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A new report from Forsyth Barr underlines the sweep of artificial intelligence and the way it is already transforming multiple industries.
It highlights four NZX-listed firms who are already making heavy use of AI: Serko, PushPlay, Plexure and Spark (more on whom below).
But overall, it suggests New Zealand is behind the curve.
The report includes ForBarr's first annual Corporate AI survey, which canvassed 58 firms. One of its five key takeaways: "NZ corporates are dipping their toes but not diving into AI."
Despite the strategic significance of AI, which is expected to disrupt whole industries, only one in seven large NZ companies had an AI strategy.
Only one in five had a staffer dedicated to AI projects and "the vast majority" spent less than $1m per year on AI investment.
"That's certainly not enough to be transformative, in our view," said the report's authors - ForBarr analysts Aaron Ibbotson and Andy Bowley, joined by US AI expert Neil Jacobstein - an AI and robotics chair at Singularity University in Silicon Valley.
Another key takeaway: Lack of AI talent is the biggest growth problem.
In a global war for staff with AI skills, corporate NZ is suffering "delays and difficulties with recruiting AI talent", the report's authors say. "A broad lack of skilled software engineers has been named as an impediment for growth. For instance, by Plexure."
A long-standing tech talent shortage has been exacerbated by pandemic border restrictions and only limited concessions by the Government on visas for tech workers (after only a few dozen squeezed into the country on Other Critical Worker visas during 2021, the rules were recently relaxed to allow 600 tech workers in. Graeme Muller, head of the industry group NZTech, called that a "drop in the ocean" for a sector that had been pushing for 3000 visas).
But Ben Reid, the founding executive director of AI Forum New Zealand and now ED of futurist outfit Memia, wonders if local firms are setting too narrow horizons.
"Yes, there's an onshore skills shortage, but not necessarily an offshore one," Reid told the Herald.
"While the competition for competent data scientists is intense and likely many New Zealanders can work remotely for US companies if they want to, that doesn't stop NZ companies hiring remotely located resources. Anecdotally I'd pick that many NZ businesses still have chronic proximity bias when hiring."
Reid agrees with the ForBarr team's finding that AI uptake, and AI expertise, is low in corporate New Zealand. He says this is partly because most of our large firms are "technology takers" of AI solutions developed by others.
But he says it's also partly due to the ongoing issue of tech's limited profile in the boardroom. "How many directors of NZ corporates come from an IT or software engineering background? Not many," he says.
"The competitive logic for NZ corporates to invest early in AI is challenging in such a small market," Reid says. "A domestic supermarket chain, electricity company or bank directors aren't lying awake at night wondering how an AI-driven competitor will take them out in just a couple of years. Hence compelling investment cases to build capability now are lacking."
He adds, "NZ exporters and startups are slightly different as they're operating closer to internationally competitive levels."
Reid says examples include:
• Auckland company Zenith Technica (bankrolled by one-time synthetic cannabis king Matthew Wielenga and recently profiled by the Herald).
• Christchurch's Seeo, which uses AI to analyse CCTV footage of a workplace or construction site to find gaps in health and safety practices; and
• 2040 - the commercial arm of the Cacaphony Project, run by Shaun Ryan, founder of e-commerce search firm SLI Systems (which was listed on the NZX until it was bought by Texan firm Avolin in 2017). Founded to aid conservation, 2040 makes internet-connected smart traps and thermal cameras that can track predators. As Covid persists, thermal camera was recently adapted to created the $3999 Te Kahu Ora fever screening system for detecting fever in human visitors to a location - with cloud-based tracking and alerts.
Then there are a number of more established firms where AI is central, including Auckland-based, ASX-listed Straker Translations - albeit with a group of humans who finesse translation results billed as its competitive edge over fully-automated translation services.
Then there are two local makers of AI-powered avatars who can read emotions and answer customer queries: Soul Machines, which has raised tens of millions and landed global clients including Mercedes and UneeQ (formerly FaceMe), whose early adopters include ASB and Vodafone NZ.
There's also a clutch of med-techs that are using AI to automate the process of analysing scans and customising care. They include the Wellington-based, ASX-listed Volpara, and the earlier stage Formus Labs (orthopedic implants), Toku Eyes (eye scans) and the Peter Beck-backed HeartLab.
