March 26, 2025 • 40 mins
The Government is busy pushing its growth agenda, but what’s the best way to pursue sustainable growth that produces higher-value jobs and more export earnings?
A new report by Boston Consulting Group says it involves taking a more strategic approach to New Zealand’s economic future, identifying five key ecosystems that could drive the nation's growth and global standing by 2050.
But isn’t that picking winners, a strategy that has got us into trouble in the past?
Boston Consulting Group's Kelly Newton who joins Peter on this week's episode of The Business of Tech.
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Episode Transcript
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Speaker 1 (00:02):
On the business of take powered by two degrees business.
What could New Zealand look like in twenty fifty if
we got a little bit more strategic about plying to
our strengths in a few key areas that could fuel
economic growth.
Speaker 2 (00:15):
We don't want to pick winners. Some of that is
maybe afraid to say no or afraid to be wrong.
I would frame it as we can gamble on potential
happy accidents and hope that something works out. And some
people will point to we're very good at being having
winners in very niche or industries or her applications that
(00:37):
no one else is looking at. But that's also really
difficult to develop any kind of expertise in because you
can't anticipate what that might be. My position would be
that those happy accidents can happen even if you're placing
some strategic bets.
Speaker 1 (00:53):
I'm Peter Griffin from Business Disk and that was Kelly Newton,
co managing partner for Boston Consulting Group New Zealand. BCG
has just published what it calls an Investigation into the
Future of New Zealand Inc. The consulting firm points out
that our economy has been reshaped and bolstered by growth
as export industries such as dairy, film and tourism benefit
(01:17):
from a prospering middle class, particularly in Asia. They want
safe nutrition, rich cinematic experiences and beautiful places to holiday.
But those industries aren't going to serve us so well
in future. The local dairy industry says that New Zealand
has reached peak milk production. Film and television production is
limited to serving the outsourcing needs of Hollywood studios, and
(01:40):
travelers are choosing more affordable and lower carbon holiday options.
So what does little Old New Zealand do amidst a
war for talent, rapid technological innovation, and the growing impacts
of climate change. Kelly Newton was my guest today. She
says we should focus on five key areas where we
(02:01):
have a competitive advantage and can build highly valuable ecosystems
as we seek to reshape our economy.
Speaker 3 (02:14):
Kelley Newton, Welcome to the business of tech. How's it going?
Speaker 2 (02:17):
Oh great? Thank you for having me, Peter, It's great
to be here.
Speaker 3 (02:21):
Yeah. And look, we've heard a lot about Boston Consulting
Group multinational all around the world offering advice and consulting
services to big companies governments. You've been in New Zealand's
with an office here what for a couple of years now?
Speaker 2 (02:39):
Yeah. So we reopened our office here in New Zealand
in twenty twenty two, and then I joined the BCG
down here in twenty twenty four after many years in
the US. I feel like I'm ancient in the BCG
sense now.
Speaker 3 (02:56):
Yeah. And interesting timing to be sort of opening your
operation in New Zealand pretty much into a recession. How
have things gone in the last couple of years that
you've been sort of operational on the ground here again, Yeah, I.
Speaker 2 (03:10):
Think a lot of our strategy is about more longer
term and so whether there's a recession or the business
is looking good in any one year is kind of
less important. But I think there's a real recognition that
both the environment within New Zealand is different and it's
difficult to serve that from Australia. The ability to build
(03:32):
relationships with people understand the unique context here within New
Zealand is really important and so we viewed it as
a critical part of the strategy.
Speaker 3 (03:42):
Yeah, that's great. And you're known for really high quality
insights and research into the advice that you give to countries,
in some cases big companies as well. You've been looking
at the future of New Zealand, which a lot of
people are sort of fretting over at the moment. You've
posed in a new report, really good report out that
(04:05):
we will link to in the show notes, quite a
provocative question, what will New Zealand be known for in
twenty fifteen. I think it's an open question at the moment.
We have a government with a growth agenda. Our Prime
Minister has recently been to India trying to do a
free trade deal all over Southeast Asia as well, so
very much this government is really preoccupied with growth. We've
(04:28):
had a stagnant economy, but you're looking a bit more
long term and sort of posing that question, what do
we need to put in place now to be more
prosperous and economically and socially advanced by the middle of
the century. And you start out in that report looking
at some of the challenges, frankly, that we face as
(04:49):
a country and maybe that's where we should start. For instance,
the traditional pillars are for our economy, dairy, tourism and film,
and a lot of people have been saying you point
out in your own report. They're facing real headwinds, aren't they,
even though you know, price daries up. At the moment,
the trend is towards these sorts of industries are really
(05:11):
not going to deliver the way that maybe they have
in the last few decades.
Speaker 2 (05:16):
Yeah, that's absolutely right. So I think there are a
couple of trends. One is I think everyone is aware
of long term productivity trends within New Zealand, and I
think people are probably starting to become tone deaf to
the fact that New Zealand is falling behind and it's
somewhat accepted of that's where our position is, and that
(05:36):
hasn't changed that much since the earlier in the two thousands,
and so the question is, well, what starts to change
that trajectory, And it's not something that changes very quickly,
and typically to achieve better productivity you would think about specialization,
and so that's not necessarily groundbreaking, but in terms of
(05:58):
how we currently approach things, it's been more of being
very open to doing everything versus trying to place some
strategic bets on things that would lead to specialization. So
I think that's one aspect around productivity. And then some
(06:19):
of the traditional industries are more of those primary industries,
and we might be leaving some money on the table,
so to speak, in terms of how we're approaching those sectors.
And so I think one industry where you saw more
of a successful transformation was maybe what kind of John
(06:39):
Brackenridge did with New Zealand Marino and taking what was
a primary industry kind of commodity product and then turning
that into something where you did more of the value
add and thinking about how you participated in more of
that end product that was an export. And as we
think about some of the industries within New Zealand, is
(07:01):
there an opportunity to grow beyond maybe producing the milk
and the milk powder to something that would be more
value add or more in the technology space that's associated
with the EG sector that's growing much more quickly and
could be more of an export for New Zealand.
Speaker 3 (07:19):
Yeah, And look, we've had commentary in our media for
probably decades now about moving up the value chain as
we call it, to try and do that, and with
very limited success in areas like dairy, you know, we're
still selling milk powder and sort of raw materials that
other companies are then turning into products. You know, Fonterra
(07:40):
is even sort of floating the prospect of selling its
consumer brands, which I thought, wow, what a great sort
of resource. We have this direct relationship with consumers around
the world. So it seems that may not be in
Fonterra's future. So we've got challenges facing those Industry tourism
really hasn't recovered since COVID the film Sick. There's still
(08:01):
going gangbusters and here in Wellington we just saw James
Cameron really talking up Wellington as a great place to
make films. But you know, very much linked to who's
going to pay the biggest subsidies and we continue to
pay them. But that one is sort of a fickle industry,
isn't it. Those productions are going to go to the
lowest cost destination, right.
Speaker 2 (08:23):
It's kind of transitioning to say it's good to be
the location where the filming is taking place, but when
you look at the value across that industry, it's not
necessarily where the filming is taking place. And so what
opportunities do we have to actually expand across that and
what needs to be in place to enable it. There
(08:46):
are some great success stories with wet a workshops and
what they've done, but creating the ecosystem that goes around
it and then connects it so that the value isn't
all leaving New Zealand. I think the the gaming industry
has also been somewhat successful in how they've set up.
