"Choosing to spend money that has no chance of making a profit anytime soon is a difficult challenge," says Spark managing director Simon Moutter.
Moutter — winner of the Deloitte & Orbit World Travel Chief Executive of the Year — has been relentless in his commitment to Spark's future as a digital services business despite the natural temptation to rely on the steady revenue of the past.
"The pressure is to hunker down, go to the cost line, to pump dividends for as long as you can off that core business," he says.
But going with the flow is no longer an option in a world where digital disruption remains the biggest challenge.
The forces of disruption are so strong that if you let yourself follow the existing revenue streams they can lead you into "sunset mode", Moutter says.
Managing the balance is as much art as it is science, he says. It's crucial not to let daily cost pressures divert you from the greater goal.
"It requires constant attention of the leadership team to make sure those trade-offs are made only at the most senior level," Moutter says.
"So that you're not allowing trade-offs to be made lower down because the natural force will cause the 'new' to be snuffed out to protect the old."
Moutter says one of the mantras at Spark has been to invest heavily in the new ... "but to free up the cash from the old."
"So it's almost: invest as much as you want in your new world but make sure you're getting it from the old. That creates a sense of viability about it and a sense of value."
"You've got to pay attention to it or you can easily lose control of the model, and you wake up one day and all the new stuff has been shut down."
That creates strong discipline around the value of cash and means you aren't asking the board and shareholders to take unrealistic leaps of faith.
Moutter cites the big global tech companies as his major competitors now, not the other local telcos.
"You've got a change occurring in our industry where telcos could easily be relegated to nothing more than data connectivity providers and many of the smaller players in New Zealand are already," he says.
"But if you aspire to be more than a data utility then you've got to confront rapid change in what customers want. You're going to have to confront competitors like Apple and Facebook, Google, Amazon and Netflix.
"It's a hard play because these are big sophisticated, well-performing and well-funded businesses."
For Spark, now that it has cemented a strong position locally in the connectivity business the question is: "How do we eke out and maintain a growth profile and a role in digital services that can stand alongside the best global providers?"
Moutter has been actively building a new culture at Spark since it rebranded from Telecom just over three years ago. He was with Telecom for almost a decade from 1999 to 2008 eventually as chief operating officer, before he took on the top job at Auckland Airport.
In 2012, he returned to head up Telecom. The company was recovering from a regulatory bashing and a difficult split with its lines business Chorus. Moutter drove the push for a rebrand in 2014.
An important part of his job has been communicating the new vision to staff and dealing with ongoing tension between a cost focus at one end of the business and a growth focus at the other.
"Inside Spark today everyone knows the plan," Moutter says.
"We share the plan on the page with all staff and we expose those trade-off choices. They all understand that in some areas we are trying to free up cash."
"Success breeds success," he says. "If you can make some things happen that are cool and positive and new, then the culture of the organisation steps forward into that, it leans into it. And they get excited about what's next.
"So in Spark today we have the backing of the organisation to try to reinvent the company. We may fail. We've always got the option to roll back to being a connectivity business ... but why would you die wondering? Why wouldn't you have a go at trying to establish a position in digital services that's relevant to New Zealand?"
Moutter, who has a passion for horse racing, believes it's about weighing the risk and placing the right sized bets. "We're making sizeable bets but not betting the farm and putting the whole business at risk."
So far it's paid off for shareholders.
But as well as financial performance of the business the Deloitte Top 200 judges noted Moutter's contributed to broader industry issues in New Zealand.
He's been committed to encouraging innovation and diversity.
Spark has backed a venture capital business Spark Ventures putting more than $10 million aside to invest in local start-ups.
And the judges were impressed by his decision to put Jolie Hodson, former Chief Financial Officer, into the future focused role as chief executive of Spark Digital.
Moutter says it has been part of his personal philosophy to make doing business about making New Zealand a better place.
"It's what's led us into the public discussion around taxation of global corporates, equality of access to broadband, diversity ... we're willing to put our voice into the arena.
Not because we think we're awesome at those things but if we believe it about our tech services why wouldn't we lend our weight to these other issues."
It was a patriotic outlook Moutter adopted at Auckland Airport.
"We set the strategy around doing a job for New Zealand rather than just being an effective business at turning activity into money.
"That same philosophy is what we've applied at Spark. In the reinvention of this company the number one setting is that we need to make a much bigger contribution to New Zealand."
Spark is one of New Zealand's largest spenders on infrastructure — spending more on the network than all its retail competitors combined.
"So the country needs Spark to be successful. And the country will be more successful if Spark does a great job."
That attitude helped to reset the business with a deeper sense of purpose around helping New Zealand unleash its potential, he says.
"When you're making really good choices to do a better job for the country it's a much more powerful starting point. And that makes a difference with the culture-building.
"I don't think many people get excited about going to work to make more profit. Profit is an outcome of a successful business," he says. "There's a high level of motivation that comes from a business that really adds value for customers or adds value to people's lives. Or makes a real contribution to the economy and the country."
"That is something worth getting out of bed for in the morning, something to go and spend your day doing."
Finalist: Geoff Babidge, The a2 Milk Company
Geoff Babidge.
As chief executive at a2 Milk since 2010, Geoff Babidge has overseen a remarkable transformation for a company that was once on the fringe of the New Zealand dairy sector.
The company was originally founded in 2000 by New Zealand scientist Corran McLachlan and the late Howard Paterson, a millionaire farm owner.
It struggled until moving its focus to Australia and towards the Asian markets.
When Babidge took over it shares were worth just 9c — they are currently trading above $8.
Babidge has over 30 years of senior management experience working in the Australian fast-moving consumer goods industry. Prior to his role at a2, he held senior executive roles with companies in Australia including Freedom Foods Group Limited, Bunge Defiance and National Foods.
He started his career as a chartered accountant and Partner at PwC.
The Deloitte Top 200 judges noted that the market rated Babidge highly, off the back of a fantastic company performance. This year a2 also features in the Company of the Year category and Best Growth Strategy category.
a2 had followed an aggressive plan for value creation, with key milestones, the judges said. The market said "you'll never hit that" — he has, and exceeded it.
The environment for small companies to expand in infant formula outside NZ has been difficult and fraught with regulatory challenge. Babidge had played that card very well, the judges said.
"Ten years ago it was just hunker down and try and keep the wheels on the road and fix this business," Restaurant Brands chief executive Russel Creedy told the Herald in August.
"And now there's more opportunities than we could ever wish for, it's just picking the right ones. I plan to just enjoy the business and have fun."
Deloitte Top 200 CEO of the Year finalist, Creedy has overseen a remarkable turnaround at Restaurant Brands and an expansion which has seen it take on new brands and move offshore into Australia and Hawaii.
In April 2016 it expanded into KFC in Australia and in March 2017 bought the largest fast-food operator in Hawaii. The acquisition made it the sole Taco Bell and Pizza Hut franchisee in Hawaii, Guam and Saipan.
Creedy says bedding down that expansion was both the biggest challenge and the biggest highlight of the past year.
Since taking over as chief executive in 2007 South African born Creedy has managed a successful brand refresh for KFC and the addition of the Carl's Jnr burger chain.
From making a loss of $3.6m in 2007 the company's latest reported net profit after tax was $26.0m for the year to 2017.
The Deloitte Top 200 judges noted that Creedy built confidence of the master franchiser to the point it was able to expand both vertically and horizontally.
He had overseen improved performance in a highly competitive industry with relatively low barriers to entry.
