Knowledge wave wake-up
The rules and practices that determined success in the industrial economy of the 20th century need rewriting in an interconnected world where resources such as know-how are more critical than other economic resources. These rules need to be rewritten at the levels of firms and industries in terms of knowledge management and at the level of public policy as knowledge policy or knowledge-related policy. An aspect of knowledge that has been largely forgotten in knowledge economy thinking is wisdom. Wisdom invokes questions of judgement, ethics, experience and intuition, all of which are necessary for the best application of knowledge. The Knowledge Economy, Wikipedia.
At the dawn of the new millennium you could hear uncertain mutterings around the halls of power; earnest rantings about an emerging ‘knowledge economy’ were the revelations of a Rip van Winkle waking from a decade of dozing to a world that had passed him by. In his cobwebbed hand was a pile of yellowing reports and studies on how a nation might transform itself for the age of light-speed communication and borderless transactions by being visionary and backing winners.
The techno prophets had foretold that even in the remotest outposts the ‘tyranny of distance’ would quickly be defeated and New Zealand would be able to participate in a new digital economy on an equal footing with world powers. We could work electronically while those in retro time zones slept. Our tiny nation would become a great repository of knowledge and innovation, a haven for entrepreneurial activity and intellectual property creation, safe from itchy nuclear trigger fingers, and terrorist interests.
We were a nation of 3.8 million, generally well-educated people with a modern infrastructure, an abundance of creativity and a pioneering spirit. We typically had a rare combination of talent, skill, and innovation. We weren’t bogged down by unions who insisted it was ‘more than our job’s worth’ to step beyond our work definition. Our creative people were technically aware, and our technical people were typically creative. If the off-the-shelf solution didn’t work we would adapt it or make our own. If someone said something couldn’t be done, that was seen as a challenge to prove them wrong.
There was a sense that this was New Zealand’s time in history, but if we didn’t know who we were and what we stood for then the big question was, how would we ever rally the passion to get to where we needed to be? We should have been an incredibly wealthy little nation by the turn of the millennium but it seemed we were sliding down a slippery slope. So what had gone wrong?
For a start we weren’t very good at pushing our own barrow; telling the world our well-kept secrets. We just got on with it and hoped the government or industry groups would do that for us. Of course there were the clichés that New Zealanders were afflicted by the ‘tall poppy syndrome’ – eternally slapped down by those who felt they could do better – or that we were a humble lot of quiet achievers. There was truth in both assertions and as a consequence the tall poppy harvester had reaped a fair crop in its time. We conveniently forgot our best quality meat, dairy produce, seafood, software, and expertise was in high demand offshore.
There were those who misinterpreted visionary thinking as arrogance and rejected any call to national pride as ‘uncool,’ fuelling the ‘Kiwi cringe’ myth that if it came from anywhere else it must be better than if it came from here. Unlike the United States where ‘pick me’ was considered a sign of enthusiasm worth encouraging, downunder in the ‘land of the long white shroud’ we were becoming adept at shooting our own pioneers in the back. If the ‘sit down, shut up and pull your head in’ armchair crowd hadn’t done enough damage to our fragile egos, then the failure of successive governments to foster, encourage, and market our fledgling digital industries to the world might finish off the job.
Global warnings
While the statistics told us how many sheep, trees, and cars we had, there was little official recognition or analysis of our vibrant community of smart business people, intelligent and innovative software developers, hi-tech engineers, inventors, scientists, film makers, artists, songwriters and authors, experienced consultants, designers, and entrepreneurs. We were full of ideas but often lacked the funding, marketing, or business skills to turn them into profitable ventures. When Wired magazine publisher Kevin Kelly visited New Zealand in 1988, he suggested our high levels of creativity were due to being a nation literally on the edge. While the centre typically represented stability and comfort, ‘the edge’ was usually an exhilarating, active place where change and innovation occurred.
People had been talking about establishing New Zealand as a global repository for information since the 1970s, but no one except the computer press and industry groups seemed to catch on. In 1992 the government set up the WCL to explore the hi-tech possibilities of the future and ensure the newly deregulated New Zealand economy remained at the leading edge. Its main focus was on developing bandwidth and high-speed applications that might benefit the country through foreign investment and by attracting research and development facilities to our ‘wired’ environment. The government and Telecom withdrew funding for the WCL after only two years.
Faster communications from the heartland of business through to the average consumer was essential if New Zealanders were going to seriously participate in the world of on-demand services, electronic commerce, and interactive multimedia. The Internet was fundamentally changing relationships of all kinds, bringing synergies between individuals, groups, and nations. But as usual policy lagged practice. The World Development Report (1999) stated it clearly for all to see; ‘today’s most advanced economies were focusing on knowledge as the most important factor in determining the standard of living.’ No one could say we hadn’t been warned to shift from the 1950s farming, forestry, and fishing mainstay to embrace the next economy, one based on zeroes and ones and intellectual property.
New Zealand continued to ignore expensive advice to reshape, re-educate and restructure for the new world. Endless government reports on e-commerce and the knowledge wave, including the need to revise our Crimes Act and Copyright Act to enforce and protect our intellectual property and our compliance with international treaties, were still languishing. Each report and study, showing clearly where we needed to be in the future to remain competitive, seemed to get little further than the in-trays of ministers or bureaucrats. We continued to steadily slip down the OECD top 30.
The warning that we were ill prepared had been sounded numerous times, including by Harvard professor Michael Porter in 1991[1] and again in 1998 when he came to review our lack of progress in migrating to an information-based society. Upgrading New Zealand’s Competitive Advantage, co-authored by Porter, was commissioned by the government in the late 1980s after a two-year study. It looked at four companies operating in each of 16 market sectors, and suggested strategies for future growth. It was considered inspirational at the time but nothing was implemented at government level and there was no follow-up. The Porter Project, as it came to be known, claimed our economy had fallen out of alignment with the mandates of modern competition, with little having changed since the 1950s. It warned that unless New Zealand encouraged growth in more hi-tech industries we would remain out of step with the global economy.
