Infotech are reporting that a French firm has been identified as “preferred provider” for an integrated smart card solution across the Auckland region. If NZX listed local company Infratil misses out, it underlines the continuing struggle faced by local technology firms to secure major publicly funded contracts.

The Auckland Regional Transport Authority (ARTA) has been assessing tender responses for a much needed smartcard solution that would provide considerable relief for beleagured commuters in the City of Sails. But ARTA appears to have already flagged Thales as the most likely candidate in the project, which is reportedly valued at up to $100 million. At a time when everyone is concerned about preserving jobs, you would think that local contractors would receive favourable consideration. But – as in the past – local component is not a criteria for assessing public spending.

The stakes are high for the companies concerned. Wellington is considering extending to a region-wide solution and Christchurch is looking for a system that is compatible with whatever technology Auckland settles upon. The New Zealand implementations will also be excellent business case studies to support future export sales.

So perhaps the local technology is inferior? Not so. Last year Infratil, in a joint venture with ANZ bank, developed and launched the Snapper smartcard on its bus network across the Wellington region. Apart from some minor teething problems at the outset, the product has proven a success amongst Wellington’s commuters and usage continues to grow. The swipe cards can be recharged periodically and also used for small purchases at convenience store outlets.

Perhaps the chief criticism of Infratil’s solution involves concerns about monopolistic practices, because only Infratil buses currently have the Snapper technology installed. However that argument seems like a moot point given that ARTA have complete control over the scope of the solution for Auckland. Infratil will also draw upon the experience of it’s Australian project partner, infrastructure giant EDI Downer. So there is little doubt about the vendor’s ability to stay the course. Having eliminated the usual arguments – what is it that stops NZ public agencies from supporting local businesses? Outdated attitudes towards procurement of local technology should be confined to history.

Instead of retrenching, businesses are now being encouraged to use “shaping strategies” to navigate their way forward through uncertainty, so why couldn’t we apply this approach in the broader economy?

I’ve discussed at length the need for a unified national strategic blueprint for research, science and technology innovation. In difficult economic times this is more important than ever, because a ship without a rudder goes around and around in ever decreasing circles. But during an economic downturn is the perfect time to build capability in preparation for the next up cycle. This applies as much to a national economy as it does to  a small business. So we need to look at how we formulate innovation strategy both within our technology ventures and as a nation.

Shaping strategies eschew Darwinian styled adaptation to rapidly changing environments in favour of a vision that inverts the traditional risk/reward pyramid. Shaping strategists argue that by defining the market and offering a compelling case for investment, companies can leverage extraordinary returns.  For example in the confusing world of carbon trading and taxation of emissions, traditional polluters such as energy providers are now investing in disruptive clean technologies as a new source of revenue. The entrepreneurs who saw the change coming and established solar and wind energy technology ventures five to ten years ago are now reaping the rewards.

Shaping strategies are exemplified by involving large and diverse ecosystems of participants but within which profitable niches are established. So in the same way that Apple and Microsoft defined desktop computing, Google is now embarked upon a strategy to reshape how consumers perceive enterprise software. And although not every business has the resources to shape the market, there is lots of space to occupy the various niches that emerge within the new paradigm. For example at ideegeo we are carving out a space through which we can utilise our expertise in domain related technologies to support the transformation from proprietary software to hosted services.

So could we use this model to address strategic deficiencies in our own economy? I say yes, but it calls for a grand vision that previous governments never quite delivered on. A national shaping strategy that includes addressing infrastructure shortcomings whilst simultaneously raising research, science and technology output would create many new niches for businesses and individuals to occupy. Unfortunately politicians and civil servant bureaucrats are somewhat risk averse and therein lies the problem.

John Key’s recent announcement that the hard won R&D tax credit will be wiped out under a National government demonstrates a deep lack of understanding by the party regarding the role of the State in stimulating innovation and encouraging improvements in terms of global competitiveness.

Oddly, only two weeks previous they were proposing only a reduction in the tax credit from 15% to 10%. Now they want to drop it altogether, as well as kill Labour’s Fast Forward programme. The supposed savings would then be applied to pastoral greehouse gas research and primary sector and food research. Those are precisely the areas Fast Forward was targetting already, which means their policy results in a rather poorly disguised net loss of funding available to research, science and technology.

And if you think that government funded innovation sounds oxy-moronic, I agree. The agencies that fund and support innovation and economic development are (ironically) amongst the most bureaucratic and tunnel-visioned in New Zealand – and to their credit National have clearly expressed a desire to work on improving that situation. After all, there is a core of good people working within those organisations and a bunch of passionate scientists who really do want to make a difference, but whom are sometimes stymied by silly rules, mountains of paperwork and funding inconsistencies.

And there certainly remains a role for State intervention in economic development because markets do not always resolve economic short-comings in an equitable fashion. In fact, other small, agrarian nations have surged ahead in OECD rankings and in global competitiveness partly through the wise use of state directed programmes, including tax incentives. The Nats would be well advised to get over their pathological revulsion towards government sector and instead open their minds to some fresh ideas.

Of additional concern is the fact that the National Party’s economic development spokesperson Dr Richard Worth has been notably silent on exactly what strategies the blue team have in mind to forge New Zealand into “an innovative, export-led and high wage economy”. In fact Dr Worth’s last press release about anything at all was almost a year ago. This illustrates how much of a cult of personality that National has now become. That’s a problem because of Key’s background. He made his fortune trading in financial futures and equities, not through being entrepreneurial and actually building something worthwhile. In fact Key and his ilk are precisely the reason why the global economy is in serious poo right now.

Next week: Did Labour Govt. Squander Economic Transformation Opportunity?