Frontier Firms Follow-On Funding Favoured

frontier-firms

The recently published New Zealand Productivity Commission Report on the economic contribution of “frontier firms” predictably rated only a passing mention in local media. However recommendations in the publication could have far reaching impacts if implemented. But is the government listening?

Frontier firms are described as the most productive, profitable and innovative in an economy and generally have scale and global reach. But the report says that New Zealand’s frontier firms lag behind their global peers in terms of productivity. The OECD defines productivity as the ratio of economic output compared to inputs. Nations with highly productive frontier firms have greater competitiveness because of more efficient use of resources such as labour and capital. These nations also benefit from secondary “innovation and knowledge diffusion” within their economies.

Chairperson of the Commission Ganesh Nana, in an interview with Radio New Zealand says New Zealand is already well behind other small developed economies in the OECD in terms of productivity and the gap is growing every year. He says part of the reason is because we do not have many so-called frontier firms to which smaller innovation based companies can anchor. One of the key findings of the report is that the government must invest in developing a deeper innovation ecosystem, including supporting more commercialisation of research, science and technology.

But will the government take on board this message? Many of us currently working within the New Zealand innovation ecosystem have lobbied in the past for vastly increased resourcing and for setting greater aspirations as a nation. But such pleas have largely fallen upon deaf ears over the years. There are sadly also actors within our ecosystem that are philosophically opposed to any kind of government investment on the basis that only wealthy and well-connected players should be allowed in the game. This is despite the fact that our neighbours (and competitors) in places like Australia, South Korea and Singapore identified the value many years ago and have literally invested hundreds of millions of dollars into building out their own innovation ecosystems.

Developing more frontiers firms is not about growing more “unicorns” as some have mistakenly claimed. But it is about building a more interconnected economy that has research, science and technology at the heart of the beast. That’s a big ask for a small nation for which there are many competing priorities and challenges to face such as health, housing and climate change. But the key to motivating the decision-makers involves grasping the reality that having a powerful innovation ecosystem is actually part of the solution to those challenges.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest, advisor at ThincLab within the University of Canterbury Centre for Entrepreneurship and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.

The Commercialisation Imperative

Oxford

Blue Skies Thinking Needed

Competing and surviving in a highly technological, fast changing and globalised economy increasingly dictates that universities and institutes step up and generate economic returns on their research. But although there have been a few notable exceptions at New Zealand universities, we continue to underperform in the commercialisation of new scientific knowledge into value generating products and services that drive economic growth. So if disruptive innovation lies at the core of economic development, how can we better reconcile commercialisation with the core purpose of our institutions?

Firstly, there are some valid arguments in favour of the separation of commerce from academia. Normative, collectivist elements of academic science as a social system, along with the autonomous nature of university culture, seem to sit uncomfortably with the motivations of profit seeking firms that wish to take ownership of intellectual property. Claims of IP ownership can lead to fears of diminishing the scientific commons, which would be detrimental to the collegial and collaborative nature of science and therefore hinder the very process that will drive future discoveries.

Furthermore, commercialising technology research is risky and accommodating new and developing fields of commercially focused science takes up resources that might be used for other teaching and research, impacting the core mission of universities. We have already witnessed closures and staff reductions within arts and humanities faculties where commercial outcomes are less of a focus. There’s also a danger that high tech institutes established in emergent fields become impenetrable and elitist silos of specialist knowledge open to only a few, at a time when we should be striving for greater equity. Are there other societal factors at play that dampen success?

Patent filings data is sometimes quoted as an indicator of “innovativeness” in the context of economic development. New Zealand sits at the lower end of the table, but not because it is a small economy. Countries with relatively small populations such as Finland, Switzerland and Israel lead the pack. In New Zealand total expenditure on research and development as a proportion of GDP has been increasing in recent years, but continues to lag behind other developed countries. Investment rose to 1.37% in 2018. This compares to an average research intensity figure of 2.38% across all OECD countries, ranking New Zealand 21st out of 34 nations [Statistics NZ — 2018]. So whilst the size of an economy does not fully explain the innovativeness of a nation, the level of commitment to research and development investment certainly plays a part.

