Callaghan InCite

Are we surfing or drowning?

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Technology is changing our entire economy and society. Everyone knows that. Or so you’d think...

By Vic Crone

...Except, as a recent survey of New Zealand business found, most of us think the impact of technology will be minor, or far off in the distant future. The MYOB report on the survey, The Age of Change, said just 44% of business operators believe their industry will be significantly changed by technology in the next 10 years. 

With respect, the other 56% of business operators are in for a shock.

The pace of technological change is gathering momentum. While this happens, the businesses facing disruption are falling further behind the industry leaders as they gobble up business opportunities. They can see the great wave of change approaching and they recognise that to get or stay on top, they must innovate — and that means spending on R&D.

The indications are that New Zealand’s commitment to investing in R&D is growing, but there’s a long way to go. 

Callaghan Innovation’s namesake, Sir Paul Callaghan, pointed out a few years ago that Samsung generates the equivalent of half of New Zealand’s GDP with only 123,000 employees — about 5% of our workforce. Productivity is not about how hard we work, he said, it’s about what we do, and in today’s world it’s technology that counts.

In the next decade, around half of our jobs will disappear. We can either replace them with higher-value technology-enabled jobs, or stand by and watch our economy become irrelevant.

The businesses that will succeed are the ones that are prepared to disrupt themselves.

Doubling or tripling the contribution of dairy or tourism is not the answer, given their respective demands on land, water and infrastructure, and their poor productivity returns. Tech is New Zealand’s third-biggest export sector, bringing in more than $16 billion a year in overall revenue. What this sector needs to expand is more brains, more ideas and more capital to bring those ideas to market.

Vic Crone, Chief Executive of Callaghan Innovation
Vic Crone, Chief Executive of Callaghan Innovation

The businesses that will succeed are the ones that are prepared to disrupt themselves. This is happening in industries all the time. Uber is working on self-piloting cars and drones to ensure it’s near the front of the queue when autonomous ride-sharing takes over. Locally, the meal delivery company My Food Bag has eaten into its own business model by producing a budget-conscious option that undercut its premium brand before any competitor did.

But among New Zealand businesses, this kind of innovation is an exception, not the rule. We invest about half the OECD average in R&D, even after a record rise in R&D spending between 2014 and 2016. The OECD’s Economic Survey of New Zealand 2017 shows a correlation between our rate of investment in R&D and our relatively low-wage, low-productivity economy (with our GDP sitting at 28th out of 34 in the OECD).

Let’s be bold, disrupt the disruptors by being future-focused and embrace the opportunities this new era will bring to our country.

It’s not that the act of doing R&D increases wages by magic. It’s that if you want to be an export-driven business − which all sizeable or ambitious New Zealand companies need to be to succeed − you need to come up with something no-one can get their hands on anywhere else.

Are we surfing or drowning - surfing

It’s bringing new products and services to the world that creates demand, grows wages and boosts productivity. And guess what? If you want to bring something new to the world, you need to be doing R&D. It’s not rocket science (although it could be).

We’re at a pivotal moment in our history. It will take bravery to step into the unknown. Let’s be bold, disrupt the disruptors by being future-focused and embrace the opportunities this new era will bring to our country. Doing nothing is effectively deciding to wait for the wave to break over our heads.

It’s not too late for New Zealand’s big earners to get their act together if they’re prepared to be genuinely transformational, rather than incremental, in their response to the onslaught of change.

Now’s a good time to think about that new-to-the-world idea. Give us a call.

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Updated: 25 July 2017