David Wilson: Increased productivity in Northland means better profits and wages

Affordable flat pack housing under construction in the UK. The new houses are to help first time buyers into the housing market. Locally Northland's Donovan Group is an example of what investment in innovation can do for local profits and jobs. Getty Images

Government set up an independent commission in 2011 to focus on increased productivity and with good and obvious reason; increased wages and profits follow increased productivity.

In a working paper last year titled "Cut to the chase innovation and firm performance" the commission drew a few important things together; research and development, innovation and government investment in private sector innovation.

First, they point out that "as a share of GDP, public and private investments in R&D are among the lowest in the OECD. New Zealand is also unusual in that less than 40 per cent of total R&D is funded by the business sector, whereas the OECD average is close to 70 per cent." So, clearly we need to lift our game.

The problem is when New Zealand mainly exports raw materials and primary produce the returns from R&D to increased productivity are hard won. In tech sectors, with new disruptive technologies, the risks are higher but so are the potential returns. The answer for New Zealand lies somewhere between the two, or perhaps, more to the point, in combination.

Donovan Group is now investing in a multimillion-dollar expansion in Whangarei to help distribute this new building technology throughout the country.

Dr David Wilson

Recently the commission has called for increased technology-led productivity in SMEs (small to medium enterprises); where technology uptake has been slow to date. Our SME sector has been able to work in the domestic market quite comfortably, but this is no longer a given.

Digital technologies are having a disruptive effect in a both domestic and export sectors.

The trick for our SMEs is to take advantage of new technologies in their own businesses but also to differentiate and compete on their own terms in their own market and build an innovative culture.

Labour productivity is measured as the amount of GDP generated per employed person in the economy. Northland has been steadily increasing since the 2009 global recession when it troughed.

Although we are still working harder not smarter in many of our strongest sectors such as agriculture, horticulture, forestry and manufacturing, Northland's labour productivity has been improving and significant advances made. Tourism still lags behind in labour productivity, mainly due to seasonality and the types of careers on offer, but it too is improving.

Callaghan Innovation, established in 2013, was set up to address our low R&D rates. Organisations like Northland Inc issues public sector R&D grants on Callaghan's behalf in partnership with businesses in the region. Many Northland businesses have benefited from these incentives.

How does this actually work? Donovan Group was established in Whangārei in 1969 by Graham and Sue Donovan and initially focused on manufacturing under licence for some of Australia and New Zealand's major construction brands.

Brothers Brett and Kyle Donovan purchased 50 per cent of the business in 2006, and set about investing in building technology software and patenting a number of new, innovative building systems. The brothers were the founders of Coresteel Buildings, which is now New Zealand's largest commercial building franchise system.

In 2015 Brett and Kyle were joined by IT entrepreneurs Tim Williams and Jonny Hendriksen, who bought into the business 50/50. A new board was established and the new team set about revolutionising the building industry.

In 2016 they purchased KiwiSpanNZ, which together with Coresteel Buildings, brought the total number of national distributors to 47 throughout New Zealand. The total number of buildings procured through Donovan Group's centralised Northland manufacturing plant this year is upwards of 700, with the largest being 30,000sq m.

For the past four years, with the support of some key R&D grants, the company has come up with new processes and revolutionary technology that will reduce building costs and improve the standard of living and the speed at which buildings can be built.

Donovan Group is now investing in a multimillion-dollar expansion in Whangarei to help distribute this new building technology throughout the country. The expanded plant will be New Zealand's largest modular housing construction facility, capable of producing a further 1400 flat pack homes per year, while the assembly hall will be capable of assembling 220 medium density single-storey to high-rise units.

Donovan's investment in innovation will pay off, for them, their workers and the region.

■ Dr David Wilson is the chief executive officer of Northland's Economic Development Agency, Northland Inc, and Chair of Economic Development NZ.