Shifting The Economic Goalposts

Economist Brian Gaynor’s recent article on why we will never “catch up” to Australia was another sobering reminder of the hard road that New Zealand has ahead. Invoking a sporting analogy by beating Australia may be a popular rally to arms, but it focuses public attention on completely the wrong set of goalposts.

Another sobering occasion was when we sadly learned of the passing of Sir Paul Callaghan, one of New Zealand’s most passionate science communicators and technology entrepreneurs. Sir Paul lived every moment and notably even turned his cancer treatment regime into an experiment. More importantly he was one of the most ardent promoters of science and technology commercialisation as a means of growing New Zealand’s economy.

“Sir Paul was a true public intellectual who earned the respect of everyone, including those who disagreed with him”, stated the government’s sternly worded Ministerial press release reporting news of Sir Paul’s death. Curiously, outside of Cabinet, I can’t name a single (intelligent) person who actually disagreed with his thesis that New Zealand urgently needs to ramp up economic growth through more investment in research, science and technology commercialisation, rather than continuing with an over-reliance on flogging unprocessed, environmentally unsustainable dairy commodities to the world.

To its credit, the government has finally moved to increase research funding and there are more frequent mutterings along the lines of “doing something” about uncovering intellectual property locked up within our many publicly funded institutions. But those of us who looked on frustrated over the last decade as the “Knowledge Wave” withered on the vine, are becoming more and more concerned that the opportunity to fully promote science and technology as an economic driver is disappearing.

Beyond pumping more cash into research, we need a huge cultural shift involving both governmental agencies and the public mindset. As clean-tech entrepreneur Nick Gerritsen stated at a recent seminar, “we need more millionaire scientists and fewer millionaire sportsmen”. With the loss of Professor Callaghan, I’m left wondering who will be brave enough to pick up the mantle.

You can follow the author on Twitter @GeniusNet

Building Our Innovation Ecosystem

Innovation, incubation and competitiveness are firmly back on the political agenda. 2011 has been a busy year, with the government setting about reforming publicly funded scientific research and reconfiguring IRL in an effort to drive more commercialisation activity in the technology sector. The government funded trade agency has also been talking up successes from its incubator programme. In the meantime, the recently formed Productivity Commission has quietly begun developing an academic framework to address infrastructural inefficiencies in the New Zealand economy.

In this context, it was unsurprising to see some recent commentary that was highly critical of the manner in which government gets involved in innovation and business. More specifically, Rowan’s comments alluded to some deficiencies in the methodologies being employed by business incubators when advising software start-ups. Notwithstanding the fact that incubators are generalists and lack the huge depth of experience and background of success that Rowan brings to his own web and software ventures, there were some fair criticisms which pleasingly generated a lot of intelligent follow-up discussion.

Where I parted company with this debate however was when the tone shifted towards questioning the necessity for providing events to engage the start-up community. Most readers will be aware that I’m deeply involved in organising such activities in addition to my role as a co-founder of a couple of tech companies. One of these companies is pre-revenue start-up, the other is growth phase and profitable. Being involved in the community is a deliberate strategy which is partly altruistic (because it’s fun), but also good for business. We are only as strong as the people around us.

The government’s moves to redefine how we approach identifying and commercialising high value science and technology based ventures are oxygen for our economic flame; so too are the various contributions made by formal incubators, informal “innovation hubs”, university commercialisation offices and the various business related events and competitions. The Ministry of Science & Innovation’s report on Powering Innovation even talks about “…the creative connection of talented minds across discipline boundaries“. We do not need to emulate Silicon Valley, but we should learn from that ecosystem model.

Around the world, entrepreneurship is increasingly seen as both a legitimate career option for young people and a growth spark in an otherwise dull economy. At a time when youth unemployment stands at around 30% in New Zealand, we cannot afford to ignore the opportunity of infusing young people with an entrepreneurial spirit. I recently attended the 30th anniversary celebration of the Young Enterprise Trust. This organisation provides entrepreneurship programmes for high schools and counts such luminaries as Rod Drury and Seeby Woodhouse amongst its alumni, demonstrating the importance of a community approach to entrepreneurship education.

Building an entrepreneurial and export focused culture has never been so important as now, with traditional models breaking down faster than ever. Knowledge sharing and relationship building within and amongst our specialist communities is foundational to strengthening our innovation ecosystem. We can no longer afford to operate in silos or to make the assumption that there is only a single approach to building cool businesses that solve real problems and generate economic returns.

AMD Opens Doors For Fingertapps

Unlimited Realities is living up to its name. Last year the company inked a deal to provide its gestural interface software for integration into Dell manufactured computers. Now the door has been opened by computer chip maker AMD. Fingertapps was showcased this week at the AMD Fusion Developer Summit in Seattle ahead of its rollout with AMD’s next generation of chips for Windows based PC and tablet devices.