They have the development that's based here in New Zealand.
(09:09):
It might not be as many. There are a lot
of jobs, but is it as many as we would
like it to be and things that wrap around it.
There're probably some additional opportunity in how we think about that,
but that's been a good export and a lot of
the value is retained here within New Zealand. So I
think for those creative industries, is there something that would
(09:32):
is there some synergy across both gaming as well as
what we see within film. Do you need to pick one?
That might be still an open question, but what are
the other elements of the ecosystem that would help to
develop those industries into those larger kind of profit pools
(09:53):
as you might consider it in the future.
Speaker 3 (09:55):
Yeah, and look, with the rise of artificial intelligence, I
think we're just going to say the blurring of the
line between what is a game, what is a film?
What is augmented reality. What is a digital avatar that
does all of those things?
Speaker 2 (10:08):
Absolutely?
Speaker 3 (10:09):
Yeah. Some of the other challenges climate change you talk about,
and often this is just sort of a rote mention
in a lot of these reports about the future, a
token thing that you have to mention. But there are
some serious threats, aren't there, Not only to our agriculture
and tourism things like that that we do rely on
as pillows off our economy. What are some of the
(10:30):
other threats that climate change poses to New Zealand according
to your research.
Speaker 2 (10:36):
Yeah, so I think we didn't dive as deeply into
climate change necessarily in this report, But as you think
about broadly, there are changes to where and what type
of agriculture and what you can grow as a result
of climate change. There can be rising sea levels that
would impact any island, including New Zealand. I think there's
(10:59):
also an opportunit unity in the near term with the
renewable energy that we have within New Zealand And. Is
there a way for us to leverage that as a
benefit or potentially is a comparative advantage versus other countries
to kind of be on the leading edge. It's probably
(11:19):
less so just in the technology itself, but is there
something in how we deliver it or what is made
here or that would allow us to benefit. So data
centers is one example of Yes, there could be an
opportunity for us to house data centers here in New Zealand.
There's already some momentum going in that direction. But is
(11:42):
that sustainable when you look out kind of twenty years
or is it just something over the next kind of
five to ten that is a good wave for us
but might not provide sustainable growth in the long term.
Speaker 3 (11:55):
Yeah, so there's that. The other one you mentioned is
the growing talent gap. And when I talk to people
in the tech sector and that you know, this is
just a I say, what are the big things preoccupying you?
They don't really talk about the stagnant economy. They talk
about getting the right people on board. It's a continuous
problem and the government is trying to address this with
(12:16):
various visa changes to make it easier for highly skilled
people to come to New Zealand. But obviously you see
this as absolutely integral. If you want to have a
better country by the middle of the century, what do
we need to do to retain and attract talent.
Speaker 2 (12:33):
Yeah, So on the talent side, it is multi fascinating.
It's really hard to fix, and I think education is
one that's traditionally very hard to address because something you
do today you might not see some of the benefits
for ten years or more. And so one of the
(12:54):
sectors that we mentioned in the report is space and satellites.
And when I think about the time to grow and
a PhD student that's going to be able to go
into that industry as an engineer, well, first you need
them to get the PhD, which is several years in
and of itself. In order to get into the PhD program,
(13:14):
you need the master's programs and the undergraduate baseline around engineering.
And then just getting into engineering at the university level,
you need to be taking the STEM classes all the
way through high school and elementary school. And so I think,
when if I'm a university that's here in New Zealand,
(13:37):
that can be a very overwhelming thought to try to
train every student to cover every industry that we might
be in within New Zealand. And so if we're looking
to attract talent from other countries, then why would they
come to New Zealand to study here? It's probably not
enough to say, well, we speak English and we're in
(13:58):
English speaking country, but you want them to come here
because we have the best programs in a particular sector.
And we can't all be great at offering agriculture and
programs and food science programs across every university. And so
is there some specialization that we want to consider at
(14:19):
the university level. And I think that there's been some
exploration of that. I know Peter Gluckman is in the
process of looking at what some of those sectors might
be and the universities and how those might be aligned,
and that process is ongoing. But I think a recognition
(14:40):
of it might be good for us to have a
university that's going to be very dedicated to the kinds
of skills that would be good for space and satellites,
and a partnership between the businesses that are starting up
with in New Zealand to say these are the skills
that we want to have with and the businesses would
(15:01):
be a great conversation to have with the universities to
make sure that they're actually preparing people to work in
these sectors going forward.
Speaker 3 (15:10):
Yeah, and that's probably the central theme off your report,
really is that concept of we need to do some
level of specialization. And the way that you sort of
term it here is an ecosystem approach. You've identified basically
five areas, including agriculture four point zero and we'll talk
a bit more about that, space and satellites, as you've mentioned,
(15:31):
green tech, the future of medicine, and the creative industries,
which we touched on as well. And this is a
perennial argument that goes on in New Zealand. Should we
pick winners, some would say, or you know, put our
resources into certain areas where we have strength, or should
we strengthen the system in general? And stuff will bubble
(15:54):
up and people point out that, you know, sir Peter Beck,
who would have thought that he would create, you know,
a very successful commercial rocket company from New Zealand that
if you'd tried to pick that winner twenty or thirty
years ago, it would have been impossible. So yeah, interesting
in your view, you guys, obviously thinking you've looked around
(16:15):
the world and seeing where this is successful, that focusing
on these ecosystems where you have pre existing strengths as
really the way forward.
Speaker 2 (16:24):
Yeah, So I think this is a question. It is
a question that comes up across New Zealand of we
don't want to pick winners. Some of that is maybe
afraid to say no or afraid to be wrong, and
I would frame it as well a couple of ways.
One is we can gamble on potential happy accidents and
(16:45):
hope that something works out. And some people will point
to we're very good at being having winners in very
niche or industries or applications that no one else is
looking at. But that's also really difficult to develop any
kind of expertise in because you can't anticipate what that
(17:07):
might be. And my position would be that those happy
accidents can happen even if you're placing some strategic bets.
And those strategic bets are what do we have an
advantage in and what do we think could be successful,
And we're going to place some of those bets. They're
not all going to pan out, because innovation is actually
(17:29):
about trying some different things and learning from it, and
they're not all going to work out, but you hope
that some do and you can adjust along the way.
And as successful as we've seen Rocket Lab beat like
that's great, but I would love to see four or
five of those coming up within New Zealand, And I
(17:51):
just think of are there others that could have been
successful but haven't quite gotten there yet because maybe they
didn't have those different elements of the GO system. And
so while there are going to be some that are
successful regardless of what you put in place, think about
what are the others that you want to encourage. So
(18:11):
within kind of space and satellites, there's some other companies
that are popping up and getting some good traction. But
you would love to see it's not just the ones
that are launching the rockets that is the kind of flashy,
super fun. We all love to see a rocket go
up in the air. Some people love to watch them
explode to but thinking about, well, what kinds of materials
(18:36):
are used in rockets and we should have that kind
of advanced material capability here within New Zealand. And what
are the things that go into the design and the engineering,
the launch, the monitoring, the repair, the services, everything that
wraps around it, because that's what creates that stronger ecosystem
(18:56):
and will support other businesses. So you see Kia Aerospace
and Don Aerospace coming up like that's great, Like how
do we get more that are building on some of
that success.