Overseas, KIwi Alex Kendall recently raised US$200m for Wayve - the London startup he founded to develop technology that allows driverless EVs to teach themselves how to navigate unfamiliar roads (see video below).
And Reid says there are a number of agribusinesses and research teams using AI to crunch data from remote sensors and earth images to track everything from vineyards to orchards to farm animals.
"Fortunes will be made from curating valuable datasets and applying machine learning for precision agriculture," Reid says.
Auckland-based Autogrow is targeting some 20,000 indoor growers in North America (including those in the medicinal cannabis "gold rush") with its AI that lets growers talk to plants - or, at least, talk to an avatar about the health and progress of their crops.
And a new business incubator, Sprout, backed by Finistere Ventures and others, is helping to fund AI ag-techs, including Dunedin-based Iris Data Science, which has developed facial recognition for sheep.
Mid-way through last decade, there was a burst of enthusiasm from National then Labour for creating a framework to help encourage local AI initiatives and grapple with the ethical and legal questions raised by the technology, which comes into play with everything from deepfake videos of political leaders including Jacinda Ardern to your EV's "brain" potentially making decisions such as whether to sacrifice your safety to save three pedestrians as you go into a skid ... or the reverse.
But now, "Progress appears to be stalled on a national AI strategy which would help to identify pressing national-scale investment cases and kickstart building more in-depth capability in industry and research institutions. There's been no progress in a year," Reid says.
Artificial intelligence is a technology that enables a machine to simulate human behaviour.
A commonly associated term, machine learning, is a subset of AI which allows a machine to automatically find patterns and "learn" from data rather than being programmed by humans to solve a problem.
ForBarr's report says previously-listed Trade Me uses AI to predict the items people want to buy based on previous searches and other users' similar searches. The technology knows not only what we tend to buy, but what people like us tend to buy, and it remembers that data to rank ad listings in an order that makes sense to individual browsers.
Serko
Serko uses AI within its flagship Zeno product to predict the different elements of a customer's journey from home to hotel via airport and hotel. Its AI-powered recommendations use previous behaviours to push suggested locations, times and
type of accommodation. Zeno's success saw it win a major contract to create a white-label version of Zeno for global travel giant Booking.com (also a Serko investor).
Earlier Serko CEO Darrin Grafton told the Herald that while the pandemic had knocked his industry, it was also an opportunity for his cash-rich company to develop and launch new AI-based products as competitors pulled their heads in.
Spark
ForBarr says Spark "may not be able to compete with the largest global tech companies in the AI arena. However, it does have the potential to extract meaningful value by being the 'last mile' partner for the likes of Amazon Web Services and Microsoft."
The telco gets kudos for its use of AI across its operation, but ForBarr says the most "AI mature" Spark business is its big data, analytics and artificial intelligence unit Qrious, which in 2021 created a cloud-based dashboard to improve patient care for Auckland District Health Board and developed an AI solution to help save New Zealand's endangered Māui dolphins. The dolphins are tracked by drones, but given they roam over hundreds of thousands of square kilometres of ocean, a system was needed to predict their likely location.
Spark has not broken out financials for Qrious, but indications are that it's still in a formative phase. In the telco's 2021 accounts, it's lumped into the $137m "Other" revenue category that also includes Spark's Internet-of-Things initiatives, Spark Sport and income from exchanges.
Pushpay
PushPay is using AI to help "megachurches" gauge the "health" of their congregations by analysing attendance and donation trends. AI also feeds into personalised messaging.
Plexure
Plexure, which makes mobile marketing and ordering apps for global customers including McDonald's, uses AI to help its clients forecast customer demand, and personalise marketing. Unlike Serko, Spark and Pushpay which have made strong gains overall in the past 24 months (even allowing for the recent across-the-board tech dip), Plexure has been an NZX laggard, with its shares losing two-thirds of their value over the past 12 months as it fell short of analyst expectations and swung to a loss. ForBarr noted earlier that in the US (a market not served by Plexure), McDonald's franchisees had complained that personalised marketing apps had failed to deliver the promised sales boost.
Two current executive roles would be reduced to one under a new proposal.