By Andrew Patterson
Twelve years on from the much heralded Knowledge Wave conference in 2001 and only now has a new crown entity been established to formally take responsibility for driving the country’s innovation agenda.
To date, the much talked about economic transformation of New Zealand as a smart technology driven economy has remained largely elusive; despite plenty of political noise along the way.
After numerous conferences, academic papers, reports and ministerial visits to similarly sized innovation superstar countries such as Denmark, Sweden and Israel, it seems we’re finally beginning to realise that supporting innovation is as important as talking about it.
Callaghan Innovation takes its name from the one person who probably did more to articulate a vision of what New Zealand could become if it was to chart a new path for its future economic direction.
The late Sir Paul Callaghan was a fearless champion of innovation who recognised the importance of bringing business and science together as a logical pathway for New Zealand’s future.
His address at the Strategy NZ – Mapping our Future conference in 2011 remains a compelling watch one year on from his untimely death last year.
Making up ground
There can be little doubt that Callaghan Innovation faces a significant challenge making up lost ground when many other OECD countries have already left us in their wake.
Take Denmark as one example. Both countries have a largely agrarian economic base, a similar population and have been forced to adapt to a rapidly changing global economy. While Denmark does have an advantage being part of Europe, it has pulled well ahead of this country by focusing on and fostering innovation resulting in significant growth in its technology and pharmaceutical sectors and creating thousands of additional high paying jobs along the way. By comparison, New Zealand has largely assumed a default position where our only claim to fame has been the creation of more cafes per head of population than Italy!
More concerning though is the lack of retention of the business innovation success stories we have created. According to figures released in 2012 by the Technology Investment Network, 32 of the biggest and best high-tech businesses that we have created over the last decade have since been acquired by overseas investors.
As Sir Peter Maire told the NZ Herald last year “I think why the businesses get brought for their IP is that NZ tech companies are pretty good at developing stuff and they’re good at [creating] the IP, but they’re absolutely abysmal when it comes to commercialising – they don’t understand product management and they don’t understand scaling manufacture.”
These days he now freely admits that selling Navman in 2004 was one of his worst business decisions ever after seeing it broken up and sold just a few years later.
A new era begins
However, Callaghan Innovation’s recently appointed foundation CEO Mary Quin isn’t daunted by any of this, saying she’s excited by the challenge the new organisation now faces.
“When I first heard about the role I was intrigued by the idea of being able to have an impact on New Zealand's economy in the long term, and particularly the focus on high technology and high value manufacturing and services. It also seemed to me that the challenges of the role called upon everything in my background and it's not often you get that kind of opportunity in your career.”
Epitomising the fact that New Zealanders are to be found in almost every corner of the world, Quin is no exception having previously been based in Alaska, of all places, when she first heard about the role.
“For the last 12 years I was living and working in Anchorage running NANA Management, a quite sizeable company of around three thousand employees. While it was fairly low-tech in its make up focusing on janitorial services, food service and security guards most of my career to that point had been in high-tech companies and manufacturing operations including sizeable organisations such as Kodak and Xerox as well start-up companies like Avid Technologies and Beta Phase.”
Technology not a one way bet
Both companies are a reminder that technology isn’t always a one way bet. Kodak is regularly held up as a leading example of a company that was unable to make the transition from film into the digital landscape while Xerox is often criticised for being unable to fully leverage its position of market dominance in the 1980s. Remember when we used to talk about getting a document “Xeroxed.” So what did Quin learn from her time at these two iconic companies?
“I got to see in each of those different companies - again, ranging in size from very small start-ups to huge multinationals - that product development is challenging and there's always an element of risk along the way but also how incredibly important it is to a company's growth and long-term success and competitiveness. So I had the chance to see how a technological idea could lead to digital video editing for the television and movie industry and the success of Avid Technology in that area.”
“I also saw how Xerox did some incredibly important things in digital and colour copiers and printers but has been widely criticised for failing to exploit some of their own internal R&D developments while Kodak, of course, is the textbook case of a company that wasn’t able to make the transition from its historic analogue film business - silver halide film to the digital era, even though I think it saw it coming a long way off.”
While New Zealand has less exposure to the technology sector, something Callaghan Innovation hopes to change over time, Quin believes the importance of market scanning shouldn’t be under estimated.
“The important thing for NZ businesses is to be constantly scanning the horizon globally in order to identify the key trends, emerging technologies and thinking about what sort of impact these could have whether you're looking at it from an individual firm's perspective, or the entire industry or even a country's perspective.”
“I'm not convinced that physical distance is so relevant anymore as long as a country has a good infrastructure including air transport, shipping, logistics, ports etc. I don't really think that the distance issue is a big concern. If you think about the fact that we’re closer to many of our major markets - for example China and most of Asia - than the East Coast of the United States and no one would consider New York City remote, so it's all a matter of perspective.”
