Rick Boven: We need to cultivate connections

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Opinion

Auckland scores very well on the lifestyle aspects of liveability but not so well on economic performance. Better economic performance would lift incomes and make Auckland a much more attractive place for people who are choosing where to live and invest.

As China, India, Thailand, Indonesia and many other developing countries build their technological and manufacturing performance, increasing competition from their exporters threatens manufacturers and other types of businesses in the developed economies. Innovation is required to stay one step ahead. Innovation is the foundation for identifying and building new businesses, for launching new products, for finding new sources of customer value and for reducing costs.

Innovation performance is one of the most important determinants of economic performance, and therefore incomes, within advanced economies. New Zealand has been a relatively poor performer but is now launching a big effort to catch up.

As New Zealand's pre-eminent city, Auckland's innovation performance matters a lot. Auckland has been mainly a services and consumption centre in the past.

The city's economic strategy for the future aims to grow industry sectors that produce high value goods and services for export. Building stronger innovation capabilities and an innovation culture would help lift the performance of domestic as well as export businesses.

The stated goal of Auckland's innovation plan is to become "an innovation hub of the Asia-Pacific region". The inclusion of "hub" in the goal is designed to focus effort on creating and improving international connections. Successful innovation depends on understanding customers want, what competitors are doing and which technologies might be useful.

In a global economy, access to the information for gaining understanding depends on being well-connected internationally. Building connections with researchers, investors and businesses with channels to market is critical for success.

Many of New Zealand's innovative businesses are small and all are a long distance from their target markets. There is a cultural tendency that leads many of our innovative businesses to assume they know what customers will want and so to spend less time than they should understanding market needs.

Innovation success depends on businesses choosing to innovate and developing the capabilities and connections required for success.

The New Zealand Government and Auckland Council can help by ensuring that supporting infrastructure and institutions are in place and by helping ensure that important resources including talent, capital and knowledge are available in sufficient quantities.

As a very small participant in the race to develop innovation capabilities and innovative businesses, Auckland must specialise in business segments where it can build competitive advantage. Building co-located clusters of similar and complementary businesses in related industries, learning from and working with one another, and developing shared international and domestic connections helps a lot. Work is in progress to develop larger and stronger clusters in Auckland.

The Innovation Precinct in Wynyard Quarter will emphasise information, communication and technology businesses, including digital media. Other developing clusters are focusing on foods, life sciences, health innovation and advanced materials.

There is now strong commitment to improving economic outcomes and innovation performance, improving collaboration among the relevant agencies, and efforts to address resource gaps. There is a lot still to be done but no insurmountable obstacles.

Central and local government agencies can help create the conditions for success but long term innovation performance will depend on talented leaders choosing to start innovative businesses or to increase the rate and value of innovation in existing businesses.

Business research and development spending is low in New Zealand relative to many competing small trading economies so promoting a culture that encourages innovation and celebrates success will be critical.

Building a strong innovation ecosystem and using that to grow many more large internationally competitive businesses offering high value jobs will take many years.

Moving quickly and vigorously is critical because we need to catch up with other innovative urban regions, and we are in a race. Rigorous monitoring of performance so emerging institutional and resource gaps can be recognised early and closed effectively will ensure progress is sustained. Maintaining momentum and committing sufficient resources will remain a challenge.

If the innovation efforts succeed, Auckland will establish an international reputation as a place where clever people collaborate to develop innovative products and services. Auckland will be recognised as an innovation hub, a place others in the Asia-Pacific region want to connect with. Auckland's liveability will be improved by combining improving economic performance with an advantaged lifestyle.

Rick Boven is former executive director of the New Zealand Institute.