KEY POINTS:
Ignore the biotech hype. Say no to nano. Look for a career with companies that manufacture smart stuff intelligently and sell it overseas.
That seems to be a conclusion to be drawn from the Technology Investment Network's third annual survey of the 100 top technology exporters.
High-tech manufacturing
accounts for half the list and 72 per cent of the $5.8 billion in revenues the TIN 100 generated last year.
TIN is actually Greg Shanahan, a former Fisher & Paykel employee who has committed himself to encouraging the growth of the country's tech sector.
Fisher & Paykel Appliances tops the 100, with revenues of $1.4 billion last year, with Fisher & Paykel Healthcare bringing up fourth place at just under $350 million.
That tells you a lot about this company's tech sector right there. They, along with GPS equipment manufacturer Navman and IT services company Datacom, are the only four companies doing more than $200 million in business last year.
There's only 10 companies in the next grouping, between $100 million and $200 million, including such well known names as Provenco, Tait Electronics, Weta Workshop, Gallagher, Tru Test and Rakon.
That highlights one of the flaws in an earlier Government target to get 100 $100 million companies within a relatively short span of years.
Shanahan reckons our companies typically take at least 20 years to hit the $100 million revenue mark.
At that point their growth accelerates as they have developed the infrastructure needed to exploit international markets.
"Those companies with a long incubation period develop an experienced management team who understand their business and can leverage it internationally.
"It's critical they can combine that with people who understand aggressive marketing and distribution channels."
Shanahan says the current economic environment and high dollar is putting pressure on companies to find a buyer for the business or to expand aggressively,
The predominance of high-tech manufacturing means much of the TIN 100 are vulnerable to changes in exchange rates and increases in commodity prices.
"If you look at the top companies, they are generally investing heavily in research and development as a result of those pressures," he says.
"The key for all companies above $100 million is they realise they need to accelerate the pace they are getting critical mass.
"Any New Zealand-based company is relatively small in a global sense so they are at disadvantage for economies of scale and distribution."
Getting the right mix of people at management or governance level is hard. While a few experienced tech entrepreneurs like Navman founder Peter Maire are out in the marketplace lending their expertise to other ventures, people with his experience are rare.
"It's a Darwinian thing. If you don't have a large enough economy, the absolute numbers of top people you are generating are that much fewer," Shanahan says.
The bias towards physical sciences may be because of the competitive advantages in building up a manufacturing business from scratch, rather than the huge capital investments required to get biotech and life sciences applications to market, or even the challenges of building major software companies from this side of the world.
"We are good at small, multi-disciplinary teams," Shanahan says.
"Design, engineering, manufacturing, we do that well because we have relatively small companies where you have cross-mixing of disciplines."
But despite some of the country's engineering talent being second to none, New Zealand companies are penalised by the high exchange rate.
That has led some companies, like Fisher & Paykel Appliances and Methven, to move some of their production overseas.
Ownership is also moving offshore. Nineteen of the TIN 100 are foreign-owned, two more have majority foreign ownership and Software of Excellence is in the process of being bought.
North America is the largest single market for technology exporters, with 28 per cent of revenue coming from there. Australia accounts for 27 per cent, 26 per cent comes from the local market, 10 per cent from Europe and only 8 per cent from Asia.
Shanahan puts that down to companies following the path of least resistance to the US economy.
"We can communicate with them in the same language, we understand the culture and it's an overnight flight to the West Coast. You can't say that with Asia or the UK."
He says a key step on the way to international growth seems to be boosting distribution capacity, either through acquiring an existing distribution partner or building a network from the ground.
"It's not enough to have solutions. You've got to have international distribution or it's an opportunity for someone else to take that margin.
"A lot of technology businesses are engineering businesses with a business-to-business solution, so not a lot is spent on marketing and distribution."
That can be a strength. Shanahan points to airport handling systems, where BCS Group, Glidepath and Atrax are thriving because they have been able to move fast in response to increases in air travel, the need for greater security and changes in airports required by introduction of the larger Boeing 777 and Airbus 380 planes.
There's also the growth experienced by Provenco through its understanding of changes in the way oil companies wanted to run their service station forecourts. "They see an opportunity and grab it quickly.
"It comes down to astute CEOs and management teams understanding their business and how to make a business out of it."
* www.tinetwork.co.nz