New objectives defined
Economic Development Minister Stephen Joyce has been one of the leading advocates for creating Callaghan Innovation and he believes its objectives have been clearly defined.
“Callaghan Innovation’s work will mean a significant change to the way our innovation system works. It will be a one-stop-shop for business innovation support whether in science, engineering, design or technology, providing a stronger and better focussed system for the benefit of New Zealand businesses and our economy.”
Quin is more pragmatic and believes the new organisation has a simple mandate – to crank up the pace.
“Callaghan Innovation is really created to do three key things, motivate, connect, and deliver. What I mean by that is the opportunity to play a significant role and to find ways to get current business owners and entrepreneurs excited about and confident in the fact that they really can grow to be very sizeable businesses. We’re also going to be focusing on the next generation of entrepreneurs we want to work with as well. That includes the education sector and some of the existing programs to get young people from primary school through to universities excited about science, engineering, and technology but also converting those ideas and learnings into successful businesses.”
“Historically New Zealand has been quite fragmented. We’ve had lots of very creative ideas and plenty of world-class science and engineering over the years, but for quite a small country we’ve been surprisingly fragmented. So one of the things we're doing is creating national technology networks where we will be the linking mechanism between all of the different institutions, teams or individual researchers that have expertise in a particular area of technology. We want to quickly link firms into the right resource whether it's a capability inside Callaghan Innovation or whether it's another organisation - a university, a CRI or NZTE.”
The new head office for innovation
Becoming the new head office for innovation in New Zealand might be one way that Callaghan Innovation would like to describe itself to the uninitiated; though it’s a descriptor it realises it will have to earn.
“What I've been really excited about in my three months in the role so far, is the tremendous interest and willingness to partner with us in every part of New Zealand's existing ecosystem. Whether its businesses, other government agencies, the universities, the economic development agencies - everybody is excited about the mission. They also share our goals and are very supportive in helping us to be successful. But ultimately our success will be measured by the success of the firm's that we’re here to serve.”
“It's really important that businesses, in particular the high-value manufacturing and services business that we’re focused on, have a good awareness and understanding of what we can do to help them. So that's a high priority for us.”
“We also recognise the importance that incubators such as The Icehouse have in the process of growing the eco-system. Just recently I met with the CEO and the Chair of The Icehouse to talk about how we can work together and bring their capabilities and the very effective programs that they have built up and combine those with what we’ll be doing at Callaghan Innovation. What we don’t want to do is duplicate any services or capabilities that already exist in New Zealand. We would rather link businesses into those capabilities where they exist, whether it's at The Icehouse or any one of a number of other organisations that are already doing really great work.”
But how is success measured for an organisation like Callaghan Innovation where the key performance indicators are less well defined than a state owned enterprise and how do you avoid allowing the organisation to morph into a pseudo policy think tank? Quin says she’s acutely aware of the need to get runs on the board.
“We've got direct services that we deliver ourselves in addition to the fact that the former Industrial Research Limited (IRL) is actually the biggest part of the organisation in terms of headcount. So we are continuing all of those R&D programs, particularly in the area that's directly supporting product development for firms, all of that's on-going. We are also the administrator and provider of the government R&D grants, the growth grants, the project grants and grants for internships. We have a dedicated team of people, with plenty of expertise, to help firms apply for those grants.”
“If we were to look out about five years into the future, what would I like to see happening? Certainly that there are far more New Zealand companies that are growing in size, much more quickly, that are based on technology for their products and services and that we have been successful in linking together all the different science and engineering providers around New Zealand. We want to create a more seamless process for firms to get the help they need from the right source.”
“We would also consider it an important part of our success that the Maori economy is growing strongly in the area of high-value manufacturing and that the Maori corporations around New Zealand are a very strong and integral part of our mission. I think ultimately we look at countries like Denmark, Germany, Israel, and watch how they are approaching innovation. What I'd love to see in the future is that there are delegations coming from other parts of the world to look at New Zealand's success in this area.”
“One of the strengths that New Zealand has, which I've become more appreciative of since I've been back, is how diverse the industries are that our New Zealand firms are involved in. I mean everything from biotech, medical devices to video games and digital entertainment, communications, navigational products. It’s an incredible variety of high-value businesses with potential to grow into global markets. So that’s a real strength, and if we can grow across all of those different industries to the point that they become as large eventually as our primary industries then New Zealand will continue long into the future to be in a very, very strong economic position.”
As for the $70 million allocated to the National Science Challenges in this year’s budget Quin describes them as still a “work-in-progress.” Watch this space is all she’ll say at this point.