The company, which has development offices in Wellington and Palmerston North recently appointed former Kiwibank CEO Sam Knowles as chairperson. It now seems to be on a rapid growth trajectory, having been one of the earliest providers of computer touch screen technology. We saw the “unlimited potential” of the product back in 2008 when we invited Unlimited Realities business development manager Ben Wilde to show off Fingertapps at Wellington to the World.

New Zealand companies are becoming increasingly adept at forging relationships offshore and the U.S. computing market is generally the most obvious first port of call. Fingertapps is yet another great example of high flying Kiwi technology going global from New Zealand.

Starting Lean: When to Pivot

Lean Startup methodology when applied to technology start-up companies advocates rapid prototyping, iterative re-testing of market assumptions and soliciting frequent customer feedback to more quickly evolve a product offering. At a recent lunchtime seminar hosted by Wellington’s Lean Startup group, we discussed when to pivot.

Pivoting involves a fundamental change to one or more of the three fundamental questions that frame the business model and could be a response to either a flawed model or a new opportunity.

We Are Selling What? + Via Which Channel? + To Whom?

Bruce Aylward from Psoda described how his company underwent a complete change in strategic direction in terms of how their product was marketed and distributed. Psoda is a SaaS suite that assists professionals to manage programs, projects, requirements, testing and product development. Psoda’s pivot point came when they realised that customers only wanted some of the services being offered – so they created a pick ‘n mix option. It was a subtle change that boosted the company’s revenue take.

The domain registrar industry has a well established model and hundreds of incumbents. Finding ways to innovate within such a model is tough, but it is the only way forward for a new company. At iWantMyName our pivot point came when we realised we were creating a scalable platform-as-a-service offering that we could rapidly roll out to channel partners. It was a great learning experience for us that added a lot of value to our business.

Can Private Equity Rebalance?

Private equity firms in the U.S. alone are reportedly sitting on over $US 1 trillion in funds whilst at the same time economies are being hollowed out as cash strapped businesses go to the wall. But a surge in buyouts in the first quarter of 2009 suggests that equity investors are emerging to pick over the fallen carcasses of once great firms. In Asia, private equity firms successfully raised over $US 50 billion in 2008. Now with the faltering of several leading equity firms in Australia, there has been a resurgence of interest by Asian firms in that market especially.

It remains to be seen how the rebalance of power across Asia-Pacific will impact on New Zealand. But one thing remains certain, private equity deal-making is alive and well across the region and New Zealand will not go untouched. One example of this is the sale of accounting software provider MYOB. Although critics claimed at the time the price was too low, there was an ironic twist when founder Craig Winkler reinvested some of his winnings in a direct competitor. Small shareholders in such target firms would be well advised to remain alert to any further machinations that may impact on the value of their holdings.

What is clear at present is that there is generally a dearth of quality assets on the market. Profitable medium sized firms are hard to come by, but this situation will change. In particular family owned firms that survive the recession may attract more attention as their baby boomer owners head into retirement and look to offload. At the other end of the scale relatively new companies, that have a unique value proposition, may begin to look more interesting. But current indications are that such businesses are few and far between and even some local venture capital firms are struggling to place cash.

So what does this mean for New Zealand technology companies? Asia-Pacific looks like becoming the “buyout destination of choice”, according to the Asia Venture Capital Journal. Deal flow was up in the first quarter of 2009 and (surprisingly) the more developed economies benefitted most, as opposed to the emerging economies of China and India. The implications of that fact are that eventually a bunch of cashed up former business owners from around the region, like Craig Winkler, are going to be looking for new projects.

Bloggers PredICT Event ’09

Unlimited Potential is kicking off the New Year in fine style with its annual Bloggers Predict event. Bookmark Tues 27th January and start contributing your own predictions by adding some comments below.

Our picks for this year:

1. 2009 will be the year of the community exemplified by the growth of enterprise use of Web 2.0. The most successful cloud applications, blog sites and gaming venues will be those that cultivate an active community of interest around their services. “The network creates the value”. The same applies to real life communities such as UP!

2. Twitter will blossom as an important mainstream social media application provided it addresses capacity constraints, manages spam and adopts a business model that does not disenfranchise users. Likely to receive an attractive takeover offer, but may choose not to sell initially.

3. The first generation of (real) semantic web applications will emerge in 2009 in response to user needs to organise ever increasing amounts of web based content. Applying semantic search to real business problems will be the focus for developers and investors.

4. Plunging commodity prices and declining consumption will hurt investment in recycling and other clean technologies and will shift the media debate away from green issues. Creation of web-based problem solving technologies around water conservation and energy management will leap to the fore however.

5. Gesture driven multi-touch interfaces such as Fingertapps (that we featured at W2W) will be adopted increasingly in a variety of electronic consumer goods and services.

6. Our domain registrar site iWantMyName will experience huge growth on the basis of its easy functionality and through the deployment of innovative value added services during 2009.

So…post your own predictions below, register for the event and see you there on Tues 27th Jan.