Shaun Coffey: Creative thinking in challenging times

Shaun Coffey. Photo / Supplied

Opinion

As New Zealand looks to pull itself up out of the current recession by its boot-straps, access to capital looms as one of the most significant barriers to firms seeking to improve productivity and to grow.

Given the current tight fiscal environment, I was heartened to read in the Herald coverage of the University of Auckland Business School Entrepreneurs' Challenge.

I'd like to commend donor Charles Bidwill for his generosity and Business School dean Professor Greg Whittred for his creative use of this generous donation. Challenges of this scale are just what the country needs.

Challenging times should be seen as times of opportunity. And as the global recession eases, some firms have the opportunity to develop new products and services that will enable them to assert themselves in global market niches.

While access to capital is an issue, businesses need to invest in research and development to take full advantage. History has shown that it is often investment in R&D that proves the difference between market leaders and market followers.

As the Wall Street Journal recently noted, some of the most successful products have been developed during tough times after significant investment in R&D.

DuPont introduced the world to nylon in 1939, shortly after the height of the Great Depression. Apple increased R&D spending by 42 per cent between 1999 and 2002, while revenue dropped by 6 per cent - the result being the iPod music player.

Today, the WSJ says, many of the world's top firms have slashed everything but R&D spend, despite falling revenues - this is something that the leaders of aspiring New Zealand businesses should note.

Industrial Research is a Crown owned laboratory charged with supporting businesses by providing science and technology solutions that meet their diverse needs.

While most CRIs generally serve one or several closely linked sectors like pastoral agriculture or forestry, IRL works alongside industry in a diverse range of sectors and sub-sectors from primary production and pharmaceutical development to ICT and advanced manufacturing.

Part of IRL's wider role is to encourage more investment in R&D. Business leaders often bemoan the Government's comparatively low levels of investment in R&D compared to our OECD trading partners but in fact private sector investment in R&D is even further down the OECD table.

To raise the profile of R&D in this country, IRL has instituted a competition called What's Your Problem New Zealand? With a first prize of up to $1 million in R&D services from IRL to the winner, the competition seeks to encourage firms to improve long term productivity and profitability through increased R&D investment.

We will be announcing the winner next month but with 10 finalists chosen from a field of more than 100 entries, I believe the competition has already achieved many of its goals. The IRL business development team is looking forward to working with all the finalists and potentially many more of the applicants.

Tough times often have the affect of shifting thinking and changing attitudes. Tough times also have the effect of bringing people together and it is clear that today industry, Government and R&D providers like CRIs and universities need to collaborate more closely than ever before.

When we look at how similarly small, export focused economies like Singapore and Finland have benefited from this collaborative approach it is clear that the rewards, including improved living standards and vastly improved social services, can indeed be great.

* Shaun Coffey is chief executive of Industrial Research Ltd.