Tech sector beats recession but room for improvement

Technology companies' average growth rate for 2009 was 39%, according to a new survey, but this number could be much higher if strategic approach was widely implemented. The second annual market measures survey of sales and marketing activity in New Zealand, conducted by PricewaterhouseCoopers (PwC) and Concentrate, revealed last year's growth rate was down from 58% in 2008.

Technology companies’ average growth rate for 2009 was 39%, according to a new survey, but this number could be much higher if strategic approach was widely implemented.

The second annual market measures survey of sales and marketing activity in New Zealand, conducted by PricewaterhouseCoopers (PwC) and Concentrate, revealed last year’s growth rate was down from 58% in 2008.

Owen Scott, Concentrate managing director, told the National Business Review considering many businesses were battered by the economic downturn, last year’s figure, although much lower than the previous year’s, was “impressive”.

But he said the growth rate was restricted as too many companies adopted a “one-sale-at-a-time” attitude rather than a more strategic approach to growing large-scale businesses.

“That’s what’s stopping them becoming big great companies. They are working really hard but they’re trying to do that all by themselves, sending their sales guys overseas without any strategic approach to it.

 

“A symptom of this in the survey results is that while our exporters are positioning their products as premium they are typically only attracting market or below-market prices – that is leaving a lot of value on the table and constraining what they could achieve in terms of growth rates and size.”

Businesses, which implemented a more strategic approach, were the highest performing companies surveyed.

“Typically they are focussed about selecting target markets, have developed a strong and convincing positioning around their brand, invest in building brand awareness and demand generation, and work with resellers and other partners in their chosen market.”

The survey revealed 77% of export companies mainly sold directly. Mr Scott said to prosper companies must invest in brand building and distributors.

“The quickest way to market is to try to get your product through a distribution channel. Sales and marketing effort is enormous and if you get a distributor engaged then you’re off.

“[But] even the smallest of our technology companies are trading offshore, selling directly to customers rather than through a distributor.”

Given the government’s renewed focus on innovation, there should be concern about this overall weakness in our ability to commercialise our products effectively, said Mr Scott.

“Despite some obvious success stories, Kiwis don’t have a great record at commercialisation i.e. finding people to sell our inventions to at a profit.

“That New Zealand hasn’t yet built a lot of large scale technology-based businesses, with a few outstanding exceptions, is evidence of this commercial weakness.”

The study surveyed 144 companies, covering a range of technology exporters, including electronic, software, telecommunications and associated services.