Approximately half of that R&D investment originates from publicly funded sources. With government investment comes an expectation that tax payer funded academic research will provide a “return on science” or economic and social benefits to society. The challenge then is to generate meaningful commercial outcomes, that do not undermine the core missions of teaching and research. There are a great many reasons to do so, not the least of which is our ability to fund future health, education and welfare needs. As a nation heavily reliant upon commodity based income we must gravitate towards higher added value goods and services to ensure the future economic wellbeing of our society. Developing an ecosystem approach to cultivating innovation is a key part of this journey.

For example, benefits in cultivating university-industry ties become amplified due to network effects and serendipitous conversations around the humble water cooler (or perhaps kombucha fridge these days). This “innovation ecosystem” approach has benefitted a number of scientific fields. For example the emergence of biotechnology as both a science and business from MIT and other institutions clustered within the Boston area. Commercialisation of new knowledge can also speed up solving complex social, health and environmental problems that might not otherwise be addressed, attracting both government and private sector funding into academia.

The global pandemic has also accelerated the need for scientific innovation. Previous hard won gains against poverty and improvements in social equity have been wiped out by pandemic related economic carnage. In addition, because of growing urgency in relation to addressing environmental challenges, there is forecast to be a vast migration of capital away from polluting industries over the next two or three decades. This green transition will create enormous opportunities for scientific organisations operating at the leading edge of cleantech, renewable energy, low carbon construction and regenerative agriculture, for example.

Embedded within entrepreneurship centres of research, university innovation labs such as ThincLab at the University of Canterbury are important intermediaries in the cycle of innovation and a key part of a vibrant ecosystem that engages with a wide array of supporting players to ensure the success of spin-off companies, whilst at the same time respecting the scholarship that underpins scientific discovery.

This article was first published on the ThincLab blog and formed the basis of my presentation to the Food, Fibre and Agritech Supernode Challenge 2021 cohort.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest, advisor at ThincLab within the University of Canterbury Centre for Entrepreneurship and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.

Entrepreneur Ecosystem Resource Rethink Requested

Square EManifestoNZ PostDuring the last few months a number of us from the entrepreneur enabler community have been working on a manifesto document aimed at making the case for a more coordinated and vastly better resourced entrepreneurial ecosystem. The initiative sprung from a weekly discussion session that began during the pandemic lock-down and was hosted by the Global Entrepreneurship Network in New Zealand.

As entrepreneurs we are accustomed to dealing with uncertainty and frequently making do with limited funding. But as the economic and health crises evolved, it has become clear that as a nation we will need to do a great deal more together to support entrepreneurship. This is more important than ever now because encouraging early stage new venture development will be fundamental to both the economic recovery and preserving our living environment. In fact we need to be embedding transition thinking into every economic policy decision.

Despite claims by officials to the contrary, government support for early stage entrepreneurship is negligible by comparison to our neighbours across the region. New Zealand is light years behind and it’s time we had an honest conversation about it. Singapore and Australia have already injected hundreds of millions of dollars into developing their ecosystems over the last few years, with demonstrable success – particularly in software and deep tech. There are currently over 4,000 technology based startups operating in Singapore and there was around US $10 billion in venture investments made during 2019 alone. Australia’s “deep tech” incubation program turns 20 years old this year and continues to churn out high tech success stories with publicly funded support through the universities.

But how do we make a case for scarce public funds at a time when there are so many other competing needs? The reality is that we cannot afford to delay any longer. Our innovation infrastructure has been left to languish for far too long thanks to gate-keeping and a lack of a compelling vision. This long-standing under-investment now looks like a threat given the challenges we currently face. So it is our role to inform and educate through the Manifesto document.

Fortunately we could make a huge difference with even a modest increase to resourcing. Through the manifesto we’ve suggested five areas [PDF] that could deliver early wins and for which there are already a number of initiatives in play that could very easily be leveraged and scaled up. Building upon our existing innovation infrastructure is the smartest way to grow economic activity and employment.

