About Face on Brokering FDI

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Economic development Minister Trevor Mallard last year announced an about face in how Investment New Zealand will operate in the future. Investment NZ is a government agency currently involved in attracting foreign direct investment (FDI) capital into the country. But a recent review of the organisation showed that it spent $60 million over four years to attract a net additional investment of only $155 million.

It is not clear from the review whether this result speaks more about the lack of “greenfields” opportunities than it does about any shortcomings in competency. However, it has been decided to refocus instead on encouraging New Zealand firms to grow through investing offshore. The theoretical net result should be more dividends returning home, exposure to new markets and networks, greater access to capital and acquisition of new technology. In principle it sounds like a great road map for adapting to a globalised world – create a few more Fonterras.

But shouldn’t we also still be facilitating new inwards investment – especially in the tech sector? Just because Investment NZ underperformed doesn’t mean we should stop engaging with offshore investors. It just means we need to find a better way to do it. And just because we are currently at about the OECD average for FDI doesn’t mean we can be complacent. Now you see what I mean when I discuss lack of economic leadership and the price of political expediency when it comes to government funded initiatives. It also underlines my point about the inappropriateness of having risk averse government agencies involved in facilitating business. Investment NZ needs to be tweaked for sure, but it doesn’t need to be completely nobbled.

What if Google Ruled the World?

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The debate over Google Knol vs Wikipedia continues to rage unabated before Knol has even been launched. But the real issue is the gradual spread of Google’s tentacles.

Google have clearly signalled their intent to drive new revenue streams from owning online content. And what better way to quickly build up a rich cache of material than to invade Wikipedia’s domain? But Knol differs from Wikipedia in that the focus is on authorship, so it’s more like a blog/wiki mashup.

Wikipedia is a wonderful project, but it has always suffered from a credibility gap. With crowd-sourced content we can never be certain where the boundary between truth and folklore lies. Knol addresses that to a certain extent through the use of accredited subject matter experts. How much editorial influence will be vested in individual users is not clear at this stage.

Some commentators have already predicted a disturbing dystopian future in which “content and advertising become indistinguishable”. But in the “co-production economy” I thought we were supposed to be able to subvert and avoid vested interests and traditional media?

But there is another important principle at stake here. If Google both owns the content and controls the search hierarchy, that seems like a great deal of power to concentrate in the hands of a single corporation. Will Google rise to be the most powerful media outlet in say another ten years? In war, the victor gets to rewrite history. That’s a concern here too.

Unsurprisingly, Microsoft is again making serious overtures to Yahoo. (Microsoft’s new CFO, ex-pat New Zealander Chris Lidell, is rumoured to be driving the purchase proposal.) MS clearly needs to shore up its offering in the face of Google’s incessant assault on its patch. We will probably end up with an online content and advertising duopoly. Either way, the dim flame of unfettered “citizen journalism” and freedom from vested corporate interests is likely to be snuffed out. Webstockers might like to chew over this possibility whilst they dine out at Google’s expense this week.

Webstock Show Hits Town

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Web 2.0 luminati from New Zealand and abroad roll into Wellington this week for the annual Webstock event. The festival of web design, innovation and usability has risen to such fame that Google have even come to the party with sponsorship.

As the centre of the digitally creative universe in New Zealand it is entirely appropriate that the event is hosted in the heart of Wellington city; long may it continue to do so. The fact that the workshops are already sold out is a testament to the brilliant work done by the locally based organising committee as this event goes from strength to strength. Well done people.

And if you missed out on a place, we hear that presentations will be available on the highly “user-centric” and “content-oriented” website in due course.

Webstock – 11-15th Feb, 2008 – Wellington Town Hall

Not in the Spirit of Good Customer Service

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I have always been fascinated by things aeronautical and have had a long association with the local aviation industry as both a recreational and commercial pilot. I’m an unashamed plainspotter from way back and I follow developments in the global airline industry quite closely. So it was with some surprise that I read about an appalling incident in which the arrogant CEO of a U.S. airline sent a vitriolic personal email response to a customer that had complained.

I always thought that customers were stakeholders in any business, the oxygen supply that ultimately determines the difference between success or asphyxiation. Apparently not according to Ben Baldanza, CEO of Spirit Airlines in Florida. Spirit is a high growth low cost carrier that primarily serves a niche market between the U.S. and Carribean/Central America. Most of its customers are low to middle income holidaymakers and returning migrants.

