Were we betrayed by Coutts, or our own bad management?

By DON COWIE

Well it is three zip in the America's Cup and I understand only one defender in more than 100 years of the event has won from here.

Although the sporting coverage of the event has been comprehensive, the commercial issues remain largely unexplored. Now may be an appropriate time for a brief survey of these.

For New Zealand, unlike for the challengers, the America's Cup is a commercial enterprise, not a sporting event. The relevant facts for the nation are well known: the $840 million in event expenditure, the growth and international positioning of our yachting industry, the international exposure of the country for tourism etc, altogether worth several billion dollars of value to the economy.

The difference in the scale between the personal wealth of the world's billionaires and the interests of a small economy and its citizens demanded an explicit acknowledgement of this reality at the outset. This distinction is essential to any understanding of the recent dynamics of the event. Team NZ should have anticipated after winning the cup that the commercial management challenge would be as great as the sporting/technical management challenge.

The Herald's recent publication of the matters of fact leading to two New Zealand sailing teams contesting the cup on the Gulf was instructive. In essence, Coutts and Butterworth left New Zealand in 2000 and returned having signed with the Swiss as commercial agents maximising the value of their past cup sailing experience.

In a commercial sense, the apparent conflict of interest here is breathtaking.

NZ faces the probability of losing the cup early, one of the country's largest industries, due to Team NZ's commercial naivety. I suggest the following observations are relevant:

* For a nation of 4 million people, the cup has always been a commercial activity. However, Team NZ never developed adequate institutional arrangements to manage this responsibility as a separate line of business from the defence on the water.

* Fundamental to this commercial management process was the protection of Team NZ intellectual capital. To allow members of the past team to take all the intellectual property to competing syndicates was grossly negligent in a commercial sense. The employer responsibility was to establish that any employee who has benefited from that intellectual property had the opportunity to participate in the next Team NZ campaign. Where they chose not to, they must stand down from any competing syndicate for the duration of the next cup.

* To ensure this outcome, a separate commercial management needed to have been resourced reporting separately to the Team NZ board of directors. The executives charged with managing the team's commercial affairs would run in parallel with the sporting/technical development management.

* Were we hosting the world's commercial, rather than sporting, press, they would be incredulous as to the neglect of the most important aspects of Team NZ's intellectual property strategy over the past six years. Where NZ businesses meet any of the challengers in their commercial fields, eg pharmaceuticals, software products or apparel, if they attempted (in the same manner) to take intellectual property for cash, the litigation and damages sought by these same personalities would be huge.

From a commercial perspective it is appropriate that individuals seek to maximise their own individual net worth within the rule of law.

Team NZ's mistake was not to recognise they were engaged in a commercial enterprise and that their employees are subject to the same forces of human nature as anyone else.

The economic model of man is what drives human behaviour in this particular field of human endeavour.

The "loyal" campaign was an emotional reaction to the fact that it is not part of the Kiwi way to maximise personal wealth at the expense of eliminating $1 billion plus of commercial activity from the economy.

The criticism from foreign sports media of this reaction illustrates an unwillingness to address the commercial issues to which it is a reaction. "Loyal" represents an aspect of Kiwi culture that we should cherish and nurture - this includes the censure of those who would break the code.

The probabilities are that in three years a team of Kiwis will defend the cup on the waters of the Mediterranean or off Portugal and, as a by-product, generate commercial activity and wealth for the citizens of that region (and no doubt look forward to coming home after the event). Such is the cost of an inadequate commercial business plan.

Meantime, go Team NZ!

* Don Cowie is a corporate turnaround manager based in Auckland.

nzherald.co.nz/americascup

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