New Zealand’s ability to raise its export profile is limited by a lack of government vision and a lack of willingness among many SMEs to take the road less travelled.
BY: YOKE HAR LEE
Do Kiwi exporters lack ambition to push for the big deals or are they simply intimidated by the task of doing the hard yards to tackle global markets?
The answer lies somewhere in between, business observers say. Some Kiwis have low aspirations while those with big goals have little experience to tackle the globe.
To compound the problem, New Zealand is stuck in a generational time warp where baby boomers – who make up the current generation of business owners – are still waking up to the fact that many travelling hours are required to build a successful exporting nation.
Alasdair Thompson, chief executive of the Employers and Manufacturers Association (Northern), maintains that many small- and medium-scale enterprises (SMEs) are happy with the status quo although they could be doing better. “They are quite happy to stay at that level rather than export – and as business owners, they have the right to set the pace they want to go.”
New Zealand ranks 24 out of 134 countries on the 2008 global competitiveness index. Kiwi business sophistication is also lower, in 34th place, against Australia at 26 and Norway’s at 15.
New Zealand needs to be more ambitious in building international companies, industry leaders say.
Andy Hamilton, chief executive of ICEHOUSE, an incubator for growing Kiwi companies, says: “this is the dichotomy. There is a group who need more aspirations. Then there is a group with aspirations who need help.” “We could be more effective in providing the help,” Hamilton says, although he is of the view that the government is on the right track with its programmes for building capability and reaching new markets.
But nine years under the Labour-led government has built paralysis into the system and National hasn’t shown speed in putting its plans in actions either.
“The Labour Party, when you really expose them, there are individuals who are deeply suspicious of business. As for National, nine years in opposition didn’t really do anything for them when they became government,” Thompson says.
While Prime Minister John Key’s six-point policy initiative (improving regulatory reform, investment in infrastructure, better public services, education and skills, innovation and business assistance, and a world-class tax system) have highlighted areas that need improvement, implementation has been slow, he says.
New Zealand’s export as a percentage of gross domestic production is less than what smaller OECD countries achieve. The prime minister highlighted this aberration in June – the export contribution to GDP has been slow to grow. Over the past 30 years, 90% of our exports come from just under 5% of our exporters.
It takes at least a generation to acquire a mindset tuned into exporting, the ICEHOUSE’s Hamilton says. “I am 40. When I went through school, there wasn’t this awareness that building an export economy was important. That’s changing. We haven’t had enough people who have built international businesses but we now have a minority of businesses that want to build an international business that we need to focus more on.”
Thompson, from the EMA, says there are exceptions, such as Bob Fenwick of Planhorse systems. He represents an older business generation whose marketing odyssey takes him around the world. “Around 90% of what he produces is for the export market. How many guys in his age group (50-70 years old) who run their business are willing to be constantly travelling?” Planhorse exports filing systems for oversized plans to over 60 countries.
Fenwick, Planhorse’s managing director, blames lack of export willingness on the education system, which he says does nothing to imbue students with interest in international trade. “The biggest frustration for SMEs is the lack of a ready pool of young talent — people are prepared to be away from family and be disrupted from nice easy weekends – to do the marketing.”
Software entrepreneur John Blackham thinks Kiwis have ambition but lack know-how to tackle the global market. Innovators tend to reinvent the wheel and lack a mechanism to assess whether their innovation is new at all and, if so, whether there is a global market, he says. “We do not have the mechanisms in place to overcome the ‘proximity to customers’ issue that would make us successful,” Blackham says. He sits on the APEC Business Advisory Council advising the government on policy matters.
He highlights the success of a company like Procter and gamble which in 2005 introduced an innovation programme that sources 50% of its R&D from 15 innovation centres around the world. That has helped it reduce its R&D costs by 25% and increased revenue and margins. “The problem with our innovators is that 30% of government funding actually goes into research that reinvents the wheel.”
Failures Kiwis have experienced have also been a deterrent for others with global ambitions, Blackham says. The
Government’s Beachhead programme is half-way to what’s being required. But Blackham notes that the name itself sends a wrong message – that of invading a territory – rather than building relationships with people in the target markets.
An approach the APEC Business Advisory Council is working on is helping member countries promote the concept of linking innovation to an existing distribution plan or network.
Blackham says going global is tough. “It is how we go about climbing Mt Everest. It is a very big mountain to climb, you have to leave the nest, and so far, we have a poor strategy to help exporters fulfill their ambition. That creates failures and deters people from trying.”