Tony Caughey: The business of competition

How can New Zealand get more competitive in business? Photo / Thinkstock

The Harvard Business School is leading an initiative to improve the competitiveness of US companies. There is much that we, in New Zealand, could learn from this work.

Last month in Washington DC the Dean of the Harvard Business School released the findings of a study on US Competitiveness. The study, led by Professors Michael Porter and Jan Rivken, highlighted the declining competitiveness of US firms. To emphasise the importance of this study, the March issue of the Harvard Business Review will be devoted entirely to the subject of US Competitiveness. Competitiveness, they say, should be the central goal of the US economy.

So, are we giving the subject of competitiveness enough attention in New Zealand? Has anyone said that competitiveness should be the central goal of the New Zealand economy? If they did, would anyone know what they were talking about?

We seem to understand competitiveness in sport - what it takes to win. Our rugby world cup victory was the result of complex systems, built up over decades, that delivered victory on an international stage.

Business competitiveness is a different story. With some exceptions, we do not understand how to put similar systems around our business endeavours.

Business competitiveness is a subject that is taught in many universities round the world. Our universities have been slow to catch on, but Otago and Auckland have recently recognised the importance of this subject and are starting to catch up. In the meantime, our institutions lack a deep understanding of this subject.

At the end of last year, Auckland was host to the 14th Annual Conference of the Barcelona based TCI. "The Competitiveness Institute" is the global practitioners network for competitiveness, clusters, and innovation. The conference brought to our shores almost 200 international experts in the economic development of cities and regions from 36 countries from all continents. They told us their stories, such as the adoption by the government of Catalonia (Barcelona) of industrial cluster policies 20 years ago, and the significant dividends from these initiatives that they now enjoy. Unlike New Zealand, every EU country has in place a cluster development programme.

One keynote speaker at the conference was Hong Kong based Professor Michael Enright, a significant contributor and co author of the 1991 report "Upgrading New Zealand's Competitive Advantage". He is working on a competitiveness study in New Zealand and its results will be available later this year.

Two key questions addressed at the conference were first, "how can locations devise an effective competitiveness strategy to support high and rising levels of productivity and prosperity?" And second, "what is the role of clusters in competitiveness?"

These issues go to the heart of the 30 year Auckland Plan.

Since the publication of "Upgrading New Zealand's Competitive Advantage", New Zealand has focused on getting the macro picture right, and good progress has been made. This has been necessary, but not sufficient. We now feature well in international tables on economic freedoms, but our competitiveness and productivity have not delivered. It is time for microeconomic reform. To this end, the Auckland plan, with some aspirational goals and sector strategies is heading in the right direction, but more needs to be done.

TCI was invited by Mayor Len Brown to present a submission on Auckland's plan. Drawing on the experience of many conference delegates its submission highlighted a need for a stronger emphasis on cluster development.

The submission acknowledged that clusters are no silver bullet and they need to be part of a broader competitiveness strategy to reach their full potential. But they are a tool and perspective far too powerful for Auckland to neglect given the ambitious path on which the region has embarked.

Now to give my answer the original question, I would say that we are giving woefully inadequate attention to the subject of business competitiveness in New Zealand, but good progress has been made in recent months. With the release of the Enright study on New Zealand's competitiveness, we have an excellent opportunity to close the understanding gap with the rest of the world.

Readers who are interested can find the keynote presentations to the TCI Conference at www.tci2011.com

* Tony Caughey was chairman of the steering committee for the 14th TCI Global Conference in Auckland. He was also part of the team that produced the report "Upgrading New Zealand's Competitive Advantage".