Posted on October - 12 - 2010
Why most Kiwi businesses won’t turn their good ideas into world class commercial results
Share Tweet
I’m sure that we have all wondered at some stage – “How can kiwis be so inventive and work so long and hard yet our productivity, profitability and national prosperity is at best mediocre?” (See for the NZ Institute’s Report Card). A nation as innovative as we think we are should be a world class economic performer. That we aren’t is a perplexing puzzle – one that is maybe starting to paralyse our thinking.
Einstein once said that the definition of insanity is doing the same thing over and over and expecting a different result. He also said you cannot solve a problem with the same thinking that created it. Yet we’ve been trying variations on a theme for decades now and our relative economic performance has been going backwards. We need to look beyond the things that we are familiar with – like distance from market, our small size, scarcity of capital etc. Because when you dig, none of those things provides a complete and compelling answer to the puzzle. Meanwhile, what is going on in our heads – the way we think about innovation, about management, about engaging with other people – fills in a lot of the missing pieces of the puzzle. Our Kiwi mindset causes us to unwittingly think and behave in a particular way causing us to let a surprising amount of value slip through our fingers – even though we work long and hard.
There is a reputable body of research and literature showing a correlation between innovation outcomes and national culture. National culture is an important factor in determining how people from one nation think differently to people from another nation. In our case it is responsible for our Kiwi mindset or psyche. National culture can be measured and ranked. Our research has examined how national culture affects the way that we manage in New Zealand. Kiwi culture means that we are more motivated by and gain more satisfaction from starting new things (including invention), than it does from turning that invention into productivity and profit. (See a one page summary of the business essentials of Kiwi culture ). In short – we have a CONVERSION PROBLEM. Kiwi culture creates a barrier to converting our inventiveness into business and economic performance.
We can increase productivity by driving down the input costs. We focus a lot of attention on that and we’re pretty good at it. But productivity can also be increased by creating and harvesting more value. That is where we should be focusing our attention and directing our resources – to increase our conversion of inventiveness into value.
We think that there are four core areas we should focus on to increase the value that we create and harvest. First is that we need to stop “thinking for our customers”, stop assuming that they are just like us, value the same things we value and want to do business the way we do. That needs us to understand ourselves a lot better and especially to be receptive to feedback from our customers and markets. It means interpreting that feedback from our customers perspective not from our own. That alone will deliver us rewards.
Next we need to address the tall poppy syndrome. It seems unlikely that we can reduce the syndrome itself since it’s so deeply engrained in our culture. But we can equip ourselves and our staff better to resist its negative influences. We call it “immunising the firm and its people against the tall poppy syndrome”.
Then we need to exploit company know-how, trade secrets, and other valuable assets by managing the intellectual assets. Innovation is driven by the firm’s accumulated intellectual assets. Those assets may, according to Standard and Poors and Intellectual Assets Magazine, make up as much as 80% of a company’s value. Businesses and industries that fully exploit their intellectual assets create greater returns and value for their shareholders. Managing intellectual assets is one of the greatest opportunities available to Kiwi businesses. Intellectual assets are represented not just in legal patents and trademarks but also in the business’s personnel, their collective knowledge, know-how and accumulated experience, customer databases and relationships, trade-secrets and many other elements that are often not even recognised. Value that never appears on balance sheets, rarely in management plans and hardly ever in the bank account.
Finally, we need to own or manage much more of our distribution channels. Many of our products and services find their way to the end user via long and complex channels. Those channels often create and harvest more value than the kiwi producers. But worse, they create communication barriers between our firms and the people that actually use the products, compounding our habit of thinking for our customers and our reluctance to listen to customer feedback.
When we understand ourselves better, how we think and behave and engage with our customers, we will be in a better position to adopt innovation and management practises that help us to create and harvest additional value without the need to work even longer and harder. Then and only then will we be able to enjoy New Zealand’s fabled quality of life.
Tony Smale Director/Consultant Forté Management tony@forte-management.co.nz www.forte-management.co.nz
BusinessBlogs Newsletter
Please fill in the details below. A confirmation email will be sent to you. Please click the link in the email to confirm your subscription.