For example, there are several excellent educational programmes operating within New Zealand that aim to build entrepreneurial and innovative capability, specialising in various demographics from primary school through to postgraduate research level. All of these programmes bring value to the ecosystem and help to create a pipeline of talent. But there is little in the way of coordination between these initiatives. This is a lost opportunity at a time when there has never been a greater need for high value, new venture innovation across society.

One approach would be to provide an overlay to better align our efforts in educating, encouraging and empowering entrepreneurs from an early age. Furthermore, creating an “innovation nation” is the key to solving the most intractable environmental problems that confront us, whilst also generating positive economic and environmental outcomes across society. New Zealand has a unique window of opportunity to show global leadership in this space right now, in order to attract the capital and talent we will need to rebuild better.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.

Innovation As Infrastructure

For the first time in decades, the government has an extraordinary amount of political license available to expend on addressing key social, environmental and infrastructural problems that have become a handbrake on progress in New Zealand. The dual public health and economic disasters visited upon us have provided an unprecedented impetus to unlock the public purse. It is also a once in a lifetime opportunity to transform the economy towards a cleaner, more inclusive, lower carbon future. Innovators and entrepreneurs must be part of that conversation.

With the exception perhaps of the fibre rollout, it is widely understood that there has been decades of under-spending on key infrastructure which forms the foundations of the wider economy. Resilient infrastructure and fostering innovation also comprises part of the United Nations sustainable development goals, to which New Zealand is a signatory. So as part of recovery investment, we are hearing that there will be government led co-funding for “shovel-ready” infrastructure projects. Debt constrained local bodies are now scurrying to dust off previously paused plans for roads, cycleways, water pipes and much more. Useful works that will provide much needed short term employment – but hardly transformational.

We have also recently seen a proposal from the Greens calling for a $1 Billion investment in the natural environment. The project involves regeneration of wetlands, protection of waterways and restoration of native bush. Apart from providing instant employment, the long term environmental returns would be substantial. The crisis has also illuminated shortcomings and under-investment in the health sector. It is clear that there is room for funding some improvements. There will no doubt be numerous other programmes and waves of investment arising in the future. How can this public investment generate the best return to our economy at a time when external trade is problematic?

With support from government, our innovation ecosystem has grown vastly during the last two decades, so there is plenty of talent available to work in partnership on these problems. Government agencies will require substantial additional capability to quickly deliver on these initiatives and to get cash out the door and circulating within the economy. A collaborative approach involving the rapid roll out of partnerships with local bodies, social enterprises and other businesses will be required. This calls for a bold evaporation of the the risk aversion and gate-keeping that so often derails and delays promising and innovative partnerships with government.

What if we devolved responsibility for identifying, funding and managing discrete environmental projects to regional public-private innovation partnerships? How about an education technology incubator that sits alongside a teacher training institution? What if we had a private sector centre of excellence for IoT and AI tech embedded within the proposed public works agency? How about a FinTech entrepreneur programme engaged with Treasury?

Let’s re-purpose our innovation ecosystem, in partnership with the State, onto solving the really big social, environmental and technological problems confronting us currently. GovTech on steroids, with meaningful funding, actionable deliverables and value creation through protecting and growing any associated intellectual capital.

Christchurch based Carl Pavletich had already been looking at transition processes within organisations when the crisis hit. He realised that, like during the earthquakes, there had once again been a catastrophic transition forced upon us. “Instilling a startup mindset may be our best emergent strategy to adapt”, he says. Paveletich developed Spire, a simple model that guides rapid prototyping of organisational responses and keeps all stakeholders in the loop. This is the kind of thinking that should inform and accelerate engagement between government and the innovation community.

So as the government grapples with how to breathe life back into a dormant post-virus economy, we must ensure that innovation and entrepreneurship are at the forefront of progress. Beyond that, we actually need to rethink how we view the structural aspects of the economy. Glass, bitumen and concrete infrastructure are important, but as futurist and serial entrepreneur Nick Gerritson suggested recently, we all need to start thinking of innovation as economic infrastructure. If the goal is transformational change plus avoiding a terminal economy – the public sector must get onboard with this philosophy, fast.

Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of New Zealand based technology venture iwantmyname,  a co-founder and director of Creative Forest and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Finnotec Triumphs Again

finnotec2019After missing the previous two events due to timetable clashes, the planets aligned and I finally made it to this year’s Finnotec event. With some important partnerships now sorted and a bunch of thought-provoking speakers in hand, Binu Paul from Savvy Kiwi, the driving force behind the event, has ensured Finnotec will remain New Zealand’s prime conference for all things FinTech related.

With payments technology being an important aspect of my previous venture, I thought that I possessed at least a rudimentary knowledge of what goes on behind the scenes in traditional financial processing systems. But the high quality speakers at Finnotec soon made me realise that I had a lot more to learn. The annual one day conference has become an important “clearing house” for accessing regulatory knowledge, business networking and a nice showcase for emerging talent in a category that barely existed a decade ago.

I was especially impressed by speaker Cathryn Lyall, who clearly has a huge depth of experience across the FinTech space. A board member at Deutsche Bank UK and with 30 years in a variety of roles across capital markets, including as a market floor trader, ex-pat Aussie Lyall is undoubtedly well placed to be an investor and advisor in Fintech. The big takeaway from her talk was about the urgent need for Fintechs to “create real value” for customers in a crowded marketplace where users already get a lot of their services for free from the incumbents.

So courtesy of Rewired the new Xero co-working space, we enjoyed a number of presentations from some hot new startups that have been making waves in our local FinTech scene. Here’s a quick run-down from the showcase:-

MyCap Markets – A blockchain based private share management offering complete with a secondary market platform. Solving the problem of liquidity for shareholders of smaller, unlisted companies.

Kernel – A data driven approach to index investing with a digital tool kit that helps customers make informed decisions.

Transactional AI – Using AI to analyse consumer spending behaviour and better inform lenders. One of the shining stars of this year’s Kiwibank FinTech accelerator at CreativeHQ and a favourite with the Finnotec crowd.

Planolitix – A financial cashflow diagnostic Saas offering initially aimed at financial advisers. Anything that banishes spreadsheets has got to be good, right?

First AML – Simplifying dealing with the obligatory and burdensome administration around anti-money laundering legislation. Solving a real pain point.

Relay.AI – Back in the day it was called “factoring”, but this startup digitally reduces waiting times for businesses to receive invoice payments.

Overall, a thoroughly informative and engaging day out with a diverse group of highly dedicated players and supporters in New Zealand Fintech. Harmoney, Westpac Ventures, Paymark, Xero and UK DIT deserve compliments for having the foresight to back this event. With a little more community curation and the continuing support of FinTechNZ, this event can only get bigger and better as the industry grows.

Paul Spence is a commentator and serial entrepreneur, formerly a co-founder of New Zealand based technology venture iwantmyname,  a co-founder and director of Creative Forest and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Optimising Our Knowledge Networks

Instructing the Super Fund to channel $300 million of investment into emerging tech firms, as well as a recent call for delivery of a “deep tech” incubator to assist commercialisation of public funded research in New Zealand, illustrates that the government has been listening to the concerns of the high tech business community around the need for greater support in the commercialisation of knowledge. Health, environment, food production, robotics and AI – there are many problem areas in which we can excel.  But whilst a broadening of activity in the innovation ecosystem must be seen in a positive light, new entrants may face an uphill battle.

Some say that government involvement in the sector is long overdue. Not a month goes by without the media reporting the departure of a promising high growth, high tech firm such as Rocket Lab, for example. The paucity of follow on capital and expertise available locally is often quoted as the culprit. Successive previous governments failed to address the problem due to being ideologically opposed to what has sometimes been unfairly branded as corporate welfare. But interestingly the most vocal critics of incubation and government directed investment funding tend to be wealthy and well-connected individuals who have no problem sourcing capital for their own ventures.