Tony Caughey, principal with strategic consultancy firm Caughey O’Boyle, was involved in the original Porter Project and said much of Porter’s research ended up in ministerial speeches and his philosophy and ideas were picked up by senior management across the country. “The awareness of his ideas was high. It had an impact on a lot of people but it was never institutionalised and nothing was set up to press ahead.”[2] Porter returned in 1998 as a guest of Trade New Zealand and the Department of Commerce to review what had happened in the interim and float new ideas about how the country might improve its performance.
Energising vision
At the Future Active gathering, run by the New Zealand Software Association in conjunction with North Shore City in November 1998, Porter explained that New Zealand needed to find and celebrate an energising national vision that captured our distinctive culture, circumstances, and history. The country had gone through the painful process of privatising, reducing subsidies, and opening up our markets to the world but had focused on the negative aspects of those changes. Now it needed to look at the positive side, encouraging innovation and differentiating businesses for economic growth. The business strategist addressed about 500 hi-tech industry representatives and met with Prime Minister Jenny Shipley and key cabinet ministers and industry leaders in Wellington.
He said, only half of his proposals were acted on, including privatisation, reduced subsidies and opening up markets. “You did not invest heavily in resources, revitalise science and technology or focus on the positive parts.” New Zealand took the ideology of the free market to the extreme and this had held us back. Structural reforms had been made out fear and concern for survival, although this had motivated companies to make difficult changes and many improvements. “What is needed now is to create an excitement and an energising view of what New Zealand could be.” The focus so far had been on what New Zealand wouldn’t do. “You won’t protect markets, intervene, distort markets through subsidies or have government mucking around. However there has been a lack of what New Zealand will do.”
New Zealand needed to be on the map in software and other industries but this would not happen by osmosis; only when people worked together and did things as a group. Industry associations had an important role to play; beyond simply being ‘bitch ’n moan’ trade associations they could facilitate clusters. There was a need to expand boundaries. More industry groups needed to get together and seek common goals. “I would like to see a group formed which includes members of the government and opposition, labour and management and various parts of society to go through a process of becoming informed about economic reality and create a more enduring bi-partisan approach to moving the economy forward.”
While achieving best practice was a basic requirement in business, much more was needed, including strategy. “You cannot get away with trying to run the same race faster. You have to be in a different race, find a unique position for your businesses and excel at it.” New Zealand still had some way to go in achieving this, and its existing ideology had made it timid. While we had mostly got it right from a macroeconomic level we hadn’t created the right microeconomic environment to allow innovation to flourish, said Porter. Companies had done a lot to tighten up, improve organisational efficiency and move towards exporting but there was not yet enough distinctive differentiation. Many companies were still competing in ways that are very similar to other countries. “You have to innovate not imitate and there’s a disturbing rate of innovation in New Zealand.” He produced world patent statistics showing New Zealand in 1996 had only 15 global patents which compared poorly to Japan (184), the United States (120) and Switzerland (160).[3]
Porter’s economic advice came two weeks after Trade New Zealand chief executive Fran Wilde had warned that hi-tech industry groups needed to work more closely together to build export success and sustain future growth. If they didn’t rise to that challenge, New Zealand risked becoming a banana republic.
Wilde was on a panel of seven industry experts at the Hi-tech Forum, where the software and electronics industries first got together to consider a common path into the future. She pointed to our gross domestic product (GDP), which had continued to plummet over the past decade; evidence New Zealand was still struggling to find its way in the world. Our biggest export sector remained dairying but the majority of growth recently had been in high value-added manufacturing including electronics, services and software. “We have to move our employment structure to reflect the change from the industrial and agricultural age into the age of services.” We must be seen as a global producer and supplier of high-quality niche products and services with high exports per capita. The combined might of software, electronics, telecommunications, and other intellectual property-based industries could pull us back from the brink after a decade of declining GDP earnings, she said.
The hi-tech sector needed to be harnessed for future growth and it should not be left to politicians to make things happen. “If we don’t take our future into our hands our kids will blame us and so will our grandchildren.” Our declining GDP and overall export performance was a major warning for New Zealand. We were beneath the trend in world trade growth against countries we often liked to compare ourselves with; our exports as a percentage of GDP were well below Ireland, Denmark, Austria, and Finland.
One attempt at quantifying the value of the combined hi-tech industry suggested it was likely to be significantly more than $5.6 billion. Investment bankers Morel & Co, in a technology review commissioned by the government, said our successes in the sector were a well-kept secret. For example hi-tech hardware exports went from $141 million to $377 million between 1991 and 1996. New Zealand’s total hardware, software, and biotechnology exports were estimated at $738 million for 1997, up from $512 million in 1996. Survey group IRL claimed the electronics export industry was worth $880 million in 1997, with exports valued at $620 million.
Science sense slipping
The newly formed NZ Inc (Intellectual Capital) foundation was eager to promote a better export environment and get the news of our competence in this area out to the rest of the world. NZ Inc director John Blackham said current regulation and financial legislation was aimed at bricks and mortar. “All of this disappears in the information age. Everything from basic accounting principles to securities legislation will need to be changed. The business environment needs to stimulate entrepreneurs and knowledge workers in New Zealand.” However educating the right people about the challenges ahead seemed daunting. A Ministry of Research, Science and Technology (MoRST) survey showed fewer than 10 percent of New Zealanders understood what science and technology was about, and more than 50 percent believed the risks of new technology outweighed the benefits. “It’s a shocking platform to build a competitive economy in the knowledge age,” said chief executive James Buwalda.
He revealed 23 percent of our graduates were in science and technology, down from 36 percent in 1988, while the output from countries with similar economies was 40–50 percent. Dr Buwalda said New Zealand had an urgent challenge to shape lives, environments, and enterprises for the knowledge revolution. “We’ve been overlooking major drivers of wealth, productivity and economic growth. ‘New growth economics’ placed the importance of knowledge at the centre, as a resource that doesn’t get used up but grows. Knowledge begets more knowledge – the law of diminishing returns is really just a lack of imagination.” Research over the past 40–50 years in the United States had shown 87 percent of all economic growth could be put down to new knowledge and technological change not economic efficiency and capital investment.