Speaker 3 (19:08):
Yeah, yeah, really good point there, and there's some great
companies as you mentioned Zeno Astronautics another one. It's technology
to shift satellites around in orbit. So a scene has
happened off the back of Rocket Lab and it's partly talent,
but it's partly also international players going well. In New
Zealand actually now has a reputation for space applications. So
(19:31):
let's go and explore there to what extent. And we've
tried this before. Other country Scandinavia, Europe are very successful
about at clustering. So the ecosystem has a physical manifestation
in infrastructure and companies cohabit together. Is that an important
part of the ecosystem approach in New Zealand one percent.
Speaker 2 (19:55):
So it's it's really important that that the ecosystem please
off of each other and starts to create that flywheel.
So you start to see more and more companies and
it's very difficult to operate within a vacuum if you're
just an established company and you're trying to do something
but you don't have the talent that's coming in, you
(20:17):
don't have investors looking to where you are to make investments.
You don't have some of the startups that in some
places would be good candidates for you to acquire or
those startups are developing new technologies and pushing the envelope
that you might want to use within what you're doing.
So having that ecosystem actually, I would actually say co
(20:41):
located would be important. So while it would be great
if it's just generally within New Zealand, I would even
go so far to say, like picking a place within
New Zealand would also be helpful, But it is when
you look at other countries. I think we talk about
(21:02):
the example within Switzerland, and Switzerland is not that big,
but they have all of the elements of getting that
biotech together and it's the universities are doing research in
that area. You have other institutions doing research. You have
all those major companies that are co located, so you
can talent is moving in between them and that they
(21:26):
have opportunities to collaborate.
Speaker 3 (21:28):
Yeah, you mentioned in the report, probably one of the
biggest ecosystems, the most successful one is in the Cambridge
area in the United Kingdom, where you have that incredible
R and d IF it going on. You have academia
some of the best scientists and engineers in the world,
and it's created one of the biggest tech hubs in
(21:49):
the world.
Speaker 2 (21:51):
Yeah, you're absolutely right. So creating those tech hubs and
whether it's in the UK is yes, it's much bigger.
But when you look at just this one ecosystem, it's
very specific in terms of where it is within the UK.
And when you have people that are at the top
of their field and pushing the envelope, scientists frequently ask
(22:14):
where is the best place in the world to do
this thing? And that's where I want to go, And
whether that is in a small town or it's in
a different place, most of those scientists are willing to
move if they can progress the science in that area.
And so that's why I view kind of our goal
is to be well, where which scientists are we trying
(22:37):
to attract to New Zealand because they're going to want
to know where's the best place to do my thing?
And I think that's what these other successful ecosystems have done,
is they're attracting that top talent into where they are
because they've set up they have the best infrastructure that's
(22:57):
supporting that particular set they have the students that are
interested in the universities around that and other businesses that
they can be a part of.
Speaker 3 (23:09):
Yeah, and I guess the obvious one. We talked at
the start of this conversation about leaving value on the table,
and that's definitely been our agricultural story. So one of
the ecosystems you're suggesting what you call agriculture four point zero.
And we've talked a lot about industry four point oh,
which is really around sort of advanced manufacturing. We don't
(23:30):
really have a huge manufacturing base in New Zealand, but
we do have a pretty thriving agritech scene, the likes
of Halter Robotics Plus, which was just acquired by Yamaha
a couple of weeks back. So that is a fledgling scene.
I guess how do we really ramp that up? And
in the same way as you're talking about the space
(23:52):
sector as well.
Speaker 2 (23:53):
Right, I think, And again, like the sectors that we've
shared within the report are just a starting point, So
I don't know everything about which sectors we should definitely
do within New Zealand, but I think there is support
around something that's related to ag tech. I think there's
some choices. Is this hardware related to AG? Is it
(24:15):
software related to AG? Is it kind of services that
are related to AG And I think some of what's
been done is relevant to here in New Zealand. Do
we try to take a lens that's more outward looking
about what would be relevant that we could export in
the ag tech space? But right now there's some ag
(24:38):
tech that's spread across New Zealand and I'm not sure
if that there yet some of those centers of this
is the place where you would go if you want
to do ag tech. And from an investor standpoint, do
I know where to go if I want to invest
in ag tech? I could say, oh, well, I can
come to New Zealand, but is there one organization that
(25:02):
I can go to? Maybe maybe Agritech can help us
to navigate that. But some people would say, oh, there's
this going on in the White Catto, there's this going
on in Palmston North, there's this going down down in
the South. So it's it is a bit fragmented and
that maybe that's okay, But could we say that there's
(25:27):
a certain element of ag tech that each of those
places is known for.
Speaker 3 (25:31):
Yeah, I think that's one sector in particular, where they
just get on and do it and they hid down
sort of they're in the fields and they go, oh,
if I came up with this device, it would improve
my life. That's the story of Gallagher and other great
New Zealand companies. So we have seen in the US
some really good ecosystems in agritech, everything from satellite remote
(25:54):
sensing technology to look at soil moisture through to actual
automated combine harvesters. You know, there's des Moines and other
places around the US where they're leveraging really well based
on being physically together.
Speaker 2 (26:10):
Yeah, and I think even when you look at a
company like John Deere in the US that has obviously
been around for a long time, but they also have
been doing a lot on the tech innovation side. They
have their hardware which is generally still based there around
Illinois Iowa border, but then they do a lot of
(26:32):
their tech innovation in other tech hubs within the US.
So they're going over to Silicon Valley or down in
Austin because that's where they're attracting some of the talent,
and so in that instance, they're still connecting it back
to the core business. But they've actually chosen to locate
where some of the ecosystem is around the specific innovation
(26:57):
that they're looking to do.
Speaker 3 (27:00):
On the future of medicine. This is one where we
actually have a lot going on. If you read the
Tech Investment Networks report every year on the biggest sort
of sectors off of tech by revenue in New Zealand,
health tech is right up there and we've had some
very successful tech companies. Ian McCrae's company Orion was recently acquired,
(27:24):
so a lot of great companies there, but that one
feels very fragmented and dispersed. It really clustered around Otago
and Auckland University where a lot of the medical research
is going on. I think if there's that one, if
there's one on your list that could really benefit from
a more of an ecosystem approach, it's that.
Speaker 2 (27:44):
Yeah. I think the kind of medicine mad tech is
a sector that I think has a lot of promise
and a number of different countries around the world are
choosing to participate in some way. There's narrowing in on
which part of that sector you want to grow. I
(28:05):
think there's a risk actually that while we've included it
it has some relevance here in New Zealand and some
things that we can build on, but it's also a
sector where you've seen other countries really pull ahead. And
so in the report I kind of mentioned looking back
(28:25):
and back in two thousand and one, there was the
Catching the Wave conference here in New Zealand. This was
way before my time here, and it highlighted this need
to specialize and to place some of these strategic bets
around ecosystems, and I think that health technology space was
(28:46):
one of them. And if you think about a country
like Switzerland, that's around the time that they were switching
gears and starting to say, no, this is where we're
going to be focused. And now we're twenty five years
later and Switzerland's done a really good job of that,
and I think it's an example of what we could
have achieved if we had decided this is a place
(29:09):
that we want to double down, so medtech going forward
and you know, health technology. I still think it's a
great area, but how do we kind of as a
community decide this is what we want to go after.
Speaker 3 (29:26):
It's sort of been the story for the last twenty
five years in New Zealand. Really since the knowledge wave,
which I only vaguely remember, but we sort of knew
the direction we needed to go, and we saw what
other advanced countries were doing, and we didn't really do it.
