Catlins Area School at the bottom of the South Island is about as close as you can get to Antarctica and still be in a classroom. In case anyone needs reminding about its remote location, its logo features a penguin.

Of its 149 pupils, only a handful are working towards their National Certificate of Educational Achievement. But what it lacks in size, the school is making up for in enterprise.

This year it will teach unit standards in aviation studies to more than 60 teenagers throughout New Zealand, partly by encouraging them to interact with 3D images on a computer screen. If things go well it may even start teaching the course to fee-paying teenagers in other countries as well.

The school is at the forefront of an e-learning experiment that is part of a push by the Ministry of Economic Development to create what it hopes will eventually become a $1 billion-a-year 3D graphics industry.

According to deputy principal Allan Jon, the idea came about after one of the school's teachers, who happens to be a former aeronautical engineer, was talking to someone from a local industry training organisation about the shortage of young people considering aviation as a career. One thing led to another, and the New Zealand Qualifications Authority (NZQA) became involved.

NZQA was keen, but didn't see the point in the course being taught to only a couple of children a year. Enter 3D graphics company Right Hemisphere.

Essentially, Right Hemisphere's clever software enables an organisation to create a virtual library. Staff can wander in any time they like and pull out a book, with the advantage that its contents will be automatically projected on a screen that other people can see. Not only can anyone edit the content, but all the book's pages can be viewed simultaneously, so the resulting image appears to be three-dimensional. However, you also have the choice of focussing on a single page at a time.

For manufacturers in particular, the software enables them to gather an enormous amount of product-related information in one place, replacing the costly manuals and other screeds of data normally used to keep tabs on what is being made, and how. Another advantage is that it can be accessed remotely using fairly run-of-the-mill equipment.

When Jon saw his first demonstration he was extremely impressed. "We were really, really excited, because the level of information that we can communicate to students by using those 3D models is just mindblowing." The students also love it - to the point where they are often reluctant to end their lessons. "That's a positive thing, too, isn't it?" says Jon.

In the United States the same software is already being used by many of the big names in the aeronautical and automotive industries, such as Boeing, Lockheed

Martin, Sikorsky, Bell Helicopters, Siemens Diagnostic, Spirit AeroSystems, Nasa and Chrysler. Right Hemisphere has targeted these industries because they are likely to be the most lucrative in the medium term. But its long-term goal is much more ambitious: to persuade the entire world to convert its communications from 2D to 3D.

There is already evidence the world is starting to catch on. Right Hemisphere applications are now incorporated in Adobe, Corel and SAP software. The company, whose investors include the same American venture capitalists who helped get Google, Yahoo, Cisco and YouTube off the ground, is understood to have recently signed a contract with a large American manufacturer that wants to stop making samples, and display virtual prototypes instead.

And it was surely a sign of the times that toy maker Fisher-Price revealed this week it was dumping almost all the View-Master titles that for the past 70 years have enthralled young children.

To today's video-game generation, View-Masters are ridiculously archaic. But the dinky discs were used by grown-ups too. During World War II the armed forces used View-Masters to train soldiers to identify enemy aircraft and ships. They were also used to train medical students in anatomy. These days 3D software is doing the same thing, in a much more sophisticated way.

While Right Hemisphere believes it has an ideal tool for the educational, medical and construction industries, it hopes new uses might also be found for 3D images that no one has yet thought of.

3D printers are already available on the mass market, and the movie and television industry is starting to embrace 3D content. Meanwhile, an Auckland-based company, 3DLive, has started promoting holographic technology that it hopes will wow corporates keen to impress jaded customers.

Last month Right Hemisphere's worldwide head of sales won a "Stevie" award for being the best in America at his job, beating contenders from blue-chip companies such as FedEx.

It is not the only Kiwi firm earning itself a world-class reputation in this area - companies such as Weta, Animation Research and Orion Healthcare have also been spectacular success stories. So far, though, it is the only one to have received explicit Government backing.

The decision in 2006 by then-Economic Development Minister Trevor Mallard to give Right Hemisphere a five-year interest-free loan of $14 million of taxpayers' money was not without controversy. The deal went ahead despite Treasury advice it had "a low probability of resulting in net benefit to New Zealand". Critics questioned whether there was a market failure that warranted such an ad hoc intervention, and deplored the precedent it set.