Institute of Professional Engineers (IPENZ) chief executive Warwick Bishop said engineers had to take much more responsibility for educating and improving their own skills to ensure career development. However up to 20 percent of students left the country after graduation, leaving a falling population of expertise. Better education was the key to the success of knowledge-based industries. “Youngsters five to 11 years old are much more technologically aware but there’s a fall-off in maths and sciences beyond age 16-17.” An Australian study showed the best job prospects were engineering with health and medicine, followed by agriculture and marketing, information technology, and telecommunications as career choices.[4]
Finally the government and opposition appeared to have had a revelation. The mutterings turned to talk about a bright future where people would be equipped with the right skills, where small, smart businesses would be kick-started. In that future we would attract investment and put more into education, science, and technology. There was even talk of culture, creativity and – horror of horrors – a whisper of tax breaks. What a turnaround.
The awakening highlighted the inaction of successive governments who had failed to future-proof longer than a three-year election cycle. Beyond free-market reforms they had sat on their hands rather than mucking in to help reshape the nation for the challenges ahead. They watched former SOE Telecom dominate the market and essentially hold the country to ransom. We had the latest digital network, one of the highest take-ups of Internet and cellphone use, we had transformed our key businesses into mean, market-driven machines and produced world-class hi-tech products.
Without strong competition in telecommunications, however, prices stayed up and fewer benefits flowed to business and home users. A few thousand subscribers had been given a taste of what was to come with fast Internet with Telecom’s JetStream copper enhancement technology, TelstraSaturn’s full-service cable system in Wellington and Ihug’s satellite service, but the real benefits of healthy competition such as e-commerce and all the other wonders of the Web were still trickling down to most New Zealanders at the dawn of the new millennium.
We wanted to get to the world and the world was curious about us, but most satellites were either booked up or pointing the other way and competition on the tilted playing field had slowed investment in alternative local and international communications links. The full benefits of deregulation were slow to flow on to data services, even though the business community had been crying out for affordable capacity for years. web sites with streaming video and audio, up-to-date news and e-commerce capabilities could showcase New Zealand to the world, but that required big pipes so Web content could deliver in real time not daylight saving time.[5]
Badly branded and stranded
It wasn’t as if New Zealand hadn’t had ample opportunity to profile itself to the world; it had just neglected to do so in any cohesive way. The obvious window was the conjunction of the America’s Cup, the Rugby World Cup, and the APEC meeting in Auckland in the final months of 1999. Then of course there was that most unique of openings where New Zealand would be the first land to see the rising of the sun on the new millennium.
In fact New Zealand was riding the crest of an international publicity wave, starring in Time magazine, featuring in newspaper headlines around the world and on major American TV channels. The ‘massive exposure’ was labelled priceless by the Tourism Board, which predicted million-dollar spin-offs for the local economy.[6] It all sounded too good to be true, but where was the follow-through, the big marketing campaign to capitalise on all this free publicity, the invitations to bring top business people to New Zealand to look at investment opportunities, the openings generated by our offshore ambassadors to show our wares to the world? When the dust settled there was, well, dust, and maybe a few extra tourists visiting our best-known attractions.
The same fervour had been apparent back in 1991 when some bureaucrat decided New Zealand was going to have ‘the world’s most powerful national brand’ and an annual budget of $2.8 million was set aside for it. The exercise by the Tourism Board and Trade New Zealand took eight years. Agents went around the world securing the exclusive rights to use a colour version of the logo; a white fern on a blue and green background, which cost around $750,000. However this was determined by the board, now known as Tradenz and the department now known as the Tourism Board, as too frivolous for export use. A revised logo was to have been part of ‘the New Zealand Way’ promotion from 1993 but failed to grab the support needed to be considered a national exercise. Then in January 2000, after repeating the global permission process and an overall investment of around $12 million, the logo was finally presented to the public. The outcome – wait for it – a black-and-white silver fern.[7]
Along with dismay at the pitiful results of trying to brand its existing export economy, there was also deep frustration at efforts to define and market sunrise industries. The long push to create a marketable hi-tech brand, encompassing software, computing, IT, telecommunications, electronics, and engineering, had failed to ignite leadership. Little effort was being made to quantify, define, or globally market our fastest-growing sectors. An arrogant bureaucratic attitude within government, and sectarian thinking across the rapidly converging hi-tech industries was obscuring our chances of presenting a united front to the world.
IT entrepreneur Trevor Eagle,[8] managing director of the Eagle Technology Group and head of the Hi-Tech council, was concerned that government statistics weren’t giving an accurate picture of hi-tech industries or the amount of research and development going on here because there was little incentive to fill in the required forms. He claimed many companies weren’t reporting their expenditure in R&D and IT exports because they were penalised if they did. “If it’s reported it has to be amortised over three years to recover the money so they’re just writing it off.” The only way to get accurate data, he suggested, was to provide an incentive to report sales and to have a single form. “We fill in enough goddamn forms as it is for compliance reasons which are simply get-out-of-jail-free cards for reporting your exports. If you fill the form in you don’t get penalised.”
A number of user and industry groups were keen to show a united front to government, but there was still resistance from those who wanted to retain their own identity. “No one’s showing the way, no one’s leading the charge to get to those who have the purse strings to release funding so we can get it spent where it’s needed.” Eagle said the government was throwing so much money around that there needed to be a single voice to help direct that. “Why aren’t we channeling it into areas where we need more skilled people, like information technology and training more scientists and engineers? You’d have thought the Internet and e-commerce would have woken New Zealand up to the importance of the technology sector but there’s still tunnel vision.” A law was passed to stop technological colleges becoming universities after the Auckland Institute of Technology became the Auckland University of Technology. A bill had been put through parliament limiting the country to eight universities. “It’s a nonsense call. Cutting down the number of universities doesn’t achieve anything. We’ve got to lift our sights if we’re going to label ourselves a knowledge economy.”[9]
Angus Tait,[10] the 80-year-old patron saint of the New Zealand electronics industry, used the occasion of his knighthood in June 1999 to again call for a radical change in the government’s attitude and philosophy to ensure a healthy technology-based industry. “Whoever is going to be in power over the next five to ten years has to sort out how they’re going to drag the country out of the number 26 position in the OECD race back up to where it used to be 20 years ago. A primary and agricultural-based industry is not going to do that.” Sir Angus, knighted for service to technology, manufacturing and export, founded Christchurch-based Tait Electronics, New Zealand’s largest exporter of telecommunications equipment, in the late 1970s. The company was the lynchpin on which Christchurch built its reputation as the electronics capital of the country. Tait said many countries of comparable size and resource had built substantial technology-based industries which contributed a sizeable chunk to their economies. “I don’t think that’s believed at the Beehive,” said Tait, who had been campaigning for changes in New Zealand’s attitude towards technology for 20 years.
