The Press, September 2012

Is New Zealand the front row forward of the global economy? Are we tough and hardworking but a bit short on the grey matter?

This is often the impression you get when various experts opine on our nation’s ‘lack of productivity’, and that we need to work ‘smarter not harder’.

The statistics seem to support that argument – we have one of the highest average hours worked per capita in OECD (only Iceland is higher and no wonder given their cold climate), with the lowest (bar Greece) for output hour worked.

Of course it’s nonsense, it’s not the ‘dumbness’ of the way we work, but the fact that a lot of the stuff we sell, especially agricultural goods and tourism, doesn’t attract as much income as other outputs. Hence if you divide income generated by hours worked we come out at the wrong end of the productivity spectrum, but don’t try and assert that our tourism operators and farmers need to transform their productivity – they would be competitive with any country.

Instead of sending the whole country on one of those annoying ‘increasing your productivity’ courses, we need to increase the number of firms selling higher value goods, an obvious solution that the Government is intensely focussed on, last week releasing their latest “Building Innovation” report.

The report outlined 50 initiatives aimed at tuning up the country’s innovation engine, especially in the area of increasing government and private sector spending on research and development, with targets of increasing business spend from 0.54 to over 1 per cent of GDP, and Government from 0.6 per cent to 0.8 per cent.

It also confirmed the well-foreshadowed funding of the Advanced Technology Institute, a ‘suped-up’ version of existing crown research institute Industrial Research Limited, which will increase government research and development capability in the hi-tech area.

Appropriately the institute will be named after the well-respected late Sir Paul Callaghan, a pioneering scientist and hi-tech innovator. They have also backed the Institute with a high-powered, quality Board.

Where Building Innovation gets it wrong is its almost exclusive emphasis on the “building”, with too little thought given to the “selling”. I’d love to see another report entitled “selling innovation”.

One line in the document gives it away. “. . . it can be argued that it is the innovative product or service, the intellectual property a firm can bring to bear, that is the real determinant of its success.”

This is not the case at all, and it’s accepted around the world that the innovative idea is not enough. The history of technological innovation time and again bears out the fact that the smartest technology will not necessarily win.

US innovation expert Rob Adams, who recently visited New Zealand, puts it more forcefully, “Somehow there's an urban legend that has denigrated to an obsession that the idea is king; it is what will make or break the new offering. Prepare to be disabused of that notion. Your idea doesn't matter.”

While the “Building Innovation” report mentions ‘innovation’ (183 times) ‘research’ (174), ‘science’ (123); it gives little attention to who might actually want all of these ideas. ‘Marketing’ is not mentioned at all, ‘selling’ once in the introduction and concepts like ‘brands’ (1) and ‘channels’ (1) barely rate attention.

The Government may argue that New Zealand Trade & Enterprise and the private companies they service look after the ‘getting to market’ part.

NZTE do indeed have a lot of capability and knowledge in that area, but the reality is innovation must be exposed very early to the people who might want to pay cash for it. Technology can’t just be developed in isolation then handed over to the market.

It is very rare that an innovation-based product or service will not need to be modified significantly after its first exposure to real customers. Modified not just in form and function, but in all the other stuff wrapped around it – the way it is promoted, priced, sold, delivered, packaged, supported and so on.

A recent article in The Economist reported on a new US initiative designed to improve the passage of ideas from institutions like Universities into real markets.
The I-Corps project “forces researchers to stop fixating on the technology they have developed. New ventures, they are taught, are all about finding customers, what distribution channels to adopt, how to price the product, who to partner with, and more.”

I-Corps is a response to the traditional US model of using a technology transfer office within a university to commercialise innovation, a practice where “licensing revenues have rarely exceeded the costs involved.”

We need to inject some of the same into our innovation process in New Zealand. “Building innovation” is a good start, but we need to see the same smart thinking applied not just to the supply side of innovation, but the demand side too.

That’s what will help us become a truly productive nation, more the canny half-back or clever first five, than the plodding prop.

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