Right Hemisphere founder Mark Thomas insists it's not a case of the Government "picking winners".

"The Government simply said: 'We're not in the business of picking winners but clearly people who do know how to pick winners have picked this company, so let's get as much advantage out of this as possible in New Zealand'."

Thomas' goal is to eventually list the company on the Nasdaq. At present, about half its 80 staff work in Auckland and half in the US. The business is still hiring and he is determined that "the momentum, the research and development, and the brains trust" will remain in New Zealand.

In fact the conditions of its Government loan require it to keep the bulk of its R&D here. It also has to develop a cluster of spin-off companies in which its American backers are also expected to invest. If it fails to create such "spillover" benefits it has to pay 25 per cent interest on the loan.

To help nurture such spin-offs the Government agreed to provide $7 million over three years to set up Nextspace, which is based in the same building as Right Hemisphere in a business park in Greenlane. So far Nextspace has employed around a dozen staff to help identify and nurture potential spin-offs, and the looming deadline when the Government money runs out, in about 18 months' time, is helping to focus minds.

It earns revenue from reselling Right Hemisphere and Esperient software, and providing consultancy and application development services, but is not yet self-sufficient.

Nextspace's original CEO, Dr Roy Davies, has recently left to set up his own consulting firm, The Flexible Reality

Studio, which will specialise in the research and development of "clever, use-worthy, interactive 3D solutions to real world problems." Davies is a Kiwi who spent more than a decade running Scandanavia's leading virtual reality research centre. A researcher at heart, he acknowledges Nextspace needed to take a more commercial direction.

Davies' replacement is Gavin Lennox, another former Kiwi who has returned home - in his case after more than two decades abroad. An engineer with a sales and marketing background, Lennox has worked for companies such as IBM, Lotus and MapInfo.

His mission is to make people realise there are still plenty of opportunities at Nextspace for Kiwi companies and organisations to capitalise on what will very likely be the Next Big Thing.

So far staff have identified 60 potential projects, says Lennox, and have "engaged with" well over 200 companies. But as he admits, "there's a big difference between engagement, which could be a good cup of coffee downstairs, to: 'Okay, this is actually really going to change my business'."

Companies it has been talking to include clothing company Icebreaker, steel framing business FrameCad and Canterbury University spin-off MARS Bioimaging.

One of the most promising ideas it came across early on was SimDrive, a driving simulator developed by a former manager for The Warehouse, William de Hamel. De Hamel has since moved to Britain, and Nextspace also appears to have moved on.

Although there are some projects that are commercially sensitive, it has publicly named 10 cluster members: superyacht designer Urban Voyage, virtual construction consultancy Predefine, virtual showroom company Vgallery, architectural designer Buildmedia, Wellington polytech WelTec, film and video production company Shotz, Northland polytech NorthTec, interactive marketing company HIT Lab, utilities training provider Utilitech, and virtual maintenance company Revisia.

Despite the global economic situation, Right Hemisphere itself is thriving, says Lennox, hitting all its growth targets over the last five quarters. "What they have cracked the nut on is understanding how 3D can really make a difference to a business and its commercial value, and therefore being able to charge a significant and profitable level for their software. And that's what I want for Nextspace as well. I want Nextspace to make sure we're not just doing

3D for its own sake, but making a competitive difference to New Zealand companies so they can compete internationally."

Revisia, founded by mechanical engineer Mark Foster only 18 months ago, is a perfect example. Foster is a Canadian with experience in the oil and gas industries who moved to New Zealand seven years ago after falling in love with the place while travelling. With help from Nextspace he was able to exploit some connections he had at NZ Steel to build a business that already employs five staff.

He originally joined NZ Steel as a Computer Assisted Design (CAD) consultant but quickly realised that Right Hemisphere's 3D software might be able to help the company with its maintenance. His first major project involved providing virtual training for its staff in how to shut down and maintain a giant kiln.

The time taken to do the 12-hour shut-down, which is done twice a year, tended to vary greatly. A single error could be costly as each hour the kiln is shut down costs the company tens of thousands of dollars in lost production.

Foster was able to build a detailed 3D model of the kiln online, which the tradesmen were then able to pull apart and use for their planning. They were able to streamline the job to just 8 hours, saving the company hundreds of thousands of dollars a year.