A combination of our pioneering history and the ability to survive the market being turned upside down in the early 1980s meant the jewel in New Zealand’s crown was its ability to do more with less. “While we have a very cost-effective economy, Ireland, Finland, and Singapore haven’t had governments sitting on their hands on the sideline; they’ve had their hands in up to the elbows making things happen.” He blamed our economic woes on the post-1984 philosophy which suggested the market alone would solve all our problems and that government should neither help nor hinder. “In the lunatic years of the 1980s no one listened because so many clever young men in glass towers, moving pieces of paper around, had everyone’s attention. It is important, however, not to lose sight of the fact that no true wealth is ever created until somebody makes something physical. That’s what creates careers and jobs,” said Tait. One way to begin resolving the country’s dilemma, he suggested, was to make it more affordable to train engineers than it is to train lawyers and accountants. “But there’s no use generating engineers unless there are opportunities for them. There’s got to be a broad re-think across the spectrum.”[11]
All hands back on board
The Labour-Alliance Government made some serious attempts at getting rid of the hands-off philosophy of the previous government. Its focus on removing the roadblocks to the knowledge economy kicked off with the e-Commerce Summit in November 2000 and continued with a series of roadshows, encouraging the private sector to get involved. The summit made it appear the government was leading the way into a new era. But the technically literate sea of suits at the Aotea Centre may as well have been at an Amway conference. While echoing industry concerns and attempting to make peace with the business community, much of what the government was saying simply picked up the old pieces and threw them up in the air again. We’d heard the platitudes often enough: venture capital must be encouraged, changes must be made within education to produce appropriate talent for the times, and immigration policy needed overhauling so essential skills could be imported as required. Our politicians, mostly still struggling to come to terms with email, were preaching to the converted.
Following many years of volunteer advocacy work undertaken by Trevor Eagle, business entrepreneur Sir Gil Simpson became our de facto hi-tech cheerleader, seconded by the government to champion the knowledge economy. As head of industry-led e-Commerce Action Team (eCAT), he believed technological prosperity could come only through a renewed sense of the pioneering spirit with business developing its own vision. Government must simply remove any impediments.
We applauded when IT and communications figures showed 7 percent growth to $11 billion for 2000, but forgot we still had the lowest proportion of hi-tech exports of any developed country. About 30 companies earned half our foreign exchange with only one in 25 exporting; 95 percent were exporting less than $5 million a year. Instead of attracting business investment it seemed we were in the midst of a fire sale. Mergers and acquisitions to offshore interests topped $12 billion for 2000 and the trend continued in 2001.Government asset sales were supposed to pay the bills but as Deputy Prime Minister Jim Anderton kept pointing out, we hadn’t paid our way in the world for 27 consecutive years. Living standards had fallen dramatically and we owed $105 billion ($27,000 per person) because we had been living in the past.
We had failed to regard industry barons and wealth creators as heroes, despising their fortunes and conveniently forgetting their investment in productive job-creating industries. Craig Heatley, founder of Sky TV, and one of the country’s richest men, warned on his exit from these shores that we lacked a national plan for success in the world. We needed to develop innovation and leadership, offer better tax rates to attract foreign investment, and forge stronger links between the public and private sectors. Professor Howard Frederick, head of Unitec’s centre for innovation and entrepreneurship, said we were very good at creating truly novel things, but our entrepreneurial skills needed advancing so our inventions could actually reach the marketplace.
The fact was that Kiwis were well respected around the world and their skills and attitude were in high demand. At international law firms, investment banks, or hi-tech companies there was often a Kiwi somewhere near the top. Nick Bain, former head of NZInc, who had joined the Office of the Prime Minister and Cabinet, had been told by a Silicon Valley executive, “If you had Indians involved in your organisation at board level 15 years ago it was a sign you were going to be successful. Now having a Kiwi high up in your organisation has become a measure of market success.” Why? Because of our entrepreneurial overview across multiple disciplines, our good work ethic, skills, and training and our ability to quickly pick up what’s happening globally, give it a contemporary spin and make it our own.[12]
However at home we were not turning out enough engineering and computer science graduates and the amount spent on research and development was abysmal. In its Human Development Report, the United Nations rated us in the top 12 countries for patents granted but pointed out technology comprised only 15.4 percent of our total exports, on par with Chile, Trinidad, and Columbia. In February 2001 a survey of 103 scientists revealed 58 percent would not recommend young people take up a career in science. The pay was poor, the funding scarce, and the career path unattractive. Meanwhile the number of young people even vaguely interested in a career in science and engineering continued to decline.[13]
Our Internet uptake was at critical mass, but most businesses were struggling to find the incentive to move beyond email and a home page. We were losing our reputation as innovators and early adopters. In its second survey into the attitudes of New Zealand organisations towards e-business, Deloitte Touche Tohmatsu revealed fewer than half our companies had an e-business strategy and fewer than one in five could receive payment on line. It said 28 percent planned no spending on e-initiatives over the next 12 months compared to 6 percent in 2000. The University of Waikato Management School raised similar concerns. Only half those surveyed had web sites and one in five were capable of secure transactions. The lack of e-business readiness by partners, customers, and suppliers was perceived as a major difficulty.[14]
While there was every indication government, industry, and business were beginning to rally, the warnings we ignored were now coming back to haunt us. A May 2001 report from the Economist magazine’s Economic Intelligence Unit (EIU) upset the government by ranking us 20th among the world’s 60 largest economies, claiming our e-readiness was stunted by an ill-prepared legal and regulatory environment. The United States was top with Australia second and Britain third. The Australians leveraged the data to make government IT policies a priority.