Last year Baldanza was forwarded a complaint by a couple who missed a concert because their flight was delayed. The couple wanted a refund for both their flights and concert tickets. In any angry outburst Baldanza “inadvertedly” replied directly to the couple by email instead of forwarding his response to the customer service rep. He basically told them where they could shove their refund claim form. “We owe him nothing…let him tell the world how bad we are.”

That’s exactly what the complainants did, with just about every consumer advocacy and business blog in the U.S. picking up and running with the story. Bad news travels fast. I first read about this incident through an article in Air Transport World appropriately entitled “How Low Can You Go?”. Apparently Spirit Airlines prides itself on the fact that there is no receptionist to greet visitors arriving at their headquarters because this saves 2 cents per customer. It seems like the company has a lot to learn about relationship building and delivering on service.

I mention this episode because it underlines how the Web can be a twin edged sword. Sure it allows aggregation of content and customers and a hefty global reach. But it can also bite back hard when things go wrong. Corporations can no longer rely on anonymity in a connected marketplace. It doesn’t matter that James and Christine only paid 75 buckseach  for their air ticket – they are still valuable customers. Reputational capital is an important part of a company’s intangible asset base.

To be fair, the airline did offer to refund the price of the air tickets only. But why was the CEO even dealing with this complaint in the first place? Clearly not his area of expertise. If your business does not have a quality assurance programme and strategy for dealing with complaints it is fatally flawed. Oh – and by the way, Spirit Airlines made a loss of $US 49 million in 2007.

Manipulating DNA to Unlock Bio-Energy

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A few months ago I wrote about the global ocean sampling project of the Venter Institute and explained how the expedition circumnavigated the world’s oceans discovering many new microbial life-forms as well as previously undiscovered proteins. By using technology developed through mapping the human genome, the institute now intends to manipulate bacterial DNA to create an organism that might one day be able to convert sunlight and ocean nutrients directly into biofuel. But Venter’s critics say it is dangerous to meddle with the building blocks of life and such work could lead to unimaginable consequences if it results in a virulent new form of bacteria.

In a recent lecture (44 mins video) at the BBC, Venter outlines his philosophy on using genomics to help satisfy the food and energy needs of humankind. The written text of his talk is also available. In my opinion genomics will be the defining technology of this century for a number of reasons. Firstly the logarithmic growth in the populations of the developing world has exceeded the carrying capacity of those regions. There is a stark choice between allowing wide scale starvation or employing technology to expand the supply of food and energy. Secondly, the genetic engineering “genie” is out of the bag already. It is far better to have this initial research being performed openly and with strict controls than by a corporation where there are conflicts of commercial risk versus ethical philosophy. Venter welcomes peer review and oversight. Finally, whether or not you agree with them, Venter and his colleagues are doing a great job of selling genomics as a safe, green and sustainable option for aiding humankind.

So is Venter a monster or a magician? And will New Zealand be able to participate in the genomics wave? As a maritime nation and with a proud record in biological research shouldn’t we be getting on board with this? It sounds like the kind of niche area New Zealand researchers could excel in. Venter is looking more and more likely to be the next Bill Gates. If our research institutions are not investing heavily in this area right now with partnerships and research projects, then we are destined to play catch-up downstream. This calls for proper public funding of the research and meaningful environmental protocols that protect whilst steamlining research project approval.

Funding Commercialisation of RS&T a Balancing Act

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Throughout 2007 we heard from a number of scientists and business-people imploring the government for much greater assistance in funding research and commercialisation of technology in New Zealand. Universities and CRIs have demonstrated the economic potential through generating some modest additional revenue streams and investments from technology enterprises spun out of research projects over the last decade or so. There has been a modicum of job creation, some upskilling through technology transfer and even some export revenue as a result. All good news. But is it the stuff that “economic transformation” springs from? Perhaps not quite yet.

Mindful that resources are scarce, the “Trilateral Engagement Project” (TEP), a joint effort by FRST, NZTE and TEC, has been tasked with boot-strapping a handful of homegrown technology industries judged to have the potential to grow into high value, global enterprises. This inter-agency collaboration marks a departure from the silo mentality noted in a recent OECD report that criticised New Zealand’s innovation policy.