Since the public purse is already funding universities and research organisations in one form or another anyway, is it really such a stretch for government to facilitate obtaining an economic return on those investments? Those who mutter in their beards about “level playing fields” should take a look around. We are losing the battle with our neighbours in the Asia-Pacific region with whom we compete for capital and talent. Australia, Singapore and Korea all provide substantial support for startups and the commercialisation of publicly funded research.

So where does that leave New Zealand with its newly rediscovered enthusiasm for investing in science and technology commercialisation? Well there was an additional most welcome announcement this week of new funding for an existing body that has already made considerable inroads into surfacing promising research and turning it into businesses. That seems to foreshadow where government thinking might be heading in terms of who is now best equipped to develop a formal incubation programme.

But research commercialisation is actually a network optimisation problem involving many and diverse stakeholders. A post graduate study that I conducted on this topic a few years ago is still relevant. The most creative ideas and opportunities are found at the boundaries where disparate networks overlap. Hence the direction we are heading with, GeniusNet. It is therefore absolutely essential that we have an open innovation based ecosystem and a diversity of players in the incubation and commercialisation marketplace, if we are to lift our economy up the value chain.

Paul Spence is a commentator and serial entrepreneur, a co-founder of New Zealand based technology ventures iwantmyname and Creative Forest and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Will CGT Deliver “Well Being”?

The findings of the Tax Working Group are in and (unsurprisingly) the recommendations lean heavily towards introducing a full blown capital gains tax (CGT) into New Zealand from 2021. About the same time, the Prime Minister fronted with her first economic speech of the year in which she clearly signaled that the next budget will be focused on “well being”. Only a very cold-hearted person could deny this is much needed, but there are huge political risks attached to both these initiatives.

Lifting the economic, social and mental well being of youth seems to be front of mind for our government. Quite rightly so, young people are our future. Growing an increasingly impoverished and disenfranchised group in society is in nobody’s interest at all. But equally, ignoring economic realities and the role of business in society is a dangerous road to tread. Young people need jobs and hope and we cannot deliver this in a shrinking economy. The government must continue working on the infrastructure deficit and especially deliver on intelligently supporting economic growth in the regions, where there are many latent opportunities.

This point is important because youth unemployment and social needs are high in our rural areas, smaller towns and cities. Interestingly, farms, small businesses and family owned property holdings are likely to bear the brunt of a full CGT. Not exactly a recipe for economic growth in the provinces. But I think we all know that a comprehensive CGT is unlikely. The political risk is enormous and even the most optimistic of economists agree that, although beneficial in the long term, CGT will crush economic growth – at least initially. So the government needs to be ready to take that one on the chin.

A small blip in the economy could be weathered perhaps, but keep in mind that we are not a high growth economy in the first place. Forecasts (without considering CGT effects) place New Zealand at about 2% growth, compared to 3% average globally forecast for next few years. During my recent visit to Singapore, I noticed there was much hand-wringing in the media that their GDP growth had dropped to 7%! We are not in such an envious position and even a small drop has huge implications on tax revenues, thus cancelling out the resources for “well being” projects.

Another worry is the looming threat to businesses owners. Those who invest time and capital into growing their businesses may now be penalised when they come to realise gains from their efforts. Taxing habitual property traders and business that impact the environment is certainly something we should do, but taxing entrepreneurs for employing people, paying GST and income tax while strengthening the productive part of the economy, is a very bad idea.

Companies that produce high value “weightless exports” such as software are likely to be disproportionately penalised because these ventures tend to be started with minimal shareholder capital investment. Therefore almost all of the value at time of disposal will be subject to taxation. No doubt the government has an eye on the tsunami of baby boomer business owners that will be exiting in droves over the coming years. But who will replace them? In a world with an uncertain economic future, the current no-CGT regime on sales of business assets is one of New Zealand’s few competitive advantages.