Overhauling e-legislation
Ironically we were being scored badly on all counts just as the first wave of government and industry partnerships, designed to bring some focus to the issues, reached its crescendo. To ease the way for e-commerce the government was pushing through a raft of legislation that had languished for many years. We were now working on better consumer protection for on-line purchasing, legislation to take a harder line on hacking, which would become a crime, and bringing the legal status of electronic transactions in line with hard copy. Efforts were also underway to provide greater consumer, intellectual property, and privacy protection.
ECAT was talking up e-business as the key to future economic prosperity and advising the government on how the nation’s e-commerce plans could be streamlined. There was a new focus on regional development and a mandate in the new Telecommunications Bill to ensure carriers would no longer hold us to ransom. The government promised to become a model user of e-commerce, warning that any company wanting a slice of public sector business must become e-commerce capable. Proposals and suggestions on how to get the nation up and running with the e-commerce vision were posted on the Ministry of Economic Development (MED) e-commerce web site.
And there was fire in the blood of group of change agents and hi-tech industry groups determined to equip the country for the huge challenges ahead. Some of the ideas were revolutionary, some were simply common sense. All would benefit hugely from the wise use of Internet technology. New Zealand Edge web site co-founder and editor Brian Sweeney insisted the country needed a new flag, a good slogan everyone could relate to, new myths, and an optimistic spirit. He suggested we had a major task ahead to improve our image internally and externally. A good start, he said, would be to get rid of the anachronistic Union Jack and replace it with the most recognisable of all symbols, the silver fern. Sweeney was director of corporate communication company Sweeney Vesty, and a partner in developing the nzedge.com site with worldwide head of Saatchi and Saatchi and passionate provocateur of all things Kiwi, Kevin Roberts. His aim was to draw attention to ‘world-beating Kiwi ingenuity’ and his mantra was: the country needed transformational, creative responses to fast moving ambiguous times, to become more global in its ambitions and grow businesses of scale by reaching through the Internet.
The goal of the web site was to empower and liberate the New Zealand spirit; and search for ‘Kiwi DNA, and a sense of our own relevance in the world.’ “We’re here to tell stories, celebrate heroes, share ideas and network the Diaspora – the million or so scattered New Zealanders around the world.” Sweeney said good ideas act virally; all it takes is 5 percent of the population to stimulate a major social change. ‘Inspiration is infectious.’
New Zealand was the last significant land mass to be settled and the most distant from any other land mass on earth. It has been variously described as a paradise, a sanctuary, an asylum, and a laboratory and its people moody, broody, dislocated, dysfunctional, and introspective. However this had generated an extraordinary sense of innovation and social progress including in engineering, art, and design. While New Zealand has been at the edge, Sweeney warned it was rapidly losing its place in the world.
Australia saw itself as the lucky country – a myth that had served it well. The ’great American dream’ had enormous power, suggesting you could come from anywhere and achieve anything in the United States. However New Zealand’s ‘She’ll be right, mate’ hadn’t done us a lot of good. Neither did the belligerent, Muldoon-inspired ‘New Zealand the way you want it,’ which was ‘an uninspiring, authoritarian piece of politicking.’ The Rogernomics free market approach in the ’80s saw the country so busy with structural reforms that branding got left behind. “We’ve had so much left brain functional reform we now need to focus on emotional reform,” said Sweeney.
Nuclear Free New Zealand was a great vision, and in some ways the greatest marketing campaign in New Zealand history, portraying us as independent, entrepreneurial risk takers. Closing the gaps was also a good sound bite and while ‘100 % Pure’ was a useful external vision it was totally wrong. “There’s a dissonance about what we are projecting internationally and how most New Zealanders feel about themselves. They do not feel 100 percent pure.”[15]
Early promotional material for the Catching the Knowledge Wave project, to be run by the government and Auckland University in August 2001, was full of rhetoric and left many who had heard it all before wondering how real-world outcomes could be achieved. Lack of action to back up all the revolutionary ideas had given way to scepticism. We were about to be told once again told we needed to catch the ‘knowledge wave’ as 30 speakers from around the world tried to inspire 450 representatives from industry, commerce, academia, and government. Dr Chris Tremewan, Auckland University vice chancellor and chairman of the Knowledge Wave project team, said after 40 years of economic under-performance, New Zealand could no longer afford to ignore the implications of this new era of knowledge-driven growth. We need a new, strategic approach to regain our prosperity and competitiveness, he said.
Looking through the list of speakers there was a sense of déjà vu, with Harvard Business School professor Dr Michael Porter returning like a prophet of old to point his bony finger at those who had not heeded his warnings. He’d only been here three years previously to tell us we’d done the difficult things but beaten ourselves up in the process.[16]
Porter’s prescription refill
Dr Porter advised New Zealand had taken the free market to the extreme instead of stimulating our thinking, retraining the workforce, investing in science and technology, encouraging innovation, and capitalising on our uniqueness. There had been some movement towards his suggestion that we embrace clustering and technology incubators where like-minded people work together and benefit from each other’s contributions. New Zealand’s venture capital industry had also begun to come into its own and even the government was considering backing its own investment vehicle. To the surprise of the entire industry, Science Minister Pete Hodgson promised to ask the government for ‘tens of millions of dollars’ for a venture capital fund to back great Kiwi innovations, in tandem with private sector funding.
However the other key factor in the submissions of Porter and many others continued to be rejected, such as a plea for tax write-offs and incentives to invest in research and development so international firms were more likely to locate here. The banking fraternity also remained unconvinced there was any security in intellectual property, propagating the myth that only bricks and mortar had any lasting value.[17] The ultimate anti-climax at the conclusion of the Knowledge Wave event in August 2001 came when Prime Minister Helen Clark, after listening politely, made the whole exercise seem pointless by stating in a final press conference that the event would not change any of her policies.[18]
Evidence was mounting that government policies and industry efforts weren’t going deep enough to encourage the kinds of breakthroughs needed to surf the knowledge wave. Deputy Prime Minister Jim Anderton boasted the results of a public opinion poll in 2001, asking what New Zealanders wanted to be most known for internationally in ten years’ time. It revealed 2 percent wanted to have the best sport teams, one in five said ‘a clean environment,’ and nearly a third wanted ‘a fair and tolerant society.’ Half of all respondents selected ‘a society which thrives on knowledge, creativity and enterprise.’