Having identified these key new industries, the TEP has produced an RFP seeking consultants to research the potential economic impact of each. That seems a little like putting the cart before the horse. What if the reports find that the industries concerned are untenable? Notwithstanding that point, I think it’s a great idea to focus where big economic gains are achievable and around which related industries can cluster. In the past there has been a tendency towards a shotgun approach to economic development in which it was assumed at least a few winning ideas would emerge and thrive if supported with public funds.

In fact, there is no shortage of good ideas. The real issue for the NZ tech sector is access to capital. Because global capital tends to gravitate towards the most bankable ideas, it is important to expose our intellectual property to offshore scrutiny in a sophisticated manner. There is simply insufficient seed capital in New Zealand prepared to wager on high risk technology propositions. You could literally count on one hand the number of early phase tech businesses that received substantial VC funding in NZ last year. Besides that, offshore investors tend to bring a useful network of well-connected deal-makers in their wake. Let’s address that fact openly and help our high tech businesses go global with a mix of local and foreign investment. But at the same time if public funds are to be invested in this process, we need to ensure that founders are fully committed to returning some of the economic gains back home rather than selling out for a low return.

It’s a very narrow tightrope to walk across.

Walking on the Moon

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What does a white female “ghetto rap” artist, and former L.A. gang member, have in common with one of the largest rock acts of the 1980’s? Possibly very little, judging by the muted response “Fergie” received at last nights concert featuring The Police at Wellington’s Stadium.

Fergie did however impress with the sheer physicality and energy of her performance, but it was a little incongruous in such hallowed company. My young son was suitably awed by the acompanying gaggle of hip-hop dancers as they gyrated their way across the stage like newborn mosquito larvae. But that wasn’t what most of the crowd had paid 200 bucks a ticket to see. That’s a little unfair though. Like The Police thirty years before her, Fergie has cleverly managed to bridge the artistic gap between urban, ethnic musical counter-culture and white middle class pop. And through her onstage rap dialogue we are reminded why skinny white guys are driven to join rock bands. “Whatcha gonna do with that shirt full of breast”? Answer – “Gonna make you work for it, work for it!” Like I needed reminding.

I predicted that the main act would open with “Message in a Bottle” and they did not disappoint. That song was their first real chart hit in the U.K. Like much of their material, it deals with loneliness and alienation in an impersonal world and struck a chord during the grim Thatcherite era. Having already played a massive 82 gigs on this tour alone, it was not surprising that a bearded Sting was sounding a wee bit flat, his voice cracking badly at one point. Andy did little more than shuffle about the stage, but for a guy the same age as my Dad, he remains one of the world’s most talented and lyrical exponents of the lead electric guitar. Stewart stole the show by demonstrating his adeptness with all things percussive, in particular during an extended mix of “Wrapped Around Your Finger”.

Indeed, how fortunate for us devoted fans that these three skinny white guys got together three decades ago and released their first single “Roxanne” – for that is ostensibly the reason for this reunion tour. The real reason lies in the demographics of their audience, the majority of whom are dinky post-boomers with wads of disposable income. Almost all of last night’s crowd were couples in their 30s and 40s. That represents a marketing opportunity too good to miss; especially now that music sales are rapidly commoditising. The money is now in the concerts and merchandise – not the album sales.

This point is obviously completely lost on the Westpac Stadium management who book the catering stand concessions. Hot dogs, pies, doughnuts and Export Gold might work for the footy crowd but not for this audience. Where were the curries, kebabs and Heineken hidden? A lot of us went hungry in protest. Notwithstanding that minor disappointment it was a great night out under a velvety starlit sky. We were “Walking on the Moon” as we retraced our steps homeward around the illuminated bridges and boardwalks of Wellington’s gorgeous waterfront.

Esphion Goes Softly into the Night

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I have to admit I was a little surprised and saddened to read news of the Esphion sale. Five mill U.S. seems like a low price to me. In fact by my accounting, the sale price is less than the total amount placed by investors in the company since it was founded in 2002! Something doesn’t add up here. Possibly the NZ Herald article does not relay the full story and there may well be good reasons for such a hasty exit. But touted in 2005 as one of the top 100 leading edge tech companies in Asia by Red Herring and having secured several major product installations; Esphion seemed destined to succeed. 