And I keep asking the question why. And you know,
Rowan Simpson, the startup found a co founder of trade Me,
(29:46):
was on the show a couple of weeks back and
he just said, you know, and others Andy Hamilton, former
CEO of the Ice House, just said that we just
have this attitude to risk anything government. Really, if government
is driving it, of course they're not going to take
risks because it could cost them their political careers, it
(30:08):
could cost bureaucrats their jobs. So I guess the big
question is we sort of know as a country where
we need to go. Who's going to drive it? And
what does the evidence suggest when you look around the world,
where is it most successfully sort of manifested. Is it
businesses saying look, we're just going to take the initiative
and build an ecosystem, or does it need to be
(30:30):
seeded by government? That's another big argument that just seems
to go around in a loop in New Zealand.
Speaker 2 (30:36):
Yeah, so I think that you know, it's great if
the government can be on board, but that can really
vary because of the limited terms that any one person
or administration is in power. And so actually one of
the risks to these ecosystems is that change in government
(30:58):
and the whiplash that kind of her in terms of focus,
because if you have a group that's focused on one
thing and then a new administration comes in and they say, no,
we should be focused on something else, then you're never
giving enough time to actually develop that specialization and to
see that through, and so that's actually worse. So I
(31:20):
think in many cases that's why I would say, like,
you can't necessarily wait for the government to determine what
these ecosystems are going to be, because if there's a
change in government, you don't want to change that focus.
And so bringing together, yes, it's good to have some
representation from people that might be within the government, but
(31:42):
it's more about people that already participate as businesses, startups, investors,
research that happens here in New Zealand. All of that
can actually kind of help you to coalesce around things
that we have comparative advantage and then we can develop
(32:04):
the ecosystem around that. And I would say that that
orchestrator is playing the role that could help to go
back to the government to say, oh, well, for this
ecosystem to be successful, these are the parts that we're
trying to build up, because otherwise the government is doing
the best that they can. But they are guessing. It
(32:27):
could be more generous than a complete guess, but they
are essentially guessing at what the businesses need or what
those potential ecosystems need and then making investments versus there
being the pull from that ecosystem to say, this is
what we need to be successful and it's something that
(32:47):
only the government can help to provide. So for example,
the visas and opening up immigration in New Zealand, that
is something only the government can help do. But it's
great if one of those ecosystems said like we need
people with these types of skills or this is the
(33:08):
barrier for us being successful. You might see other things
in terms of you know, I think in the space sector,
you're going to face things around when can we lant
where can we lant developing those launch sites. Those are
sometimes things that the government can help to facilitate.
Speaker 3 (33:30):
I think you've put your finger on one of the
big problems is you know that orchestration and we haven't
really a lot of these fledgeling ecosystems haven't been well
served by having an orchestrator actually going making a really
coherent argument to the government for what they need or
are pockets off it like the space sector. I mean
(33:50):
that was literally so Peter Beck going to Steven Joyce
and John Key off the national government off the time, saying, look,
I've got all this business potentially coming, but I need
a launch site. Can you what I need is new
space legislation. I need an agreement with the US and
New Zealand around space technology. And that's how informal it
(34:13):
sort of was at the beginnings, and that led to
an industry taking off here. But if we can sort
of formalize that sort of orchestration so that we actually
get the things that these ecosystems need off the ground.
Speaker 2 (34:26):
Yes, So if I kind of go back to the
example in Chicago that I was involved with when I
was there, In that instance, it was a couple of
philanthropists or business people that said, this is our vision
for what we want to do in Chicago. But they
recognize the gap of having some kind of orchestrator in place,
(34:50):
and so decided that they were going to set up
an entity that would help to be that orchestrator. And
they're probably there can be so institutions within New Zealand
that could play that orchestrator role. But it's understanding, yes,
this is part of our mandate and who is it
(35:13):
that we need to bring in because it's tough to
coordinate across established businesses and startups and try to look
at investors and look at universities. But without that orchestrator
whose job it is to be thinking about how do
we make this successful and continue the flywheel, no one
(35:36):
else is thinking about that because they have five other
things that are top of mind for just keeping their
business running. And so that's why that orchestrator is really important.
Speaker 3 (35:46):
You make note in the report of our underperformance on
R and D spending we underspand compared to other countries.
Is there anything in Boston conselling groups sort of research
around the world that that gives us some suggestions for
how we get that level of spending up. You know,
the fifteen percent R and D tax incentive. Is there
(36:10):
smaller business asides too unwheel leaves too much red type
involved in going after it. Our bigger companies seem to
like it, but it's not really adding up to shifting
the needle towards two percent and then probably more realistically
three percent of GDP where we need to be on
R and D spending.
Speaker 2 (36:27):
Yeah, so I think that it's difficult to support a
lot of additional R and D spending if you don't
have a direction or a strategy about where that's being applied.
And so those benchmarks are helpful reference points. And yes,
we might be under spending. We are smaller, and so
(36:48):
where is that going to come from? And I think
when you're looking at that fixed pool that might be
available for investment, you want to pick the places where
you're going to get the biggest bang for your buck.
And and we can't be good I would just suggest
we can't be good at everything all the time. And
so having some of those ecosystems would help, I think
(37:11):
people to feel better about I'm investing into something that
we have a vision about where that's going. And it
doesn't mean that we won't invest into services that might
be offered locally or startups that are outside of these
specific ecosystems, but you want a majority kind of going
(37:33):
in the same direction.
Speaker 3 (37:35):
Yeah, so, Kelly, you've sort of framed the report as
the start of a dynamic conversation. You want to hear
from people who read it. You know, what are some
of the concrete things you think that the business leaders
in the business community can be doing as they look
towards hopefully a better future coming out of for sessions,
(37:56):
starting to invest in that growth that everyone wants. What
are some of the things they can be doing now
to try and achieve that sort of outlook you have
for where New Zealand could be in the middle of
the century.
Speaker 2 (38:08):
Yeah, I think beyond selecting what would be the best ecosystems,
which I think is one of the next challenges, is
how do you decide or get some clarity over what
those are? The next step is, well, how do what
are the gaps in the current ecosystem that we need
to fill and how would we go about filling them?
(38:32):
And so, is it something that's related to attracting investors.
Is it something that's around helping some of those startups
to continue to scale and why are they not able
to scale into that larger size? Is it about talent?
Is it about kind of creating the research institutions, kind
(38:56):
of figuring out what the gaps are in the current ecosystems,
and then well, what's the plan for us to fill it.
So it's very easy to say, well, I want the
government to tell us what it is or what are
they going to do to help support our ecosystem, But
I would just kind of flip it around to say, well,
what is it that we need and how could we
(39:19):
go about filling it?
Speaker 3 (39:20):
Good advice, get on the front foot, get that orchestration going, Kelly.
That's been really fascinating. Thanks so much for coming on
the Business of Tech, and we'll, as I say, link
to that report and hopefully get some feedback from our
own listeners about that dynamic conversation that you're just starting
to spark. So thanks very much.
Speaker 2 (39:40):
Yeah, thank you, Peter, welcome a lot of additional discussion
on it, and appreciate you having me on.
Speaker 1 (39:52):
Thanks to Kelly Newton for coming on. You'll find a
link to the Boston Consulting Group report in the show notes.
