Nigel Kirkpatrick doesn't just want to work in science, he wants to create new industries. SIMON COLLINS reports.
You have to hand it to Nigel Kirkpatrick for ambition. Not content with running a research operation, he's out to transform the economy.
Auckland-born Kirkpatrick returned to New Zealand in June to take over Industrial Research, the only one of our nine Crown research institutes not based on traditional primary industries or the environment.
Unlike his scientist predecessor Dr Geoff Page, who ran IRL from its formation 10 years ago, Kirkpatrick has spent his career in business. He has just come from Zurich, where he was global innovation leader for Unilever's cleaning equipment company, DiverseyLever.
He arrives just as IRL is sinking $6 million of borrowed money into its biggest investment yet: a drug plant on its Lower Hutt campus that will be the only place in Australasia with a current Good Manufacturing Practice certification to make drugs for human clinical trials.
The plant will allow New Zealand's growing number of biotech start-ups to keep their whole drug development process in this country before linking up with the world's pharmaceutical giants for the final stages of clinical trials, which can cost around US$100 million ($215 million).
"We are not creating products to create profits for Industrial Research. We are creating an industry," says Kirkpatrick.
"It's IRL's role to create the industry, to drive the creation of it - not to be the industry."
And not just in biotechnology. IRL's statement of corporate intent says it exists to "nurture and expand New Zealand's advanced technology sector".
That means it has a crucial role to play if Helen Clark's second Government is to achieve its goal of transforming the economy from producing commodities to exploiting high-value niches to earn First World living standards.
Fittingly, Kirkpatrick and his wife were inspired to come home by what they saw of the Knowledge Wave conference co-chaired by Clark and Auckland University Vice-Chancellor John Hood a year ago this week.
"The Knowledge Wave excited me, and then it was this role, it was because of the IRL job that we came back," he says.
Now 41, Kirkpatrick grew up in Pakuranga, went to Auckland Grammar and did honours in chemistry at Otago University. Then he joined Unilever in Petone as a laboratory chemist.
He shifted into Unilever's technical sales and marketing team, then into management, and in 1996 went to Jakarta to manage DiverseyLever's business in Indonesia and Malaysia.
He moved to Zurich in 1999, where his job was not research and development but "innovation".
"R&D is working on the science," he says. "Innovation is saying, now that we have the idea, let's start to commercialise it. It's making sure we have a balance between ideas and commercialisation, so you can reinvest in the science. That's directly related to IRL."
It is not how IRL started, when it was part of the old Department of Scientific and Industrial Research (DSIR).
Ian Devereux of Rocklabs, a small Auckland company that makes mining equipment, recalls: "In the old days when the DSIR was the DSIR, you'd go along and seek some help and it didn't cost you a bean."
Since 1992, all the Crown research institutes (CRIs) that replaced the DSIR have had to earn a return on the taxpayers' funds invested in them.
In the year to June 2001, IRL earned $8.5 million in commercial revenue from local clients and $14.6 million from overseas, as well as $32.6 million from Government research contracts. Its net return on equity was 6.35 per cent.
Its targets for the June year just ended were to boost overseas revenue by a huge 57 per cent and total revenue by 18 per cent, to lift its return on equity to 11 per cent.
Finance manager John Harrison says the export target turned out to be "more bullish than the reality" for timing reasons, but revenue from NZ businesses was up - especially in biotechnology and forestry.
The biggest export growth is in drug development, where revenue rose by 50 per cent in 2000-01. IRL has a contract with the US National Cancer Research Institute to develop a range of compounds which may combat cancers.
It has also collaborated with New York's Albert Einstein College of Medicine to develop new drugs to suppress the immune system to treat certain kinds of cancer, psoriasis and arthritis, and eventually to help patients with transplanted organs.
Professor Garth Cooper of Auckland University says his company, Protemix, is working with IRL to test the use of another compound derived from pine bark in treating diabetes. He expects to use the new Lower Hutt plant.