Paul Spence is a commentator and serial entrepreneur, a co-founder of New Zealand based technology ventures iwantmyname and Creative Forest and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

 

Crazy Rich Asians

SIN City 3If you are a fan of romantic comedies you may recall a scene in last year’s hit movie Crazy Rich Asians in which friends join the happy couple at an outdoor food centre for an evening of laughs, beer and Singaporean food. Amerasian Rachel is trying her best to fit in but is caught off guard by a particularly spicy mouthful of Laksa, much to everyone’s amusement. In some ways this typifies the visitor experience in Singapore. At first it can be hard to find your place in the cultural melange, but there are surprises around every corner and people are friendly once you’ve been properly introduced – so it’s very much worth persisting.

During a recent trip to Singapore I ventured into the Newton food centre where that movie scene was filmed. The venue exemplifies Singaporean society and politics perfectly with a spicy blend of regional cuisine subtly dominated and flavoured by the prevalent culture on the island. But perhaps that is part of Singapore’s magic formula which has been openly founded on the basis of a benevolent autocracy. And I must admit that it was a pleasure to spend a week in a society where trains and planes consistently run on time and there is no trouble from neighbours with barking dogs or idiot boy racers ripping up the tarmac. There are even plans to require registration of e-scooters, because it is simply the sensible thing to do.

The subtle hand of the State is found almost everywhere. Singapore has one of the largest sovereign funds per capita of any nation and many of the most influential corporations are State owned. But that is not to say that private enterprise is discouraged. Quite the opposite in fact. The city state has a very active startup scene and despite some obvious headwinds in the economy and increasingly stiff competition from neighbours such as Hong Kong, India and Dubai – Singapore remains the largest single source of investment in South-East Asia.

Co-working hubs like Found8 can dial you into local networks quickly and The List is a community that keeps founders in touch with all the coolest tech and innovation events around the region. I spoke to Sarah Yen from Simmonds Stewart’s Singapore office during my visit. The Wellington based legal firm assisted South-East Asian business clients to raise $220M in venture funding in 2018, which was double that transacted for their clients in the New Zealand market. Yen explained to me that after a brief lull, global venture funds based in the region are raising capital once again. The legal firm has built good relationships with U.S. based funds like Sequoia which have Asia focused funds for example.

New Zealand startups or growth stage companies seeking capital should not be shy about looking to Singapore, she says. Yen outlined how her firm can easily handle setting up a local presence for clients interested in tapping into the deep pockets of these funds. Taking VC investment is not everyone’s preferred pathway of course, but for those who choose to do so, it can be a hard road in New Zealand. For example the scarcity of follow-on funding has recently led to criticism by Rocket Lab founder Peter Beck in an explanation of why his company had to move to the U.S.

So perhaps we need to be a little more creative in how we engage with offshore funders. Either we need to somehow encourage global funds to engage locally more frequently or we need to develop structures that better facilitate inbound investment, whilst retaining economic value within the New Zealand economy. Otherwise we are doomed to remain largely excluded from the global flow of capital and confined to being an incubation nest for ventures that must eventually fly away and leave us.

Paul Spence is a commentator and serial entrepreneur, a co-founder of New Zealand based technology ventures iwantmyname and Creative Forest and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Photo Credit: Paul Spence

Whatever Happened To Competitiveness?

Having spent a decade helping to build a technology business as well as giving back to the community along the way, I thought that I was making a valuable contribution to growing a more knowledge intensive economy here in New Zealand. I was able to measurably improve my own lifestyle and assumed that we were all heading in the right direction together. But with regional economic development becoming more politicised than ever and national indicators of labour productivity and GDP actually decreasing over the last two years – I now realise that we have a lot more hard thinking ahead of us as a nation if we are to deliver on the clean and competitive, high value economy that we all hoped for.

Lately, in an effort to determine how I can best contribute intellectually to this creative endeavour, I’ve been revisiting some of the traditional macro-economic theory around “competitiveness”. As well, I’ve been exploring some new approaches that are emerging in the development arena, with the goal of bringing together my business experience and the latest in economic development thought leadership. I’m a firm believer that policy and actions should be driven by a combination of practical skills and academic theory.