Go to the podcast section at business deesk dot co
dot nz. Stream the Business of Tech podcast on iHeartRadio
or wherever you get your podcasts. Next week Trump's approach
to artificial intelligence. We get the lowdown from a top
(40:13):
government AI policy expert who was in the US looking
at AI policy and regulation as Trump won the election
that would return him to the White House.
Speaker 3 (40:23):
That's next Thursday.
Speaker 1 (40:25):
I'll catch you then
On the business of take powered by two degrees business.
What could New Zealand look like in twenty fifty if
we got a little bit more strategic about plying to
our strengths in a few key areas that could fuel
economic growth.
Speaker 2 (00:15):
We don't want to pick winners. Some of that is
maybe afraid to say no or afraid to be wrong.
I would frame it as we can gamble on potential
happy accidents and hope that something works out. And some
people will point to we're very good at being having
winners in very niche or industries or her applications that
(00:37):
no one else is looking at. But that's also really
difficult to develop any kind of expertise in because you
can't anticipate what that might be. My position would be
that those happy accidents can happen even if you're placing
some strategic bets.
Speaker 1 (00:53):
I'm Peter Griffin from Business Disk and that was Kelly Newton,
co managing partner for Boston Consulting Group New Zealand. BCG
has just published what it calls an Investigation into the
Future of New Zealand Inc. The consulting firm points out
that our economy has been reshaped and bolstered by growth
as export industries such as dairy, film and tourism benefit
(01:17):
from a prospering middle class, particularly in Asia. They want
safe nutrition, rich cinematic experiences and beautiful places to holiday.
But those industries aren't going to serve us so well
in future. The local dairy industry says that New Zealand
has reached peak milk production. Film and television production is
limited to serving the outsourcing needs of Hollywood studios, and
(01:40):
travelers are choosing more affordable and lower carbon holiday options.
So what does little Old New Zealand do amidst a
war for talent, rapid technological innovation, and the growing impacts
of climate change. Kelly Newton was my guest today. She
says we should focus on five key areas where we
(02:01):
have a competitive advantage and can build highly valuable ecosystems
as we seek to reshape our economy.
Speaker 3 (02:14):
Kelley Newton, Welcome to the business of tech. How's it going?
Speaker 2 (02:17):
Oh great? Thank you for having me, Peter, It's great
to be here.
Speaker 3 (02:21):
Yeah. And look, we've heard a lot about Boston Consulting
Group multinational all around the world offering advice and consulting
services to big companies governments. You've been in New Zealand's
with an office here what for a couple of years now?
Speaker 2 (02:39):
Yeah. So we reopened our office here in New Zealand
in twenty twenty two, and then I joined the BCG
down here in twenty twenty four after many years in
the US. I feel like I'm ancient in the BCG
sense now.
Speaker 3 (02:56):
Yeah. And interesting timing to be sort of opening your
operation in New Zealand pretty much into a recession. How
have things gone in the last couple of years that
you've been sort of operational on the ground here again, Yeah, I.
Speaker 2 (03:10):
Think a lot of our strategy is about more longer
term and so whether there's a recession or the business
is looking good in any one year is kind of
less important. But I think there's a real recognition that
both the environment within New Zealand is different and it's
difficult to serve that from Australia. The ability to build
(03:32):
relationships with people understand the unique context here within New
Zealand is really important and so we viewed it as
a critical part of the strategy.
Speaker 3 (03:42):
Yeah, that's great. And you're known for really high quality
insights and research into the advice that you give to countries,
in some cases big companies as well. You've been looking
at the future of New Zealand, which a lot of
people are sort of fretting over at the moment. You've
posed in a new report, really good report out that
(04:05):
we will link to in the show notes, quite a
provocative question, what will New Zealand be known for in
twenty fifteen. I think it's an open question at the moment.
We have a government with a growth agenda. Our Prime
Minister has recently been to India trying to do a
free trade deal all over Southeast Asia as well, so
very much this government is really preoccupied with growth. We've
(04:28):
had a stagnant economy, but you're looking a bit more
long term and sort of posing that question, what do
we need to put in place now to be more
prosperous and economically and socially advanced by the middle of
the century. And you start out in that report looking
at some of the challenges, frankly, that we face as
(04:49):
a country and maybe that's where we should start. For instance,
the traditional pillars are for our economy, dairy, tourism and film,
and a lot of people have been saying you point
out in your own report. They're facing real headwinds, aren't they,
even though you know, price daries up. At the moment,
the trend is towards these sorts of industries are really
(05:11):
not going to deliver the way that maybe they have
in the last few decades.
Speaker 2 (05:16):
Yeah, that's absolutely right. So I think there are a
couple of trends. One is I think everyone is aware
of long term productivity trends within New Zealand, and I
think people are probably starting to become tone deaf to
the fact that New Zealand is falling behind and it's
somewhat accepted of that's where our position is, and that
(05:36):
hasn't changed that much since the earlier in the two thousands,
and so the question is, well, what starts to change
that trajectory, And it's not something that changes very quickly,
and typically to achieve better productivity you would think about specialization,
and so that's not necessarily groundbreaking, but in terms of
(05:58):
how we currently approach things, it's been more of being
very open to doing everything versus trying to place some
strategic bets on things that would lead to specialization. So
I think that's one aspect around productivity. And then some
(06:19):
of the traditional industries are more of those primary industries,
and we might be leaving some money on the table,
so to speak, in terms of how we're approaching those sectors.
And so I think one industry where you saw more
of a successful transformation was maybe what kind of John
(06:39):
Brackenridge did with New Zealand Marino and taking what was
a primary industry kind of commodity product and then turning
that into something where you did more of the value
add and thinking about how you participated in more of
that end product that was an export. And as we
think about some of the industries within New Zealand, is
(07:01):
there an opportunity to grow beyond maybe producing the milk
and the milk powder to something that would be more
value add or more in the technology space that's associated
with the EG sector that's growing much more quickly and
could be more of an export for New Zealand.
Speaker 3 (07:19):
Yeah, And look, we've had commentary in our media for
probably decades now about moving up the value chain as
we call it, to try and do that, and with
very limited success in areas like dairy, you know, we're
still selling milk powder and sort of raw materials that
other companies are then turning into products. You know, Fonterra
(07:40):
is even sort of floating the prospect of selling its
consumer brands, which I thought, wow, what a great sort
of resource. We have this direct relationship with consumers around
the world. So it seems that may not be in
Fonterra's future. So we've got challenges facing those Industry tourism
really hasn't recovered since COVID the film Sick. There's still
(08:01):
going gangbusters and here in Wellington we just saw James
Cameron really talking up Wellington as a great place to
make films. But you know, very much linked to who's
going to pay the biggest subsidies and we continue to
pay them. But that one is sort of a fickle industry,
isn't it. Those productions are going to go to the
lowest cost destination, right.
Speaker 2 (08:23):
It's kind of transitioning to say it's good to be
the location where the filming is taking place, but when
you look at the value across that industry, it's not
necessarily where the filming is taking place. And so what
opportunities do we have to actually expand across that and
what needs to be in place to enable it. There
(08:46):
are some great success stories with wet a workshops and
what they've done, but creating the ecosystem that goes around
it and then connects it so that the value isn't
all leaving New Zealand. I think the the gaming industry
has also been somewhat successful in how they've set up.
They have the development that's based here in New Zealand.
(09:09):
It might not be as many. There are a lot
of jobs, but is it as many as we would
like it to be and things that wrap around it.