But it looks horribly like yet another example of a clever Kiwi idea struggling to gain traction in a global market and then getting gobbled up by a more powerful competitor. I thought the idea was to grow these companies from home and build a high tech economy?  Will the taxpayers, who subsidised the firm with grants and seed coinvestment, have an opportunity to realise an economic return? There’s little point in business leaders and scientists pitching for more government support for technology commercialisation if there is no accountability about keeping these businesses local.

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In the meantime scroll down half a page and we read that China Railway Construction, a former operating division of the Communist Red Army, is about to undertake a $4.5 billion market listing in China and Hong Kong. How ironic is that? Perhaps we should simply forget about the technology business and get into construction instead?

What Christmas is Really About

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Being Christmas time it seems oddly appropriate to be sitting here with the woodburner blazing away and the rain pelting on the roof in the midst of summer. In the corner of my lounge is a large pine tree branch that, when propped up, passes as a rudimentary Christmas tree. The most significant aspect to the tree is that my son and I spent an enjoyable hour or so decorating it with all manner of colourful items. It didn’t matter that most of the sweets and crackers had been disposed of before the big day arrived. What mattered was the love that we put into constructing the edifice itself.

When he’s not with me, I can look at that tree and be reminded of what we shared and it fills me with enjoyment and warmth. That is why the tree remains in place long after the presents are opened and the last mince pie has been consumed. In fact every year I take a photo of my son in front of the tree. Those photos form a pictorial history of his growth and development.

Christmas tradition seems stronger than ever. I believe the reasons are twofold. Firstly we remain in the grip of a headlong rush to consumerism that began with new found post-war wealth over fifty years ago. Christmas provides us with the perfect guilt-free reason to shop. Secondly, “Western society” has been rudely awakened to the fact that there are many competing ideologies outside of the Judeo-Christian paradigm. Christmas is seen as an antidote to these strange exogenous forces.

So Christmas remains as popular as ever. But the best part is whenever I come home and open the front door I am immediately assailed by pine scent and reminded of the time that my son and I spent together at Christmas. That is what Christmas is really about.

So this is Christmas

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xmas_tree.jpgI know that it is traditional to offer up rosy summaries of sterling progress achieved during the past year at Christmas time.  But being a contrarian, I’m not going to do that. Unlike previous years, 2007 was neither good nor rosy on the personal or business front. However I did learn a great deal. C’est la Vie.

I learnt that (a few) people don’t keep their promises and that a good idea on its own is worth nothing without skilled political entrepreneurship (ie. who you drink with) and a little luck. I guess 2007 was the year I didn’t get to “start a billion dollar business from the beach”. But I’m sure 2008 will bring new challenges and opportunities.

Of more concern was that with the aid of armed Police and gagging laws, as a nation we lurched a couple more steps closer to authoritarianism (remember Sleeping Dogs?) whilst on the other hand failing to protect innocent members of the public from repeat drunk drivers, child abusers and escaped violent criminals.

On the economic front, New Zealand again did not invest  in research and development at a rate sufficient to improve our poor OECD standing, because (even though we can afford to) it was not a vote winner. The actual rate of inflation for real people (with cars to run, mortgages to pay and mouths to feed) was more like 10-15%. But more of our income got swallowed up due to taxation thresholds that punish middle class families on relatively modest incomes.

In the meantime our kids are being indoctrinated at school into the racist and politically correct myth of “bi-culturalism” instead of learning English, math and science. Cultural awareness is a good thing, socially divisive dogma is not.

So with the rain pissing on my roof on a cold, grey Christmas morning, I’m starting to see why almost 30,000 Kiwis permanently left our shores for Australia in 2007. We need to turn this around!

At least it’s been fun bringing you the GeniusNet Weblog in 2007. Expect more news, info and opinion on technology, innovation and entrepreneurship in New Zealand. Expect to be challenged, don’t expect sycophancy. I like ideas, even imperfect ones, as long as we can knock them into shape together.

Now special thanks must go to those who shared comments and opinions. I look forward to hearing from you again soon. There are lots more issues to canvas in the New Year, especially with an election looming.

Have a cool Yule and a safe and profitable 2008.

Regards,

Paul