The World Economic Forum defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country”. Productivity is simply the ratio of outputs versus inputs in an economy. Traditionally a more productive economy generates more wealth and (theoretically) more income per capita and better standards of living for its citizens. In practice, it is more problematic and here’s why.

Firstly because this formula assumes wealth is the only measure of good. Happily, some governments and corporations are now beginning to rethink GDP and put more weight on less tangible measures of progress such as well-being for example. Secondly, social factors can skew apparent productivity. For example wealthy nations with large populations of guest workers who have a much lower standard of living compared to local residents. Also the rise of pan-national states (such as EU) and the drift away from globalism towards regional trade agreements, force us to revisit how we look at competitiveness from a global perspective.

Competitiveness is as relevant as ever, but it is being framed within a somewhat different context these days. Even Prof. Michael Porter, who famously drove much of the original thinking around competitiveness, agrees that the landscape has shifted. Today businesses (and national economies) are highly networked, social and collaborative – meaning that the forces of competition have changed. Furthermore Porter has evolved his own thinking and now dedicates much of his time to promoting social progress as a measuring stick independent of GDP.

The challenge for New Zealand remains the same. How do we drive our economy up the value chain and away from extractive and polluting commodity based export industries? After ten years on the job, I learned that building and scaling a knowledge based business is very hard work. Even for those who do succeed, the returns may not outweigh spending the same time and capital investing in property, dairy farming or planting pine trees. That’s a huge competitiveness problem that we need to solve if we are to maintain our enviable lifestyle into the future.

Paul Spence is a commentator and serial entrepreneur, a co-founder of New Zealand based technology ventures iwantmyname and Creative Forest and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Photo credit: Renea Mackie – Creative Forest

Big Ideas Poor Execution

In early 2014 the Wellington City Council announced a series of “big ideas” to boost economic growth in the city. Predictably, in the two years since, there has been little progress.

For starters, it was always clear that the airport runway extension was not a good idea because of technical reasons that I have outlined on numerous occasions. What was less clear, was the business case to justify a ratepayer funding subsidy based on these illusory benefits. It subsequently emerged that the real reason for the extension was to make it safe for existing aircraft. Something that the airport should have taken care of years ago.

The Miramar film precinct and creative enterprise zone idea sounded promising at first, but once again there seems to have been little progress. Additionally, Shelly Bay (see photo above) on the Miramar Peninsular is ripe for development but has been an embarrassing eyesore for many years because the ownership can’t seem to work collaboratively and constructively. A number of attempts have been made to move forward on developing the area but once again nothing has happened yet. The film museum now looks set to rise on a site opposite Te Papa, co-funded by the city. At least we have that to look forward to.

Finally, and most disappointingly, there was the concept of a tech district based around the Cuba Street precinct, where many of our most exciting startups and technology sector companies reside. Our office is located in this area and I’m not aware of any initiatives yet. In fact council staff have been putting up more yellow stickers and telling building owners to get concrete masonry sorted or suffer the consequences. So the future of the area is sketchy, especially in light of recent seismic activity.

What did happen in the previous two years was that the council invested a huge sum of ratepayer funds into a vanity project aimed at helping a private company set up a large co-working space on the edge of the CBD. It’s a good venue, but initially bold community-building objectives seem to have fallen a little by the wayside this year. I’ve also heard one or two newly elected councillors privately express their reservations over this and the lack of innovation support generally. Now that the Grow Wellington model has been homogenised and had the life crushed out of it, the incoming council are trying to figure out how to fill the vacuum.

Overall I’m worried about Wellington’s crumbling economic competitiveness, a scenario which is likely to be compounded by the hidden effects of a slow-moving earthquake impact, including incapacitation of the container shipping terminal. There are many old and damaged buildings in the city now and (unlike Christchurch) there does not seem to be a unified vision about renewal of the inner city. The old town is looking dated and shabby, whilst our neighbours in Australia and Asia surge ahead. This situation has crept up on us, but it’s time to cut through the political window dressing and admit we have a problem.

Paul Spence is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.