Every month, The Moxie Sessions bring together a small group of Auckland business thinkers to discuss ways New Zealand can take advantage of the Internet and boost its competitiveness. For more, see http://themoxiesessions.co.nz. This month, ASB Bank was generous enough to welcome us to their flash new digs as we looked at how firms outside the tech sector can make the most of technology.
In the not too distant future, Douglas Adams once proposed in a particularly dystopian digression, the only viable businesses will be shoe shops. Widespread societal malaise will compel people to buy shoes to cheer themselves up, but as more shoe shops open and productive businesses close, lower wages will lead to the only demand being for shoes so crappy they don’t cheer you up that much anyway.
New Zealand hasn’t quite reached that point yet (although anyone shoe-shopping at a big-shed general retailer on a long weekend might differ) but a surprising 70% of our GDP currently derives from the services sector (compare this to 50% for China and 80% for the USA).
So while the turning of grass into baby formula and other such export challenges are critically important, efficiencies at the shoe shop end of the economy can arguably have just as much impact on how we fare as a nation.
Murray Sherwin chairs the Productivity Commission and firmly believes that ICT is critical to service sector productivity. Frustratingly, despite pretty good infrastructure and policy settings, a recently released OECD report says the sector isn’t seeing the benefits it should. With our existing rules and system, the report says, we should expect GDP per capita to be 20% above the OECD average, when in fact it’s 20% below.
So why are all these shoe shops (and plumbers and hair salons) not getting the return from this brave new Internet age that they should?
One problem, Murray suggests, might be business leadership. In a nation of SMEs, specialist skills abound, but nous around business processes such as making the most of ICT are a bit thinner on the ground.
Another problem might be that most New Zealand businesses are small and think they lack the scale to see a return on a chunky IT investment. While this might have held water once, says Murray, cloud services seem to negate that now, making it just as affordable for small businesses to go high tech as large ones.
And when they do, says Moxie Sessions convenor and consulting economist Hayden Glass, the returns are there. Together with Google and Internet New Zealand he recently completed a study of the productivity impact of the Internet on non-tech businesses. Reviewing companies in sectors as diverse as tourism, retail, agriculture and professional services, the study found that a firm making high use of the Internet was 6% more productive than its industry average and a whole lot more productive than firms that do not use the Internet much at all.
While 6% might not seem enormous on the face of it, Hayden points out that a 6% productivity lift across the entire New Zealand domestic economy is equivalent to adding two entire tourism sectors (or one and a bit ICT sectors).
At Internet New Zealand, CEO Jordan Carter’s mission is to build a better world through a better Internet. Central to that is Internet NZ’s vision of “permissionless innovation” – an online environment where anyone can try things without having to ask some authority or comply with onerous and expensive technical standards.
But at the end of the day, that environment, and the infrastructure it runs on is to business a little like a kitchen is to a home. Most of us have them, and they’re often stacked with modern appliances and cost a packet, but that doesn’t mean we cook anything fancier than the same roast mum did.
Extending the culinary metaphor just a little further, perhaps the trick is to take a Master Chef approach. Rather than waste time and resources on teaching businesses the online equivalent of how to boil an egg, identify the ones with real potential, in the sectors with the biggest capacity for economic return, and work closely to take them to the next level. And when we find our winners, make heroes of them.
The question this imaginary reality TV show poses, of course, is who plays Simon Gault in all of this? Moxie opinion was divided on this one, but whether it’s banks, telcos, the IT sector or government, there may well be a job to do not just in getting businesses to include more fibre in their diet, but showing them how to make it part of their recipe for success.
The Moxie Sessions is an internet economy discussion group held once a month in Auckland. Its purpose is to bring together a group of interesting folks from across the economy to talk about how New Zealand can take advantage of the internet to improve its economic performance.
Vaughn Davis is principal at social media and advertising agency The Goat Farm.