, 28 May 2014.

At DNA we heartily agree with this analysis. The departure of LanzaTech for the US [the company shifted 30 staff to a new R&D hub in Illinois in April, leaving some facilities here] is the latest in a long series of local R&D successes seeking better integration offshore, with more potent and appropriate infrastructures existing in New Zealand.

“Customers buy those products that create value to them, and generally this value creation is completely dependent on the market ecosystem in which these products are being used,” the Herald article said.

The sort of design we practice at DNA, starting with the customer and working back, is one of the things beyond R&D that New Zealand needs to deploy to change its fortunes. Interestingly, the term used for one of the key disciplines of customer experience design (shorthand CX) is ecosystem mapping.

Until you understand the ecosystem, starting with the customer or end user, you can’t solve the problem. ‘Design it and they will come’ is a mantra of an earlier age of design and it’s as viable today as steam power.

But lets get back to the case in point – LanzaTech’s gas fermentation process takes carbon-containing gases, typically industrial flue gases from steel mills and other processing plants, and uses its proprietary microbes to produce ethanol and hydrocarbon fuels as well as platform chemicals that are building blocks to products such as rubber, plastics and synthetic fibres. In other words, it reduces greenhouse emissions while reducing the use of finite oil resources – a potentially wonderful and game-changing innovation.

After several years of development in New Zealand, and substantial tax payer investment, LanzaTech has moved is developmental activities and head office to Chicago, largely to fit more seamlessly into the international ecosystem of industrial processing, emissions control and green tech initiatives.

Also, in all probability, the government infrastructural support available to them is greater than that on offer in New Zealand. Losing LanzaTech and other who’ve made a similar move robs us of high value jobs and their contribution to our economic and societal wellbeing. But the problem is even greater.

As things currently shape up, keeping the front-end and ongoing development jobs a fully global LanzaTech could provide is the best New Zealand could hope for.

The bulk of employment in such an organisation needs to be close to market – not in New Zealand. To achieve global scale, R&D successes like LanzaTech have had to seek oversees ownership and capital. Initial commitments from overseas owners to keep the New Zealand R&D function central to the operation have often not lasted the distance.

A radical reshaping of New Zealand’s fortunes requires us not just to keep hold of the developmental end of our scaled up enterprises, but to own the lot and so repatriate the profit streams and taxation flows from all the necessarily offshore jobs and activities.

The lack of capital and expertise in New Zealand is often identified as the impenetrable barrier to this happening. In reality funding the growth of a raft of LanzaTechs’ to global scale from New Zealand would require government money.

The widely touted mantra that governments cannot own successful enterprises is not supported by the facts here or overseas.

Air New Zealand has been exceptionally successful under majority government ownership, and the success of the plethora of state funded Chinese and Singaporean corporations, for example, support this.

Provided such organisations had appropriately skilled governance and management (from offshore if necessary) and the government stakeholding’s vital interests were enshrined, there is no reason why we could not build high value, highly innovative globally leading enterprises on the back of our R&D expertise.

That is provided we deploy the vital CX design processes to get the ecosystem right. As we see it, design brings the ability to solve current problems and foresee emerging issues – two areas that have been fruitful in innovation up to this point. Design thinking allows testing, prototyping, iteration, learning, collaboration and de-risking of products, services, business models and markets.

The companies and organisations that we see succeeding are the ones who have adopted and integrated design in to their practices – and this is not at the expense of technology or material advances.

The companies that have sustainable futures are the ones that are designing resilience, agility and value in to everything they do. The companies that will unlock the most value and realise their full potential are the ones that put the ecosystem at the heart of their thinking and users first – using design to solve problems and assist in unlocking and delivering on innovation.

Noel Brown spent 17 years as a leader of Formway Design before becoming CEO of DNA for 10 years. He is now DNA’s kaumatua, based in Wellington.

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