There're probably some additional opportunity in how we think about that,
but that's been a good export and a lot of
the value is retained here within New Zealand. So I
think for those creative industries, is there something that would
(09:32):
is there some synergy across both gaming as well as
what we see within film. Do you need to pick one?
That might be still an open question, but what are
the other elements of the ecosystem that would help to
develop those industries into those larger kind of profit pools
(09:53):
as you might consider it in the future.
Speaker 3 (09:55):
Yeah, and look, with the rise of artificial intelligence, I
think we're just going to say the blurring of the
line between what is a game, what is a film?
What is augmented reality. What is a digital avatar that
does all of those things?
Speaker 2 (10:08):
Absolutely?
Speaker 3 (10:09):
Yeah. Some of the other challenges climate change you talk about,
and often this is just sort of a rote mention
in a lot of these reports about the future, a
token thing that you have to mention. But there are
some serious threats, aren't there, Not only to our agriculture
and tourism things like that that we do rely on
as pillows off our economy. What are some of the
(10:30):
other threats that climate change poses to New Zealand according
to your research.
Speaker 2 (10:36):
Yeah, so I think we didn't dive as deeply into
climate change necessarily in this report, But as you think
about broadly, there are changes to where and what type
of agriculture and what you can grow as a result
of climate change. There can be rising sea levels that
would impact any island, including New Zealand. I think there's
(10:59):
also an opportunit unity in the near term with the
renewable energy that we have within New Zealand And. Is
there a way for us to leverage that as a
benefit or potentially is a comparative advantage versus other countries
to kind of be on the leading edge. It's probably
(11:19):
less so just in the technology itself, but is there
something in how we deliver it or what is made
here or that would allow us to benefit. So data
centers is one example of Yes, there could be an
opportunity for us to house data centers here in New Zealand.
There's already some momentum going in that direction. But is
(11:42):
that sustainable when you look out kind of twenty years
or is it just something over the next kind of
five to ten that is a good wave for us
but might not provide sustainable growth in the long term.
Speaker 3 (11:55):
Yeah, so there's that. The other one you mentioned is
the growing talent gap. And when I talk to people
in the tech sector and that you know, this is
just a I say, what are the big things preoccupying you?
They don't really talk about the stagnant economy. They talk
about getting the right people on board. It's a continuous
problem and the government is trying to address this with
(12:16):
various visa changes to make it easier for highly skilled
people to come to New Zealand. But obviously you see
this as absolutely integral. If you want to have a
better country by the middle of the century, what do
we need to do to retain and attract talent.
Speaker 2 (12:33):
Yeah, So on the talent side, it is multi fascinating.
It's really hard to fix, and I think education is
one that's traditionally very hard to address because something you
do today you might not see some of the benefits
for ten years or more. And so one of the
(12:54):
sectors that we mentioned in the report is space and satellites.
And when I think about the time to grow and
a PhD student that's going to be able to go
into that industry as an engineer, well, first you need
them to get the PhD, which is several years in
and of itself. In order to get into the PhD program,
(13:14):
you need the master's programs and the undergraduate baseline around engineering.
And then just getting into engineering at the university level,
you need to be taking the STEM classes all the
way through high school and elementary school. And so I think,
when if I'm a university that's here in New Zealand,
(13:37):
that can be a very overwhelming thought to try to
train every student to cover every industry that we might
be in within New Zealand. And so if we're looking
to attract talent from other countries, then why would they
come to New Zealand to study here? It's probably not
enough to say, well, we speak English and we're in
(13:58):
English speaking country, but you want them to come here
because we have the best programs in a particular sector.
And we can't all be great at offering agriculture and
programs and food science programs across every university. And so
is there some specialization that we want to consider at
(14:19):
the university level. And I think that there's been some
exploration of that. I know Peter Gluckman is in the
process of looking at what some of those sectors might
be and the universities and how those might be aligned,
and that process is ongoing. But I think a recognition
(14:40):
of it might be good for us to have a
university that's going to be very dedicated to the kinds
of skills that would be good for space and satellites,
and a partnership between the businesses that are starting up
with in New Zealand to say these are the skills
that we want to have with and the businesses would
(15:01):
be a great conversation to have with the universities to
make sure that they're actually preparing people to work in
these sectors going forward.
Speaker 3 (15:10):
Yeah, and that's probably the central theme off your report,
really is that concept of we need to do some
level of specialization. And the way that you sort of
term it here is an ecosystem approach. You've identified basically
five areas, including agriculture four point zero and we'll talk
a bit more about that, space and satellites, as you've mentioned,
(15:31):
green tech, the future of medicine, and the creative industries,
which we touched on as well. And this is a
perennial argument that goes on in New Zealand. Should we
pick winners, some would say, or you know, put our
resources into certain areas where we have strength, or should
we strengthen the system in general? And stuff will bubble
(15:54):
up and people point out that, you know, sir Peter Beck,
who would have thought that he would create, you know,
a very successful commercial rocket company from New Zealand that
if you'd tried to pick that winner twenty or thirty
years ago, it would have been impossible. So yeah, interesting
in your view, you guys, obviously thinking you've looked around
(16:15):
the world and seeing where this is successful, that focusing
on these ecosystems where you have pre existing strengths as
really the way forward.
Speaker 2 (16:24):
Yeah, So I think this is a question. It is
a question that comes up across New Zealand of we
don't want to pick winners. Some of that is maybe
afraid to say no or afraid to be wrong, and
I would frame it as well a couple of ways.
One is we can gamble on potential happy accidents and
(16:45):
hope that something works out. And some people will point
to we're very good at being having winners in very
niche or industries or applications that no one else is
looking at. But that's also really difficult to develop any
kind of expertise in because you can't anticipate what that
(17:07):
might be. And my position would be that those happy
accidents can happen even if you're placing some strategic bets.
And those strategic bets are what do we have an
advantage in and what do we think could be successful,
And we're going to place some of those bets. They're
not all going to pan out, because innovation is actually
(17:29):
about trying some different things and learning from it, and
they're not all going to work out, but you hope
that some do and you can adjust along the way.
And as successful as we've seen Rocket Lab beat like
that's great, but I would love to see four or
five of those coming up within New Zealand, And I
(17:51):
just think of are there others that could have been
successful but haven't quite gotten there yet because maybe they
didn't have those different elements of the GO system. And
so while there are going to be some that are
successful regardless of what you put in place, think about
what are the others that you want to encourage. So
(18:11):
within kind of space and satellites, there's some other companies
that are popping up and getting some good traction. But
you would love to see it's not just the ones
that are launching the rockets that is the kind of flashy,
super fun. We all love to see a rocket go
up in the air. Some people love to watch them
explode to but thinking about, well, what kinds of materials
(18:36):
are used in rockets and we should have that kind
of advanced material capability here within New Zealand. And what
are the things that go into the design and the engineering,
the launch, the monitoring, the repair, the services, everything that
wraps around it, because that's what creates that stronger ecosystem
(18:56):
and will support other businesses. So you see Kia Aerospace
and Don Aerospace coming up like that's great, Like how
do we get more that are building on some of
that success.
Speaker 3 (19:08):
Yeah, yeah, really good point there, and there's some great
companies as you mentioned Zeno Astronautics another one. It's technology
to shift satellites around in orbit. So a scene has
happened off the back of Rocket Lab and it's partly talent,
but it's partly also international players going well. In New
Zealand actually now has a reputation for space applications. So
(19:31):
let's go and explore there to what extent. And we've
tried this before. Other country Scandinavia, Europe are very successful
about at clustering. So the ecosystem has a physical manifestation
in infrastructure and companies cohabit together. Is that an important
part of the ecosystem approach in New Zealand one percent.
