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Kiwi companies face multiple challenges growing from good to great. Incubation, operational clean-ups and business re-engineering are among the strategies adopted by some.

By Virginia McMillan

Fast-growing Auckland-headquartered film production company The Sweet Shop has encountered new challenges with every growth spurt.

“Each stage seems to occupy more of your time and, though it seems it will make things easier, things get more complex,” says Paul Prince, one of three directors.

The Sweet Shop is one of many Kiwi export companies emphasising the importance of good processes in the push for growth.

Several exporters spoken to by Exporter have taken part in business support and training programmes. Most attribute their success largely to having a full range of expertise across staff and directors.

The Sweet Shop started in 2001 as a commercial production company run from home. It’s now increasingly a global services exporter with 62 staff, developing its own intellectual property and content, including social media campaign design, short films and, in the near future, feature films.

Commercials will increasingly be made offshore as the exchange rate is no longer an advantage, says Prince, head of marketing.

REFORMS

Reforming into a larger-company structure was a turning point. No longer was it possible to be “marketdriven”; the company had to be “organisation-driven”.

Part of this meant embedding the shareholders’ vision and core principles.

The company upskilled via a New Zealand Trade & Enterprise Lean Business programme, focused on reducing processes, lead times and inventories, and waste of money and space.

The programme also aims to boost staff skills and morale. Senior managers at The Sweet Shop took part, as did Prince.

NZTE has helped with PR, events and market research, says Prince. There has been a mix of paid-for and free assistance.

The Sweet Shop was a finalist last year in the New Zealand International Business Awards’ $10 million-$50 million turnover category and is chasing the top figure in that range.

Prince says most years the company has grown 30-40%.

PRESENCE OFFSHORE

One key to growth was quitting distributor partnerships offshore.

This meant setting up offices in Australia, the United States and the United Kingdom and staffing them with locals. Though recruiting was fraught with difficulty, having dedicated people with local knowledge has made a big difference.

Marine consultants ASR and bus manufacturer DesignLine are just two examples of New Zealand-founded companies achieving strong growth after being bought by foreign investors.

Would The Sweet Shop’s directors/ founders sell to an overseas player? Prince says there is a lot more to do yet, although “you can never say never”.

The company is “proudly Kiwi”. Ownership by internationally experienced New Zealanders has proven its worth at animal health company Simcro, a finalist in the same award category as The Sweet Shop and growing at a similar rate.

Managing director Will Rouse had been a banker in London and Sydney and run his own business. Another shareholder’s background was investment banking; a third brought the engineering expertise required to oversee development of innovative drug delivery systems.

OPERATIONAL CLEAN-UP

In their first year of owning the business, “we cleaned things up” operationally, says Rouse.

That meant sorting out IP, the supply chain, procurement and logistics, and internal operations.

Rouse says: “There were a lot of agency relationships overseas that we terminated because they were  expensive… and we put our own people in the market.”

In the past four years there has been solid investment in scientists, engineers and salespeople with relevant backgrounds.

Simcro rebranded when it went through NZTE’s Better By Design programme. There has also been a marketing grant and, more recently, a government research and development grant of close to $1 million over three years.

With a network of contacts in larger businesses and banks, it’s not hard to get strategic advice, says Rouse, whose sights are on a $50 million turnover in five years’ time.

Four years ago, Mouton Noir – listed by Deloitte as one of New Zealand’s fastest-growing retail businesses of 2010 – was just three directors and an idea.

After acquiring outdoors company Macpac in 2008, the company set about changing the focus to retailer rather than wholesaler and has opened 25 stores in Australasia. It exports to its Australian subsidiary and to Japan, Europe and the UK.

The company is run by the three directors as hands-on divisional leaders, but none of them is CEO.

“They pass a lot of autonomy to the divisions,” says financial director David Keen. The need to fit the culture is a huge part of staff selection.

There is still a frugal start-up mentality (“every cent counts”, “stick to the basics”).

INCUBATORS

Start-ups nurtured into life by a business incubator don’t always get the sort of investment that drives a Mouton Noir or a Simcro.

Exporter found disillusionment in a couple of companies a few years out of incubation.

Advice born out of economic good times was not necessarily helping in a recession. One businessman, who asked not to be named, says some start-ups do not get the right organisational processes (highlighted by The Sweet Shop and others above), or strategic and compliance advice out of the incubator experience.

Another dislikes the additional governance complication that comes when an incubator takes a small percentage stake in a start-up, in recognition of its services.

NZTE part-funds seven incubator organisations and estimates they have provided a total return on investment of $470 million.

The agency spent $8.7 million on these and other regional supports in the past financial year. Only 10 companies with growth potential came out of incubation in the year but graduate firms earned $127 million, says the NZTE 2009-10 annual report.

An NZTE international growth fund assists a dozen or so companies considered likely to generate a return for the New Zealand economy.

Denis O’Shea spent two years at Auckland incubator Icehouse, on his own at first. Exiting two years later (October 2006) his company, Mobile Mentor, employed 30 people.

Icehouse’s network of supportive experts helped him find investors, board members and staff, he says.

One component of the company’s 30-40% annual growth has been its Brazilian operation, with its own president originally located through a Kiwi contact in Brazil and now heading a team of 100.

Five years out of Icehouse, O’Shea says he’s still leveraging his contacts there. [END]

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