This week the Business Herald looks at new technology that’s changing the world.

Kiwis have started disruptive businesses ranging from local beauty salon booking apps to rockets aimed at flying satellites to space but more could be thinking bigger, say sector leaders.

New Zealand risks missing out on fully capitalising on disruptive technology and business models, says Greg Doone, PwC's digital strategy and data leader.

"I wish I knew the obvious answer. There's something about the digital world that the New Zealand No 8 wire mentality has skipped a little bit but I do believe that we should be world leaders in this," he said.

While the Government says it is satisfied with how it was supporting these companies, business leaders are worried about keeping up.

Greg Doone.
Greg Doone.

A survey of chief executives by PwC which showed the proportion of them worried about the speed of technological change had risen from 37 per cent in 2014 to 68 per cent this year.

Xero chief executive Rod Drury said New Zealand disruptive businesses could do more on the world stage if there was a strategic plan.

"The frustration we would have is how can we leverage that to move the country forward? What we're seeing is a lack of leadership on the technical disruption."

While it was up to business to devise a plan, it needed the Government's blessing, he said.

But Economic Development Minister Steven Joyce said his government did not want to get in the way of innovation by adding complexity. It was however, supporting companies through the Callahan Institute with potential through matched funding and tax incentives.

"With Callahan we're prepared to back where people put in their own investments because that's a fairly sure sign of where the world wants to move."

Rod Drury.
Rod Drury.

The Government wanted to be reasonably neutral about technology and industry it followed rather than "second guess" it. One indicator of the disrupters' success - exports of software - was showing strong growth, said Joyce.

"While we always want to do more and I won't be happy until they're double or triple their size, the ICT (information communications and technology sector) is growing at the rate of just under 10 per cent a year."


Doone said the pace of disruption was about to step up.

"We see that a lot of New Zealand big businesses are fast followers and waited and watched how digital markets have evolved.

"But the speed of disruption now is such that it is becoming a flawed strategy - they're not able to follow quickly enough."

New Zealand's distance from the rest of the world had traditionally been a barrier for physical exports but technology meant smart firms here could easily operate overseas.

"The flip side of international competition is an international marketplace," he said.

Traditional retail and entertainment content businesses were on what Doone said was an endangered list rather than doomed.

The competitive threat was changing and it will not necessarily be local or vertical.

"Will the disruption to the supermarkets come from each other or elsewhere?" In the United States the main threat to supermarkets was Amazon through which customers now ordered their groceries.

New Zealand retailers were being hurt by online shopping overseas. The percentage of retail goods bought online from overseas sites had grown from 28 per cent in 2013 to 42 per cent in the past year.

"You don't necessarily have big financial alerts above New Zealand retailers, however there's a massive market share they've missed out on."

Drury said consumer banking in this country used to be an international leader - rolling out eftpos well ahead of other countries - but wasn't any more.

He said New Zealand disrupters needed to be more ambitious. High value, smart exports were even more important, as sectors such as dairy slumped.

"We think we need to export more and take some of the load away from the primary sector - they've done a fantastic job of being export focused and the rest of us need to move away from just providing domestic services and build export businesses."

Drury said a government-backed "chief technology officer" with the same status as chief science adviser Sir Peter Gluckman in the Prime Minister's office would help drive high-tech disrupters but Joyce has a different view.

"Rod has a touching faith that there'll be an all-seeing and all knowing chief technology officer - it's a completely different game to the science research game.

"A chief technology officer would never have picked a Xero," he said.

"We want fewer moving parts on the government side than more because of the danger of getting in the way and having one person that will drive it in one particular direction," the minister said.

Quick solution to traffic congestion

Disruptive business models offer quicker solutions to solving traffic problems than technology such as autonomous and electric cars, Transport Minister Simon Bridges says.

He has been in Silicon Valley and Japan meeting high tech companies over the past 10 days, seeing new ways of accessing cars and different models of vehicle ownership that could transform New Zealand cities.

City Hop founder Victoria Carter with Bruce Jeffreys, who visited from Australia to help promote the car-share scheme in New Zealand. Photo / Dean Purcell
City Hop founder Victoria Carter with Bruce Jeffreys, who visited from Australia to help promote the car-share scheme in New Zealand. Photo / Dean Purcell

More easily available and cheaper taxis through services such as ride-booking service Uber and car sharing companies, where vehicles are used and dropped off by subscribers, were disrupting traditional thinking on transport.

"Over time that could entirely change our cities and we'll need to reimagine all manner of things in regard to urban design because we'll have less congestion," said Bridges.

Watch Video: Umberto de Pretto from the International Road Transport Union represents taxi drivers around the world and talks about the need for regulation in the sharing economy.

"If there was a significant rise in car sharing then we'd need far fewer carparks and then you ask whether we turn them into green spaces or do development on them. Over a long time it is possible that all this means that we don't need to invest as much in concrete and tar seal.'

He said 80 per cent of seats in cars on New Zealand roads were empty and on average they were used just an hour a day which was a "hopelessly inefficient" use of an asset. "If we can get technology linking passengers to drivers and passengers to passengers so we're filling up those seats that's hugely beneficial."

A smaller rival to Uber in the United States, Lyft, reported that half of their cars had more than one "stranger" passengers, said Bridges.

In this country, car sharing service Cityhop was launched in 2007 and its chief executive Victoria Carter said it has about 1000 users who on average use small Toyotas for 2.5 hours a day in central Auckland and Wellington. Clients include engineers, architects and legal practices.

Growth had been steady but slow as the company struggled for visibility. Such services do better in countries with more dense populations.

"I would say we were ahead of the curve," said Carter.

She said people under 40 were more likely to take up sharing services, including her company's fleet of 25 cars.

Rules covering taxis are being reviewed and the Taxi Federation is concerned that newcomers have an unfair advantage through not being subject to the same rules as existing operators.

Federation chief executive Roger Heale said his 7000 members were used to competition and was confident the existing industry could compete with Uber. He said the rate of drivers switching to Uber had slowed. An Uber spokesman said the company here has 1000 drivers in Auckland and Wellington and 100,000 users.

Watch Video: Uber chief strategist David Plouffe talks at the International Transport Forum meeting about car sharing, pooling and how his company fits into public transport.

In Europe there have been violent protests from taxi drivers in France angry at Uber's entry into the market, which drivers have paid large licensing fees to drive in.

Despite opposition, Uber has spread across the globe and become wildly successful, worth an estimated US$40 billion ($61.3 billion).

France's BlaBlaCar, a carpool platform that connects drivers with passengers, is growing around the world and is seeking new financing that would value the company at more than US$1.4 billion.

Watch Video: Frederic Mazzella founded BlaBlaCar in France. He explains how it works.

Frederic Mazzella founded BlaBlaCar in France. He explains how it works.

What is disruption?

Rapid business change caused by fast technological change or transformation of business models. Cheap access to cloud computing means businesses don't have to invest in infrastructure but typically develop app-based models for customers to access goods and services, mainly through smartphones. This is leading to changes in the patterns of production and consumption.

Zooming ahead

How two big international disrupters are travelling

• Internet TV service Netflix threatens traditional broadcasters and satellite channels. It has 65.6 million subscribers and the strongest growth is in international markets, including New Zealand. The launch of Orange Is The New Black's third season in the US set a record for single-day viewership.

• In the three months ended in June, Uber (also in NZ) overtook taxis as the most popular form of ground transportation for US business travellers and has sparked anger from taxi drivers around the world who say it doesn't play by the same rules they do.

Coming up

• Challenges and opportunities for retail
• How the travel industry is adapting
• What does it mean for banking?