Success overseas born of doing it the NZ way

By JIM EAGLES

New Zealand companies tend to succeed overseas by doing the exact opposite of what current management theory would suggest, says Otago University Professor of Management Colin Campbell-Hunt.

Those companies, he said, often made a virtue of necessity, turning the requirements forced upon them by the nature of New Zealand society to their advantage.

Campbell-Hunt used his inaugural professorial lecture to pull together 20 years of research on New Zealand business development, most recently for the Competitive Advantage New Zealand project, and point to the unique path taken by successful businesses in this country.

In the course of studying firms that had expanded overseas, he said, "we invariably found that they had developed capabilities from their experience in New Zealand that later served to differentiate them from offshore competition".

Sometimes the course of development was due to company-specific factors such as New Zealand's strong focus on farming (Gallagher Group), the pioneering development of a mobile radio network in this country (Tait Electronics) or early experience with deregulation (Nuplex).

But often, "such New Zealand-based sources of advantage were more generic, drawn from aspects of our way of life that distinguish us as a people".

These included:

* An ability to do more with less that allowed firms to be faster to market and very cost-competitive.

* A creativity born of isolation and limited resources.

* Self-reliance and a willingness to have a go.

* A breadth of experience gained within small enterprises that larger and more specialised competitors find hard to develop in their staff.

* An openness in social interaction that allows New Zealand to assemble and operate diverse teams more readily than larger, more stratified societies.

* The ability of relatively small firms to draw together the huge range of activities that go on within an enterprise into a coherent and mutually supportive whole.

Overall, Campbell-Hunt said, companies often developed strategies "grounded in the distinctive realities of our small and isolated economy".

"In important respects, these strategies are diametrically opposed to those predicted by contemporary theory, emanating as it does from economies very different to our own," he said.

For instance, he said, current theory looked to an expansion path for firms beginning with exporting through agents, then opening direct sales offices and finally locating some manufacturing overseas. On this basis, the more globalised the firm the greater should be its use of direct marketing and overseas manufacturing.

In fact, studies of New Zealand firms showed that, on the contrary, the more globalised they became "the more likely they are to have manufacturing concentrated in one facility at home and the less likely they are to use their own marketing and sales staff offshore".

But companies that were primarily regional in scope, with most of their business on either side of the Tasman, "in every case have manufacturing units in both countries and prefer direct sales representation".

Campbell-Hunt said this followed logically from the fact that, because of their small size, New Zealand firms could not follow the path described by a theory originating in much larger economies.

"Instead, they have to make a choice: going for depth in our closest neighbour Australia; or going for a broad global coverage of tightly defined niche markets, using offshore partners to achieve the global expansion they themselves cannot support."

This, he said, showed "how dangerous it would be for us to blindly adopt the received wisdom from offshore, when these contradict the logic of expansion paths better suited to our SME-scale firms".

Campbell-Hunt said the unique path followed by New Zealand firms was not because they were ignorant of overseas best practice.

"Quite the contrary, many leaders spend a hundred days or more each year offshore, and they make full use of trends in the international industry to guide their own firm's development."

The successful strategies were developed to take into account the particular features of the New Zealand economy and after looking carefully at what worked. "What we observed in the histories of these firms was the extensive use of multiple, low-cost explorations of the unknown space ahead. It is a strategy we call 'sow and reap'."

Sow and reap, he said, "is a strategy of learning by doing".

Typically, it involved numerous small forays into the boundaries of existing operations: extending a product line, exploring a neighbouring market or offering established products into new markets.

"When coherence emerges in these interactions - that is, when the firm discovers customers who want to buy its products, production processes that can operate at a profit, employees that want to work those processes and strategic routines that bring everything together - then the firm expands its engagement."

After spending many years studying New Zealand firms, Campbell-Hunt said he was hugely impressed by their prowess.

"I believe the enormous growth potential of these firms and their remarkable powers to turn distinctive attributes of their New Zealand experience into competitive advantage offshore make them the most powerful growth engine we have to re-invent the New Zealand economy."