It was ironic then that universities were complaining that million-dollar cuts were depleting the country’s knowledge banks and their libraries were hugely reducing journal subscriptions. Sue Pharo, chairwoman of the Council of New Zealand University Librarians, said the amount of information held in the country was dwindling. “A huge amount of knowledge is no longer available and we will never be able to replace it. The libraries were importing more than 98 percent of their books, journals and databases to keep up with international research. They provided specialist journals for research that were used by academic scientists, public libraries and Crown Institutes.” She said, all eight universities had made cuts over the previous three years. Canterbury University alone had cancelled about 1000 journals in 2001, slashing about $1 million off its budget which capped off a gradual decline. Other universities reported similar cuts.[19]
In November 2001 we were again being told that New Zealand was one of the most innovative nations. The Global Entrepreneurship Monitor (GEM) 2001 report rated us the second most entrepreneurial nation (18.2 percent of us) in the world. In the ‘opportunity entrepreneurs’ category we were number one (82 percent); when it came to acting on a hot business opportunity, the world average was 55 percent. We also had the world’s highest rate of female entrepreneurs (44 percent). The study showed 6.2 percent of Kiwis had made some informal investment to help businesses get off the ground compared with the world average of 2.9 percent. Generally though, the level of official venture capital was low.
Ironically our entrepreneurs were inwardly focused with low aspirations and only a small percentage were considered dynamic and export oriented. The GEM report recommended entrepreneurship teaching, that research and education be strengthened at all levels and greater effort made to encourage women and Maori.
Broadening the base
Michelle Caminos, IT services consultant with Gartner Group New Zealand, believed there needed to be ‘a better marriage’ between the government, the corporate sector, and universities. New Zealand was like a breeding ground for many small start-up companies but better connectivity and a better flow of information was needed and every effort had to be made to avoid death by committee. “With so many people driving their own personal agenda the government can get bombarded by different committees rather than the total industry view. What’s lacking is the total vision of how they can work together towards a goal and put steps in place to make that happen.” She warned committees can take ages to achieve their goals and by the time they’re ready to move the whole environment has changed. Things needed to move faster with true leadership.
Local authorities could set the tone by backing innovative business and helping close the digital divide. Mike Harte, MIS manager at Dunedin City Council, believed more direction should come from central government but local authorities had a huge responsibility to stand in the gap. “Central government isn’t community focused and more and more of its services are disappearing, leaving local government to fill the gap.” For example, Dunedin City Council had established an economic development unit focused on clustering biotechnology, film, and technology firms and promoting the success stories outside of the city. Within its own ‘Silicon Alley’ there was Animation Research, which produced the America’s Cup graphics, Taylormade, which produced the Squirt TV programme and web sites, Vidmark, responsible for the Wendy Pye CD-Roms, publicly floated e-Media and ‘some great stuff’ coming out of Otago University. In fact local authorities were already repositories of knowledge for the whole community. “We’re like a factory; we manufacture information – we are the custodians of knowledge for ratepayers, customers or citizens.”
However Harte warned that 80 percent of the jobs people would be doing by 2011, hadn’t been invented in 2001. “There’s a whole generation of kids out there now who’ve never known life without the Internet. So how do you think they’ll want to do business with you in 10-15 years time when they’re your customers, residents and ratepayers?”[20]
While there was more information available than at any time in the history of the world, much of it in electronic format, turning data into knowledge required specific skills and disciplines. Information might reside on machines but the most valuable knowledge was not in databases, data warehouses or document management systems but in the minds of skilled people and could only be managed if that knowledge was shared. The challenge was for organisations to review their knowledge, organisational goals and the skills and abilities of their people in order to determine if they had what it took to move forward in the new economy.
In other words knowledge management was primarily about the development of people. Dr Dale Bent, director of Victoria University’s Master of Information Management course, said while certain tools may be helpful to the process of knowledge development, the best approach for capturing knowledge was to create occasions, usually based on ‘communities of practice,’ where skilled knowledge workers could describe and pass on their expertise to co-workers. And while business was certainly the main engine, the government must aggressively create a favourable legal and regulatory environment so knowledge enterprises could prosper here. “The key responsibility of knowledge management leaders is creating the organisational trust so that people willingly share their knowledge.”
In the knowledge economy someone with a good business sense or creative flair may be more valuable to an organisation than someone who is technically trained. People are a company’s greatest asset and the key to future growth. If you retrench skilled people who know your systems and processes for short-term savings, they may end up working for the opposition. It’s a bit like shooting yourself in the foot in order to slow down: you’ll never walk the same again.
The bulk of our exports remained agriculturally related and while we had been talking about diversity and the potential of the hi-tech sector for ages there was had been little effort to define that sector. There were high hopes that we might be capable of generating $10 billion in exports by 2010. It was hard to tell whether that was bullish or simply bullshit. If you wanted to know the size, growth potential, and export projections for the electronics, telecommunications, information technology, or software industries you had to visit numerous web sites and make endless phone calls to even get close. In fact official statistics indicated we were slowly sliding south.
Statistics New Zealand data from March 2001 showed the market had slowed to 5 percent growth compared with 7 percent in 2000. Total sales of single-user and multi-user computer hardware, communications hardware, and software and overall software sales reached $4.8 billion for 2001. IT exports overall were up 11.7 percent to $770 million. Although general software sales were up 11 percent to $537 million, software exports declined 14 percent to $97 million after four years of steady growth. At first that seemed depressing news. However the fact was the government was getting its statistics the easy way – by guessing and using old ideas of what constituted technology. If you added up the value of all the offshore software sales reported in the media each year the value would consistently blow the official numbers out of the water.
In the official government statistics, communications services – a very lucrative sector for our main players, including outsourcing and consulting contracts – was not included, and neither were electronics or embedded software. The figures didn’t include software sold or downloaded over the Internet, multimedia, or services and support, software developed here by branches of overseas-owned companies or embedded in petrol pumps, washing machines, or telecommunications devices. And what about Web development and e-commerce coding?