Selwyn Yorke of NZ Pharmaceuticals, which extracts valuable compounds from the bile of cattle and sheep, says he hopes to use the plant to make drugs for clinical trials.
"Where there is no facility, it's practically impossible to develop new opportunities beyond the lab."
Another big money-earner is IRL's work on new materials that conduct electricity without any resistance at very low temperatures - an area where it found itself unexpectedly ahead of the world in the late 1980s. It now receives royalties from, and does contract work for, American Superconductor near Boston.
While the Boston company makes the wire that is now starting to be used for electricity transmission, IRL uses the wire to make magnets and generators. It is talking to Auckland's Buckley Systems and Alphatech Systems about other opportunities.
At home, IRL has developed new materials for local manufacturers such as Wellsford's Izard Irwin, the world's biggest maker of tungsten carbide tipped circular sawblades.
Michael Hamid, R&D manager of Hamilton's Gallagher Group, says IRL has helped on several projects such as developing new animal weighing scales, and had skills in optics which might be useful for the group's building security system Cardax.
He found IRL "a very useful resource". But sometimes its scientists were too specialised.
"They look at it one way in their area of specialisation, and don't look outside of that and say, 'This is the real problem'."
Others have more fundamental doubts. Des Scott of Tru-Test, the world leader in milk meters and animal weighing equipment with annual sales of $125 million, resigned from the IRL board in 1994 and believes it has been a failed experiment.
"The CRIs shouldn't need to make a profit," he says.
"They develop a product and attempt to take it to market. I think finding channels to market is not the job of a CRI."
He believes IRL's commercial work should be privatised and its more basic scientific research should be merged with relevant university departments to create world-scale centres of research excellence.
"Our universities are falling over for lack of funding," he says.
Peter Maire of Takapuna's Navman, which earns $30 million a year from exporting electronic gear for boats and transport fleets, describes IRL as "an extremely inefficient R&D organisation".
While Navman earned $25 over three years for every $1 it invested in R&D, IRL would be lucky to earn a fraction of that.
"They are bloody good engineers, it's just the system that doesn't work for them," he says.
"I'll take all those engineers tomorrow and I'll take their budget and I'll give you 10 times that in export earnings, and within two years I'll have them up to the 25 times multiple!"
Since Scott resigned, IRL's board has lost many of its industry links. It is chaired by fish exporter Ross Armstrong and includes retired diplomat Dick Nottage, accountant Troy Newton, Air NZ director Liz Coutts and the head of Fonterra's Fencepost internet service, Alison Andrew.
Only Canterbury Manufacturers' Association chief executive John Walley and former Swichtec Power Systems owner Dennis Chapman have manufacturing connections.
However, Kirkpatrick wants to strengthen those links. He is seeking business input into a review of IRL's direction, and started a round of business calls this week with a visit to Carter Holt Harvey.
"I don't believe it's in the interests of New Zealand for world-class scientists to be doing technical reports. We should be doing world-class science which leads to real value added for New Zealand.
"In the era of biotechnology and superconductors - they will be the future of New Zealand ... Superconductors are going to bring an awful lot more money to New Zealand than being a testing centre."
He saw no conflict between helping industry and making a profit for IRL.
"Where we sit is to create value for New Zealand. You must do that through NZ industry, no question," he says.
Kirkpatrick says New Zealanders refused for years to acknowledge that they had a problem as their living standards slipped behind other countries. "Now people are starting to talk about how to fix it," he says.
"If there is another thing that I learned overseas, it is that New Zealanders tend to find the big world a bit scary and it's hard to think of ourselves as world players.
"But I would say we are generally better in our approach. We just need a bit more confidence to focus on specific things and go for it.
"Kiwis have a much better awareness of the world and finding solutions for customers. The only thing we lack is confidence."
Industrial Research Limited
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Innovation and the business of science
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