The project was such a success that NZ Steel has since invited Foster to take a look at some of its safety procedures. For example, he is using 3D software to show truck drivers how to properly load enormous steel coils onto their trucks so they won't fall off. Another spin-off is that the software will allow the company to capture a lot of the knowledge of its workforce, which is becoming an issue as many of its workers hit their 40s and 50s.

Where Right Hemisphere is leading the world is in the way its software can be easily used by almost anyone and anywhere, says Foster. Nextspace is already working on making animations available via an iPhone or another handheld device, for example.

"Traditionally, the issue has been that the information has been locked in to the engineering department on these expensive CAD machines, and now with this technology you can actually produce this stuff and make it available for wide general use."

Foster is excited about the possibilities for other heavy industries, and may even chase some business back in his home country. Fortunately for New Zealand, he adores our outdoor lifestyle and has no intention of moving back to Alberta. "That's another nice thing about this technology - it's conducive to being able to do things remotely."

Right Hemisphere's software is also being tested in the construction industry.

Zolna Murray is an Auckland-based architect who fled to New Zealand from what was then known as Yugoslavia during the Balkan Wars of the early 1990s. She has since founded a virtual construction company called Predefine, which manages mostly commercial projects.

Murray concedes that Right Hemisphere's software is not well-known in the industry. "Other packages have an established history in the industry, like 20 or 30 years, but when we look at the functionality and capability, [Right Hemisphere] are far superior to most of the other things that are on the market."

Best of all, she is able to demonstrate that the software saves clients an awful lot of money, by managing the entire project online as efficiently as possible. Because every single detail is able to be scrutinised and visualised in the virtual world first, it also prevents costly mistakes and misunderstandings from occurring.

The only hiccup she foresees is the culture change that will be required in the industry to get the various professions and trades involved to collaborate rather than constantly trying to avoid blame if things go wrong. "It's a very fragmented, risk averse industry. The way the industry is contractually set up at the moment is not really in favour of this approach."

Some would argue the same is true of the educational sector, but Nextspace believes it is making some progress. So far, says Lennox, it has provided over $6 million worth of software to educational institutes at heavily discounted prices.

Meanwhile, it is also being successfully developed for industry training.

Utilitech is a private training establishment (PTE) that trains plumbers, gasfitters and electrical workers. A wholly-owned subsidiary of energy distribution company Vector, it trains about 2000 people a year in the latest industry techniques.

General manager Chris Jobson was expecting to receive final approval this week from NZQA for a four-day course that will use Right Hemisphere software to train plumbers in the latest solar hot water installation techniques.

One of the main problems with such courses, says Jobson, is the first day is often wasted getting the less experienced participants up to speed. From now on participants will be required to complete an online course first, to ensure they all start with the same knowledge. Once they're in the classroom they will be able to manipulate 3D images that will enable them to instantly visualise what is being taught.

Another bonus is that the hardware used for the course can be transported anywhere in the country that has broadband. The bottom line, says Jobson, is that the 3D software will save time and money for both Utilitech and those it teaches. What's more, those who attend the course will be able to refresh their knowledge at any time simply by going online.

An Australian company is already interested in obtaining a licence to use the same course across the Tasman.

By going through Nextspace, Utilitech was able to get the software at a significant discount. "And because we're a PTE and because the MED is backing Nextspace, it means we're able to access things that aren't normally commercially available."

He will be particularly interested to see what younger plumbers think of the new training, compared to the older ones. "It's pretty much like a video game, really," he chuckles.

If Mark Thomas and his cohorts get their way, life will soon begin to feel more and more like taking part in a video game, as actual reality and virtual reality collide. The company's background in both engineering and entertainment (in 2002 it developed applications for computer game The Sims), makes it ideally placed to provide a universal, visual language that should make communication much easier in a global marketplace, says Thomas.

While he insists he's not taking notice of the score, there is a lot at stake, and his own reputation is probably the least of it.

"There are opportunities for people to use our technology, whether they make refrigerators, baggage handling systems, or whatever," he enthuses. "The thing I'd really like to get at is - here is something of use to New Zealand. Here is a tool which we're mandated to help provide in New Zealand at greatly reduced or zero cost - especially in education. Please come and take advantage of it, because we'd like to help."