Research company IDC suggested local software industry revenues were around $770 million in 2001, expected to grow to $921 million by 2005. It was estimated software exports alone could be around $500 million. However software companies were still loath to supply accurate information. They were already taxed on R&D spending, which could not be recovered until they had a product to sell, so that figure often ended up in the expenses column. The tax regime acted as an incentive for dishonesty and penalised pioneers. The electronics industry alone was worth around $1 billion – 75 percent of which was exported. The overall telecommunications market was worth at least $5 billion but there was no accurate breakdown of exports. If you asked Statistics for better data the answer was “Who’s going to pay for the research?” IT Minister Paul Swain had promised better statistics but how that would be achieved was uncertain.[21]
Echoes of the knowledge wave
There it was in the NZ Herald on 20 March 2002: the official admission that New Zealand had missed the bus on information and communications technology (ITC). Science Minister Pete Hodgson was saying he was now determined not to let that happen with biotechnology, which is “where it’s at in the next century in terms of technology.”
What a statement. He said, New Zealand had missed the ICT bus because it did not have military research or a venture capital industry and the entrepreneurship that went with it. There were certainly many in the industry who would argue that in fact, hands-off government policies and monopolistic practices by certain corporates had been behind the stand-off, deflecting the focus to profits and playing safe rather than preparing for rapid social and economic change. Rather than freeing up businesses, entrepreneurs, and talented people to get on with the business of doing what they were passionate about we had overloaded them with administration and compliance costs. One estimate suggested employment relations, union negotiations, health and safety, resource management, and a range of other impositions had added about $26,000 in costs to the average medium-sized business.
The term knowledge wave appeared to have been just another catch cry, which confirmed New Zealand, as Brian Gaynor quipped in the NZ Herald ‘as world leaders in consultative reports and advisory committees’ but lagging well behind when it comes to specific policy decisions.
The government’s Growing an Innovative New Zealand strategy, launched in February 2002, was another attempt to try to put some muscle behind the myth and inspire industry to the next level. It would home in on the hi-tech sector and determine what could be done to raise the profile and the earnings.
It targeted the ICT, biotechnology, and the creative industries as key sectors to promote long-term prosperity. The ICT taskforce was established to push through the objectives, which included the extraordinarily bullish goal of having 100 new ICT companies, each earning more than $100 million a year in sales, by 2012. That would mean the contribution of these sectors would need to grow from 4.3 percent ($4.8 billion) of GDP to 10 percent in ten years. The enormity of the task was underscored by the fact that just 16 companies had annual sales exceeding $100 million at the beginning of 2003 and half of them were the New Zealand arms of multinationals. ICT export sales, which were $900 million in 2001, would have to grow exponentially – in the order of $16 billion by 2012. That was a big challenge, especially in software where exports had apparently fallen 14 percent in 2001 to $97 million.
“Yes, we have set a bold target, and equally we accept that it is a target that will be unattainable if we continue to do things the way we currently do them. We have identified a number of barriers that we need to break through or remove if we are to achieve our goal,” said taskforce member Ian Taylor, manager of Dunedin-based Animation Research and Taylor Made Media. Those obstacles were access to capital, tax issues that affect the ability to grow, regulatory issues that hinder rather than promote growth and an ominous downwards trend in the number of young people studying maths and all the sciences. Among the recommendations that the government would have most difficulty taking on board were calls for changes to R&D tax rules to allow full deductibility in the year of expenditure of ICT product development. The taskforce also wanted tax-neutral investment vehicles. Taylor wanted to see the government as a major buyer of ICT, adopting a more active role in buying New Zealand made.
However the barrier to growth given special attention by the taskforce was lack of management expertise to take a company to the $100 million mark.[22]
It seemed successive governments, playing spin-the-bottle with the economy, had undermined our national self-esteem. We seemed determined to study what was happening everywhere else in the hope we might resolve our own identity crisis. We sent our spies to Ireland, Finland, Israel, Singapore, and Silicon Valley and invited their best talking heads to address our business leaders and further expound on how they had made the information age work for them. Despite the wave of knowledge economy talkfests in the first two years of the new millennium, there was a sense we were still adrift in a sea of hyperbole, in desperate need of a practical, encompassing vision to steer us away from the rocks.
Then just as New Zealand was again battling to keep the prestigious America’s Cup on the waters of the Hauraki Gulf, in February 2003 another knowledge wave event brought together world leaders in business and entrepreneurialism to try and figure out where to next for New Zealand. The Knowledge Wave 2003 – Leadership Forum was eager to get more wind into the country’s economic sails. This time Auckland University vice chancellor John Hood and his Knowledge Wave Trust involved a much broader participation than the senior business people of the previous event. There were 450 delegates; artists, actors and academics, farmers and fashion designers, small business owners and corporate leaders, central and local government officers and politicians, community leaders, new New Zealanders, and fourth generation Kiwis. Many were established leaders in their given fields, including 100 who had been identified in a nationwide search as emerging leaders. The speakers were also an eclectic lot: businesspeople, technologists and visionaries from across a range of disciplines. It was a grand gathering but many of the points raised were an echo of what had been said before. There was the harsh reality from Reserve Bank governor Alan Bollard, carefully listing our slip down the OECD rankings from 1975 when we rated ninth, to 2002. Among the 24 countries that belonged in 1975, New Zealand was now poorer than all except Spain, Portugal, Greece, and Turkey.
Organiser John Hood remained confident New Zealand could return to the top half of the OECD in economic output by 2011. But Treasury economists had calculated in 2001 that even to catch up to the average of the 30 member OECD by 2011, if all the countries kept growing at the same rate they did in the 1990s, would require more than doubling New Zealand’s trend growth in output per head of population from 1.7 percent a year to 3.6 percent.
In the Weekend Herald coverage of the conference in February 2003 Simon Collins compiled the various viewpoints put before our current and future leaders.
Sunday Star Times columnist Rod Oram took a slightly different approach, suggesting we had far too many visitors from abroad downloading their knowledge to us. He said the organisers of the conference, in bringing the best of the world to New Zealand, had passed up an important opportunity to remind New Zealanders that they too generate knowledge which the world is keen to buy. Our export of services such as education, research, and consultancy had grown faster over the previous five years than the export of goods – by 62 percent compared to 50 percent. They totalled more than $11 billion in the year to September 2002, and export of services grew faster than imports, turning around a billion-dollar deficit in 1997 to a surplus in 2002, the first surplus since 1965.[23]
Where to next?