Speaker 2 (19:55):
So it's it's really important that that the ecosystem please
off of each other and starts to create that flywheel.
So you start to see more and more companies and
it's very difficult to operate within a vacuum if you're
just an established company and you're trying to do something
but you don't have the talent that's coming in, you
(20:17):
don't have investors looking to where you are to make investments.
You don't have some of the startups that in some
places would be good candidates for you to acquire or
those startups are developing new technologies and pushing the envelope
that you might want to use within what you're doing.
So having that ecosystem actually, I would actually say co
(20:41):
located would be important. So while it would be great
if it's just generally within New Zealand, I would even
go so far to say, like picking a place within
New Zealand would also be helpful, But it is when
you look at other countries. I think we talk about
(21:02):
the example within Switzerland, and Switzerland is not that big,
but they have all of the elements of getting that
biotech together and it's the universities are doing research in
that area. You have other institutions doing research. You have
all those major companies that are co located, so you
can talent is moving in between them and that they
(21:26):
have opportunities to collaborate.
Speaker 3 (21:28):
Yeah, you mentioned in the report, probably one of the
biggest ecosystems, the most successful one is in the Cambridge
area in the United Kingdom, where you have that incredible
R and d IF it going on. You have academia
some of the best scientists and engineers in the world,
and it's created one of the biggest tech hubs in
(21:49):
the world.
Speaker 2 (21:51):
Yeah, you're absolutely right. So creating those tech hubs and
whether it's in the UK is yes, it's much bigger.
But when you look at just this one ecosystem, it's
very specific in terms of where it is within the UK.
And when you have people that are at the top
of their field and pushing the envelope, scientists frequently ask
(22:14):
where is the best place in the world to do
this thing? And that's where I want to go, And
whether that is in a small town or it's in
a different place, most of those scientists are willing to
move if they can progress the science in that area.
And so that's why I view kind of our goal
is to be well, where which scientists are we trying
(22:37):
to attract to New Zealand because they're going to want
to know where's the best place to do my thing?
And I think that's what these other successful ecosystems have done,
is they're attracting that top talent into where they are
because they've set up they have the best infrastructure that's
(22:57):
supporting that particular set they have the students that are
interested in the universities around that and other businesses that
they can be a part of.
Speaker 3 (23:09):
Yeah, and I guess the obvious one. We talked at
the start of this conversation about leaving value on the table,
and that's definitely been our agricultural story. So one of
the ecosystems you're suggesting what you call agriculture four point zero.
And we've talked a lot about industry four point oh,
which is really around sort of advanced manufacturing. We don't
(23:30):
really have a huge manufacturing base in New Zealand, but
we do have a pretty thriving agritech scene, the likes
of Halter Robotics Plus, which was just acquired by Yamaha
a couple of weeks back. So that is a fledgling scene.
I guess how do we really ramp that up? And
in the same way as you're talking about the space
(23:52):
sector as well.
Speaker 2 (23:53):
Right, I think, And again, like the sectors that we've
shared within the report are just a starting point, So
I don't know everything about which sectors we should definitely
do within New Zealand, but I think there is support
around something that's related to ag tech. I think there's
some choices. Is this hardware related to AG? Is it
(24:15):
software related to AG? Is it kind of services that
are related to AG And I think some of what's
been done is relevant to here in New Zealand. Do
we try to take a lens that's more outward looking
about what would be relevant that we could export in
the ag tech space? But right now there's some ag
(24:38):
tech that's spread across New Zealand and I'm not sure
if that there yet some of those centers of this
is the place where you would go if you want
to do ag tech. And from an investor standpoint, do
I know where to go if I want to invest
in ag tech? I could say, oh, well, I can
come to New Zealand, but is there one organization that
(25:02):
I can go to? Maybe maybe Agritech can help us
to navigate that. But some people would say, oh, there's
this going on in the White Catto, there's this going
on in Palmston North, there's this going down down in
the South. So it's it is a bit fragmented and
that maybe that's okay, But could we say that there's
(25:27):
a certain element of ag tech that each of those
places is known for.
Speaker 3 (25:31):
Yeah, I think that's one sector in particular, where they
just get on and do it and they hid down
sort of they're in the fields and they go, oh,
if I came up with this device, it would improve
my life. That's the story of Gallagher and other great
New Zealand companies. So we have seen in the US
some really good ecosystems in agritech, everything from satellite remote
(25:54):
sensing technology to look at soil moisture through to actual
automated combine harvesters. You know, there's des Moines and other
places around the US where they're leveraging really well based
on being physically together.
Speaker 2 (26:10):
Yeah, and I think even when you look at a
company like John Deere in the US that has obviously
been around for a long time, but they also have
been doing a lot on the tech innovation side. They
have their hardware which is generally still based there around
Illinois Iowa border, but then they do a lot of
(26:32):
their tech innovation in other tech hubs within the US.
So they're going over to Silicon Valley or down in
Austin because that's where they're attracting some of the talent,
and so in that instance, they're still connecting it back
to the core business. But they've actually chosen to locate
where some of the ecosystem is around the specific innovation
(26:57):
that they're looking to do.
Speaker 3 (27:00):
On the future of medicine. This is one where we
actually have a lot going on. If you read the
Tech Investment Networks report every year on the biggest sort
of sectors off of tech by revenue in New Zealand,
health tech is right up there and we've had some
very successful tech companies. Ian McCrae's company Orion was recently acquired,
(27:24):
so a lot of great companies there, but that one
feels very fragmented and dispersed. It really clustered around Otago
and Auckland University where a lot of the medical research
is going on. I think if there's that one, if
there's one on your list that could really benefit from
a more of an ecosystem approach, it's that.
Speaker 2 (27:44):
Yeah. I think the kind of medicine mad tech is
a sector that I think has a lot of promise
and a number of different countries around the world are
choosing to participate in some way. There's narrowing in on
which part of that sector you want to grow. I
(28:05):
think there's a risk actually that while we've included it
it has some relevance here in New Zealand and some
things that we can build on, but it's also a
sector where you've seen other countries really pull ahead. And
so in the report I kind of mentioned looking back
(28:25):
and back in two thousand and one, there was the
Catching the Wave conference here in New Zealand. This was
way before my time here, and it highlighted this need
to specialize and to place some of these strategic bets
around ecosystems, and I think that health technology space was
(28:46):
one of them. And if you think about a country
like Switzerland, that's around the time that they were switching
gears and starting to say, no, this is where we're
going to be focused. And now we're twenty five years
later and Switzerland's done a really good job of that,
and I think it's an example of what we could
have achieved if we had decided this is a place
(29:09):
that we want to double down, so medtech going forward
and you know, health technology. I still think it's a
great area, but how do we kind of as a
community decide this is what we want to go after.
Speaker 3 (29:26):
It's sort of been the story for the last twenty
five years in New Zealand. Really since the knowledge wave,
which I only vaguely remember, but we sort of knew
the direction we needed to go, and we saw what
other advanced countries were doing, and we didn't really do it.
