-Ian Walsh, Partner, Argon & Co ANZ

As I have covered previously, New Zealand’s GDP has been declining relative to other OECD countries for over 40 years, sitting at 21^st out of 38 countries as of 2021.

This concerning situation affects our quality of life, our ability to invest and the provision of the services and amenities we have come to expect. The root causes for this have been provided over many years: geographical separation, access to capital and, of course, productivity.

To quote American economist Paul Krugman, ‘productivity isn’t everything, but in the long run, it’s almost everything’.

We currently lag significantly behind many OECD countries in output and hours worked. It is simply not possible to work more hours. We are now in a tight labour market, with lack of skills and availability of resources and rising wages as a result and we can no longer rely on the number 8 wire, she’ll be right and just harden up attitude.

To keep up with the Irish we would need an extra 10 hours a day! This is our climate change moment. The house is burning and throwing a bucket of water at it won’t fix it.

A frontier study comparing us to similar countries in size and scale, and allowing for the geographic differences, found that the key shortfalls are:

1. Industry, government and research/university collaboration
2. Focus on key sectors which there is a natural advantage or capability
3. Support through appropriate technology and capital investment
4. Development of human capital through training, mentoring and adoption of best practices

The outcome of having these things has been outstanding performance for Scandinavian countries, Singapore, Ireland and Denmark, amongst others.

By contrast, in NZ we have:

1. Underinvested in capital, as it is easier to use flexible labour and avoid the spend
2. Underinvested in training and development (I was at a site last week that has done no training of its team in over 10 years)
3. A significant disconnect between our institutions and business, meaning many business leaders (especially SMEs) have little or no awareness of what best practices are and which tools and methodologies are appropriate

I was recently asked if I could host some visits to world class companies in NZ. I declined as there are so few and limited examples that there is nothing to see. This does not mean that there hasn’t been progress; there has been, with many companies having made solid progress over the last few years. Most however, have not.

If we don’t accelerate the rate of adoption of better practices many companies will not compete with the disrupted supply chains, increasing labour costs, the advantages technology can bring, or their competitors who have adapted and invested.

This is already happening with Amazon, Costco, Aldi and others entering Australasian markets because they believe they can compete and win.

The need to be world class is no longer optional. Covid and its associated impacts have accelerated the curve so it’s now essential to have:

1. A roadmap to world class – what practices and capabilities do you need to remain competitive?
2. Understanding of the technologies you ought to invest in, and when to do so
3. The support and training you and your people need to support this journey
4. Knowledge of how fast you need to get there to stay ahead of the curve (or catch up)
5. The right help you can access

Years ago a number of folks didn’t believe in climate change, and I don’t think this is the case now. I hope in another few years’ time we aren’t wondering what happened to NZ?

Want to know more or need some help with your business… drop me a line ian.walsh@argonandco.com