Deloitte Viewpoint: Focus on strengths

What difference year makes. At the time of last year’s Deloitte/Management magazine Top 200 Awards the world and New Zealand were emerging cautiously from the aftermath of the GFC. Growth had returned and business sentiment was positive. year on and the world is teetering on the brink of GFC round two; the European sovereign debt crisis is intensifying, US growth has stalled, and Australian business confidence lags that in New Zealand. Is Asia, and particularly China, strong enough to prevent the world tipping into double dip recession?
And we have had the Christchurch earthquake in February which has severely affected region that makes up 10 percent of our economy. The response from all New Zealanders has been impressive and it was remarkable that the economy continued to grow through the first part of this year. Next year will bring boost to the construction industry as the rebuild gathers momentum. In the meantime the impact on the Government’s balance sheet is material.
The fact that our own adjustment process is not complete was reflected in the ratings downgrades delivered at the end of September. Household debt remains too high in world that is deleveraging and facing sluggish growth for an extended period.
We face an outlook that is uncertain.
Yet we have many strengths. New Zealand is an easy place to do business, our institutions are sound, we have natural advantages in food production, our economy is well integrated with Australia, and we are close to, and building ever closer linkages with Asia.
New Zealand has many very successful enterprises, and many of them are recognised in the Top 200 Awards. It’s very much Kiwi thing to think that success comes from luck. Sometimes it does, but usually it comes from hard work. Great companies share some common characteristics.
•They have high aspirations and set challenging goals. They are never satisfied with where they are. They are always thinking about where they are going; how to develop market-leading products and services, how to turn market leadership into market dominance, how to drive superior returns to shareholders.
•They place premium on innovation and creativity. They understand that these lie at the heart of sustainable competitive advantage. Great companies have innovation at the core of their strategy, they take risks, they are prepared to fail, they are always learning.
•They focus relentlessly on execution. Ideas are cool but they are nothing if they cannot be monetised. Great companies treat execution seriously, they measure performance at granular level, they have pace and energy that is infectious.
•Leadership is always decisive. Great companies invest significantly in identifying and developing leadership talent. They recognise that leadership excellence marks the difference between success and failure.
While many New Zealand companies have these characteristics our future success depends on having more. The World Economic Forum’s Global Competitiveness Report identifies our many strengths, but also our relative weaknesses. These are in infrastructure, innovation and business sophistication. The Government is investing significantly in upgrading our infrastructure. But business needs to take the lead in building our innovation capabilities and business sophistication.
Developing an innovative culture is hard work. It requires aspiration, vision, willingness to take risks and to fail, investment in the process, and different incentives. Our traditional #8 wire mentality is barrier to true innovation in the business context. It conjures up mindset that innovation is cheap, that it is luck, or part-time activity that is not the result of disciplined process. For truly innovative companies it is none of these.
Similarly developing our business sophistication requires investment. As we embrace the Asian opportunity we must deepen our international marketing and distribution capabilities and build more complex value chains. We see this with Fisher & Paykel Appliances’ transformation of its manufacturing capability offshore. The management and leadership capabilities required to perform successfully step up few notches.
Faced with global uncertainty and anaemic economic growth prospects business could easily be pessimistic about the future. But I don’t see that. I see business community that is well positioned and performing well in current conditions. It is not time to rest after coping with the past few years – we have had “cups of tea” in the past and watched as the rest of the world moved on. It is time to invest to take advantage of the opportunities ahead. M