Cashing in on ideas
New Zealand is good at ideas and innovation but not so good at selling them into a global market. So what are we doing about it?
Tuesday, December 08 2009 || Features || BY Andrea Fox
When he goes to a pub in New Zealand he knows he’ll be talking about farming and rugby.
The business leader and entrepreneur isn’t saying he prefers one pub experience over the other, he’s just using the example to suggest that a drive to commercialise ideas and innovation is not exactly bedded in the Kiwi psyche.
But commercialisation — the putting of a product, service or process derived from research or new knowledge into the market — is getting more airplay these days as the global innovation and R&D race heats up and the government makes improving our economic performance a policy priority.
Yet general expert opinion is that a report card on our commercialisation performance would give us a C.
Interestingly — perhaps as a symptom of the maturing said to be occurring in our capitalising endeavours — no one seems to be suggesting throwing more money at the issue to lift our grade. That’s not to say this so-called evolution has lessened widespread criticism of the complexity of science, research and technology public funding streams; of the private sector’s inadequate contribution to innovation; or sector sniping about how much taxpayer funding universities receive for a lot of blue sky thinking.
And a frequent gripe among those close to the sector is that the cost of commissioning research at a Crown Research Institute (CRI) and universities is too high. (Which begs two questions: who else in a country as small as New Zealand is equipped to undertake serious research? And two, if the cost of hiring a good quality New Zealand-based scientist is around $200–$250 an hour according to Science New Zealand, what does that say about New Zealand Inc’s acceptance of legal and accountancy hourly charges?)
Navel gazing is another problem, says Greg Shanahan, Technology Investment Network chief executive.
“I’m saying don’t reinvent the wheel. There are companies that have succeeded because they have overcome some quite specific disadvantages. So look at what they’ve done and just copy it. We don’t do enough of that.”
The experts Unlimited contacted for this story agreed that, generally speaking, we are lifting our commercialising skills — albeit slowly.
The government’s drive to lift our game got mixed responses. Richardson, a former chairman of CRI AgResearch and Foundation for Research, Science and Technology (FRST), is “less than encouraged” by policy to date. He has yet to see any government recognising how to create wealth based around New Zealand's unique issues. But he also says people who suggest government keep its nose out of this area are grossly naive given its “balancing force as a regulator and competitor” in an economy that can be turned upside down in a moment by currency speculators, and which has a limited domestic market.
In a nod to the academic, computer science and science family trees of Google’s youthful founders, Richardson notes that an “intergenerational environment counts” in nurturing commercialisation — and New Zealand doesn’t have one. Although there is little doubt New Zealand is good at ideas and innovation, unless the ideas can be taken to market to build bigger, stronger, more productive companies, there isn’t much kudos in being bright sparks.
Dr Rick Boven, director of the privately funded think tank the New Zealand Institute, says the problem is not unique.
“For advanced economies, commercialisation is a key differentiator of performance, so there’s an international capability race going on and everyone’s trying to improve their performance in that race. Some small trade-exposed economies like Denmark and Singapore are moving very aggressively, and when we compare ourselves as a country which wants to succeed based on innovation, we fall short.
“We are not doing extremely badly, we are improving. We have the right institutions in place but there’s a lot of potential to improve.”
But Richardson, while acknowledging our organic handicaps and low level of government support, says New Zealand’s performance in wealth creation compared to other countries is abysmal.
“We have a profile of commercialisation that is even weaker than many low-level developing countries.”
Phil O’Reilly, Business New Zealand chief executive and chairman of the Capitalising on Research Action Group, a low-profile private/public sector group, spoke for many commentators when he said New Zealand has “world class basic science” capability, a generally good research, science and technology funding mechanism (though parts of it could do with work, he says) but some fundamental disadvantages when it comes to getting good ideas to market.
“We’re not in the right industries — pharmaceuticals and defence. The average size of our companies is relatively small and we are a long way from markets so tend to have to internationalise earlier in the growth phase, which makes things difficult.
“We have thin capital markets and underdeveloped venture capital markets, so smart capital doesn’t come to the table very early. Until quite recently we’ve had a relatively poor science push. The PBRF [performance-based research fund for the tertiary education sector] tends to get in the way of academics wanting to do this work. They over-concentrate on the fund and not so much on commercialisation.”
Other obstacles, says O’Reilly, are low national recognition of the role of R&D — which he blames partly on the plethora, complexity and “opaqueness” of government funding systems with the exception of FRST’s TechNZ $50 million business investment programme — risk averse managers, and “language” problems between science, research and business sectors.
“There are not enough science-literate managers inside business and we don’t translate well. Scientists speak French, business people speak German. We need more Belgians.”
Boven says another issue is skill gaps. “The World Economic Forums Global Competition Index says New Zealand doesn’t perform particularly well in having scientists and engineers. This is understandable given our low activity levels in R&D and our brain drain, so maybe there are gaps there.”
The New Zealand Institute has prepared a major discussion paper on ways to build something it considers a must for advanced economic prosperity — an “innovation ecosystem”.
His team is focusing on three perceived gaps: marketing skills to take new products into new markets; entrepreneurial and business leadership skills (we have good people but not the “bench strength”, Boven says); and people experienced in governance innovation and commercialisation operations.
The latter are experts in marketing and commercial governance, taking science from research organisations to the business domain, and even deciding what kind of science New Zealand should be doing.
The marketing hole could be bridged by better tailoring education, but developing appropriate governance skills is more urgent, Boven says.