And I keep asking the question why. And you know,
Rowan Simpson, the startup found a co founder of trade Me,
(29:46):
was on the show a couple of weeks back and
he just said, you know, and others Andy Hamilton, former
CEO of the Ice House, just said that we just
have this attitude to risk anything government. Really, if government
is driving it, of course they're not going to take
risks because it could cost them their political careers, it
(30:08):
could cost bureaucrats their jobs. So I guess the big
question is we sort of know as a country where
we need to go. Who's going to drive it? And
what does the evidence suggest when you look around the world,
where is it most successfully sort of manifested. Is it
businesses saying look, we're just going to take the initiative
and build an ecosystem, or does it need to be
(30:30):
seeded by government? That's another big argument that just seems
to go around in a loop in New Zealand.
Speaker 2 (30:36):
Yeah, so I think that you know, it's great if
the government can be on board, but that can really
vary because of the limited terms that any one person
or administration is in power. And so actually one of
the risks to these ecosystems is that change in government
(30:58):
and the whiplash that kind of her in terms of focus,
because if you have a group that's focused on one
thing and then a new administration comes in and they say, no,
we should be focused on something else, then you're never
giving enough time to actually develop that specialization and to
see that through, and so that's actually worse. So I
(31:20):
think in many cases that's why I would say, like,
you can't necessarily wait for the government to determine what
these ecosystems are going to be, because if there's a
change in government, you don't want to change that focus.
And so bringing together, yes, it's good to have some
representation from people that might be within the government, but
(31:42):
it's more about people that already participate as businesses, startups, investors,
research that happens here in New Zealand. All of that
can actually kind of help you to coalesce around things
that we have comparative advantage and then we can develop
(32:04):
the ecosystem around that. And I would say that that
orchestrator is playing the role that could help to go
back to the government to say, oh, well, for this
ecosystem to be successful, these are the parts that we're
trying to build up, because otherwise the government is doing
the best that they can. But they are guessing. It
(32:27):
could be more generous than a complete guess, but they
are essentially guessing at what the businesses need or what
those potential ecosystems need and then making investments versus there
being the pull from that ecosystem to say, this is
what we need to be successful and it's something that
(32:47):
only the government can help to provide. So for example,
the visas and opening up immigration in New Zealand, that
is something only the government can help do. But it's
great if one of those ecosystems said like we need
people with these types of skills or this is the
(33:08):
barrier for us being successful. You might see other things
in terms of you know, I think in the space sector,
you're going to face things around when can we lant
where can we lant developing those launch sites. Those are
sometimes things that the government can help to facilitate.
Speaker 3 (33:30):
I think you've put your finger on one of the
big problems is you know that orchestration and we haven't
really a lot of these fledgeling ecosystems haven't been well
served by having an orchestrator actually going making a really
coherent argument to the government for what they need or
are pockets off it like the space sector. I mean
(33:50):
that was literally so Peter Beck going to Steven Joyce
and John Key off the national government off the time, saying, look,
I've got all this business potentially coming, but I need
a launch site. Can you what I need is new
space legislation. I need an agreement with the US and
New Zealand around space technology. And that's how informal it
(34:13):
sort of was at the beginnings, and that led to
an industry taking off here. But if we can sort
of formalize that sort of orchestration so that we actually
get the things that these ecosystems need off the ground.
Speaker 2 (34:26):
Yes, So if I kind of go back to the
example in Chicago that I was involved with when I
was there, In that instance, it was a couple of
philanthropists or business people that said, this is our vision
for what we want to do in Chicago. But they
recognize the gap of having some kind of orchestrator in place,
(34:50):
and so decided that they were going to set up
an entity that would help to be that orchestrator. And
they're probably there can be so institutions within New Zealand
that could play that orchestrator role. But it's understanding, yes,
this is part of our mandate and who is it
(35:13):
that we need to bring in because it's tough to
coordinate across established businesses and startups and try to look
at investors and look at universities. But without that orchestrator
whose job it is to be thinking about how do
we make this successful and continue the flywheel, no one
(35:36):
else is thinking about that because they have five other
things that are top of mind for just keeping their
business running. And so that's why that orchestrator is really important.
Speaker 3 (35:46):
You make note in the report of our underperformance on
R and D spending we underspand compared to other countries.
Is there anything in Boston conselling groups sort of research
around the world that that gives us some suggestions for
how we get that level of spending up. You know,
the fifteen percent R and D tax incentive. Is there
(36:10):
smaller business asides too unwheel leaves too much red type
involved in going after it. Our bigger companies seem to
like it, but it's not really adding up to shifting
the needle towards two percent and then probably more realistically
three percent of GDP where we need to be on
R and D spending.
Speaker 2 (36:27):
Yeah, so I think that it's difficult to support a
lot of additional R and D spending if you don't
have a direction or a strategy about where that's being applied.
And so those benchmarks are helpful reference points. And yes,
we might be under spending. We are smaller, and so
(36:48):
where is that going to come from? And I think
when you're looking at that fixed pool that might be
available for investment, you want to pick the places where
you're going to get the biggest bang for your buck.
And and we can't be good I would just suggest
we can't be good at everything all the time. And
so having some of those ecosystems would help, I think
(37:11):
people to feel better about I'm investing into something that
we have a vision about where that's going. And it
doesn't mean that we won't invest into services that might
be offered locally or startups that are outside of these
specific ecosystems, but you want a majority kind of going
(37:33):
in the same direction.
Speaker 3 (37:35):
Yeah, so, Kelly, you've sort of framed the report as
the start of a dynamic conversation. You want to hear
from people who read it. You know, what are some
of the concrete things you think that the business leaders
in the business community can be doing as they look
towards hopefully a better future coming out of for sessions,
(37:56):
starting to invest in that growth that everyone wants. What
are some of the things they can be doing now
to try and achieve that sort of outlook you have
for where New Zealand could be in the middle of
the century.
Speaker 2 (38:08):
Yeah, I think beyond selecting what would be the best ecosystems,
which I think is one of the next challenges, is
how do you decide or get some clarity over what
those are? The next step is, well, how do what
are the gaps in the current ecosystem that we need
to fill and how would we go about filling them?
(38:32):
And so, is it something that's related to attracting investors.
Is it something that's around helping some of those startups
to continue to scale and why are they not able
to scale into that larger size? Is it about talent?
Is it about kind of creating the research institutions, kind
(38:56):
of figuring out what the gaps are in the current ecosystems,
and then well, what's the plan for us to fill it.
So it's very easy to say, well, I want the
government to tell us what it is or what are
they going to do to help support our ecosystem, But
I would just kind of flip it around to say, well,
what is it that we need and how could we
(39:19):
go about filling it?
Speaker 3 (39:20):
Good advice, get on the front foot, get that orchestration going, Kelly.
That's been really fascinating. Thanks so much for coming on
the Business of Tech, and we'll, as I say, link
to that report and hopefully get some feedback from our
own listeners about that dynamic conversation that you're just starting
to spark. So thanks very much.
Speaker 2 (39:40):
Yeah, thank you, Peter, welcome a lot of additional discussion
on it, and appreciate you having me on.
Speaker 1 (39:52):
Thanks to Kelly Newton for coming on. You'll find a
link to the Boston Consulting Group report in the show notes.
Go to the podcast section at business deesk dot co
dot nz. Stream the Business of Tech podcast on iHeartRadio
or wherever you get your podcasts. Next week Trump's approach
to artificial intelligence. We get the lowdown from a top
(40:13):
government AI policy expert who was in the US looking
at AI policy and regulation as Trump won the election
that would return him to the White House.
Speaker 3 (40:23):
That's next Thursday.
Speaker 1 (40:25):
I'll catch you then
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