Innovation: The key to retaining a global advantage

Greg Shanahan, managing director of Technology Investment Network (TIN). Photo / Brett Phibbs

Greg Shanahan, managing director of the Technology Investment Network (TIN) - talks to Greg Hall about key trends impacting NZ companies on the leading edge of change.

Given the growth of TIN companies over the past decade, what role do you see innovation playing in ensuring they grow even faster?

Shanahan: Innovation is increasingly important in New Zealand for a number of reasons. Firstly, innovation is required to have a value-leadership position to avoid margin erosion in a volatile New Zealand currency. Secondly, the intensity and speed of global competition is increasing, so innovation is required to sustain a global competitive advantage.

What surprises most people is how significant these TIN100 companies already are in our economy.

Last year, foreign tourism accounted for about $11 billion, dairy accounted for about $14 billion and the next on the list is the TIN sector - at $6 billion.

I see this as a golden opportunity for New Zealand, where our currency has dropped against the US dollar but the US economy is growing. All thee TIN companies that have sprung up in the past 10 years can ride off the back of that growth and improve their value in NZ dollar terms.

Because of the nature of the TIN sector, we're going to see more parity with the dairy and tourism sectors because these companies have the unique ability to innovate and be globally scalable more quickly.

What is needed to further encourage or enable foreign investment in the TIN companies?

There has already been rapid growth but we need to be careful - this may subside if the market becomes overheated and the bubble bursts.

One of the key trends is the growing number of US venture capital firms looking to New Zealand over the past 30-40 months. But the Nasdaq has passed a record level of activity compared to what it was when the Dotcom bubble burst in 2000. When the market becomes too hot, people start paying for things at prices that can't be sustained. One of the reasons investors are coming here is that there is too much money chasing too few deals in the United States, whereas here there is a diversity of opportunity. This, and the fact that the world is rapidly becoming more globalised economically, means New Zealand needs to have a long-term view in responding to these factors.

Of the companies that make the leap into the top revenue bracket, what common capabilities or qualities do they have?

There are four key things: Intention, People, Focus/Strategy and Execution.

For intention, these companies want to be big at the outset with an ambition or sense of destiny starting with the CEO and management team. What we see in these companies is that many keep "global domination" in their sights.

As far as people go - staff attraction and retention are key issues as competition for talent rises. Successful companies typically are places people want to work as they have an attractive culture, which fosters success.

Focus and strategy are also important. The most successful companies survive long-term because they are profitable. Technology exporters have maintained profitability through the Global Financial Crisis with the appreciation of the NZ dollar by becoming price makers or market/value leaders. Successful companies increasingly focus on areas where they can sustain a leadership position.

Finally, execution. We've moved past the "clever Kiwis" stage to a place where we have a growing number of innovative companies who also execute very well operationally, as well as in sales and marketing. The leaders are defining the success culture for others to follow, and defining that culture is one of the key objectives of the TIN100 Report.

The theme of the 2014 report is where the TIN companies have come from in the past decade - what changes do you see in the next 10 years?

The key trends are likely to be:

• A growing profile of larger TIN companies;

• More New Zealand companies with a global footprint;

• Growing foreign investment in New Zealand TIN companies;

• A rise in talent in New Zealand coming to fill the growing number of skilled positions. Sir Paul Callaghan used to talk about New Zealand being a place where the talent wants to reside. We need to ensure this.

The TIN100 timeline highlights that the NZ innovation sector is currently undergoing a period of growth and expansion following the GFC. What must be the wider focus in New Zealand moving forward to ensure that this period of growth is sustained?

First and foremost, we have to be able to supply the skill base required to support the growth. We must keep the country attractive to skilled people, and this is not just about the money. People want to live here for career opportunities, but also for lifestyle reasons. If you can satisfy both, you'll be able to continue to attract the people we need.

We also have to encourage investment in R & D, through cash as well as streamlined systems - New Zealand must support that. We've got to keep ourselves connected locally- our small size is a major advantage. We need to align Crown-funded research in Crown Research Institutes and universities with the more commercial outcomes of TIN100 companies.

Lastly, we need to look closely at succession planning for longer-term growth of our best companies. Looking at the CEOs of the big TIN100 companies, many are ageing, and we need to be careful that the next generation doesn't all sell up and leave.

TIN100
The TIN100 report which tracks the fortunes of the top 100 fast-moving - and globally focused - NZ companies in the hi-tech manufacturing, biotech and ICT sectors.
www.tinnetwork.co.nz