There was no shortage of examples that New Zealand was punching above its weight in the entrepreneurial stakes. Wellington’s Weta Workshop was winning global accolades for its work on Peter Jackson’s Lord of the Rings trilogy. Virtual Spectator, the Internet-based animation software for viewing the America’s Cup, was now being sought to assist in coverage of motorsport, golf, cricket and live concerts. Researcher and AUT lecturer Vishwa Shukla had come up with a digital anthrax detection unit that had been all but ignored until September 11. Tiny Auckland firm Domain Numbers had a winning application for mobile phones and handheld devices, enabling people to use numbers to access complex Web addresses. There was sceptic Professor Denis Dutton’s runaway success with his web site Arts & Letters Daily, which had been voted by the British Observer newspaper as ‘the best site in the world,’ and which sold to an Academic Partners, LLC for $1.4 million in 1999. Local security software company Marshall Software sold for $45.8 million to American firm NetIQ. Then there was 2000 chemistry Nobel Prize winner Alan MacDiarmid,[24] who discovered plastics could conduct electricity, opening the way for major technology innovation including flexible plastic transistors, electrodes, and electroluminescent polymer displays.
Whether it was Ernest Rutherford a founder of modern atomic physics, Richard Pearce, our own pioneer of powered flight, or Beatrice Tinsley, a world leader in modern cosmology, we certainly had many heroes of innovation we could look to if we were seeking evidence that we could lead the way.[25] This nation at the edge of the world, where the sun and entrepreneurs first rise, was truly blessed, but we had done little to promote innovation, encourage risk taking or promote ourselves as a nation of achievers and knowledge economy leaders. Our national budget for marketing and branding ourselves offshore – around $150 million – was pitifully inadequate.[26]
We had the Kiwi Share, ensuring free local calling, including Internet access, for all households. Our uptake of the Internet was at critical mass and the cost of access was now relatively low. At the turn of the millennium New Zealand still faced the harsh reality of the digital divide. Equitable access to high-speed communications throughout the country, not just in selected central business districts, would have been a good start.
Knowing who you want to be when you grow up is a simple question children are repeatedly asked as they head towards the teenage years, adulthood, and self-determination. The new economy required a concerted effort to define what we were good at, to clearly outline a vision, to remove the impediments to growth, and decisively act on the steps to success. Without a common vision that business, government and private individuals could passionately pursue, we were at sea with no fixed point to plot our co-ordinates to the doorstep of the world. Regardless the Kiwi can-do attitude would continue to play a pivotal role in the long-term plan. As the sign above the desk of New Plymouth–born Nobel Prize winner the late Alan MacDiarmid said, “I feel like I’m a lucky man – the harder I work the luckier I get.”
Sidebars
Footnotes
[1] Graham T. Crocombe, Michael J. Enright and Michael E. Porter, Upgrading New Zealand’s Competitive Advantage, Oxford Press, 1991
[2] Keith Newman, ‘Guru takes time to reflect on economic reforms,’ NZ Herald, 4 November 1998
[3] Keith Newman, ‘Porter stresses need for a national vision,’ NZ Herald, 10 November 1998
[4] Keith Newman, ‘Hi-tech groups can lead growth: Wilde,’ NZ Herald, 2 November 1998
[5] Keith Newman, ‘We’ve been snoozing,’ Metro, October 1999
[6] Miriana Alexander, ‘NZ basks in global glory worth millions,’ Sunday Star Times, 31 October 1999
[7] James Gardiner, ‘Our $12 m quest for the Holy Grail,’ NZ Herald, 5 January 2000
[8] Trevor Eagle, who died in December 2000, was the founding president of the Information Technology Association (ITANZ) in 1988, and the government’s first appointment to its Technology for Business Growth (TBG) advisory committee in 1992 and chairman of the Hi-tech Council, tasked with keeping the government informed about industry needs. Keith Newman, ‘Obituary Trevor Eagle: Passionate IT Advocate,’ NZ Herald, 14 December 2000
[9] Previously unpublished comments from interviews with Trevor Eagle, 1999
[10] Sir Angus Tait died at the age of 88 on 7 August 2007. He founded Tait Electronics in 1969, with a second mortgage on his house, after a previous business went broke in 1967. The business grew to employ 750 people with revenues of around $170 million
[11] Keith Newman, NZ Herald, June 1999
[12] Keith Newman, ‘Visionary leadership overdue,’ MIS magazine column, May 2001
[13] NZInternet.com, February 2001
[14] ‘Catching a Deluge In a Paper Cup,’ NZBT, 27 July 2001
[15] Keith Newman, ‘Kiwi Edge Needs Sharpening,’ nz.Internet.com, April 2001
[16] Catching a Deluge In a Paper Cup’
[17] Keith Newman research from articles for nz.Internet.com and MIS magazine in February and August 2001
[18] Simon Collins, ‘Catching up a tall order,’ Weekend Herald 22–23 February 2003
[19] Cathy Aronson, ‘Cutbacks rob knowledge banks,’ NZ Herald, 28 July 2001
[20] Keith Newman,’Kickstarting The Knowledge Economy,’ MIS, Dec 2001
[21] Keith Newman presentation to Flaxroots conference at AUT, ‘Changing Gears,’ 11 April 2002
[22] Chris Barton, ‘Ambitious goal in days of the dotcom wreck,’ NZ Herald, 11–12 January 2003
[23] Rod Oram, ‘We have our own wave of knowledge,’ Sunday Star Times, 2 March 2003
[24] Alan MacDiarmid died on 8 February 2007. MacDiarmid was one of three joint winners of the Nobel Prize in Chemistry for the discovery and development of conductive polymers in 2000. He was made a Member of the Order of New Zealand, for his outstanding contribution to chemistry and the New Zealand science community in 2001. Throughout his career he has maintained close research links with the Victoria University of Wellington School of Chemical and Physical Sciences, the Crown Research Institute, Industrial Research Ltd, at Lower Hutt, and the Royal Society of New Zealand.
[25] View the growing archive on our heroes of innovation at the NZEdge web site: www.nzedge.com
[26] Keith Newman, ‘Contradictions for Entrepreneurs,’ NZBT, 30 November 2001