OPINION LEADERS Growth? It’s up to business

What’s keeping CEOs of growth companies awake at night? Is it the economy? Compliance costs? Maybe, lack of government support for business?

Last year’s results from the Fast 50 annual survey of New Zealand’s fastest growing companies identified four main challenges: (i) managing cash flow, (ii) accessing capital, (iii) finding and retaining skilled staff, and (iv) maintaining an infrastructure that supports growth. striking feature: the top three are challenges that the private sector can and does address – not issues for the Government to fix.

Obviously there are things the Government can do – improve the availability of skilled staff by investing in education or changing immigration policy, for instance. Certainly requests for the Government to do its job better – in the form of reduced compliance costs, reduced taxation, and more active support – came through the survey as well.

But the main challenges for business are ones where the private sector is just as well equipped as the state to make difference. It’s sign of how far we have come.

Twenty years ago the Government held the keys to success for business. Licences, tariffs, protections and subsidies provided the framework around which business was built. Today, much of the Government’s focus should be on maintenance of the fundamentals already in place: stable macroeconomic framework, an open economy, and population with levels of health, education and welfare to participate actively in the economy.

Within this framework the ultimate challenges of business now sit within the private sector. While we may complain progress made in the past decade has stopped and we see piecemeal rollback to old models, in general most of the responsibilities for growth lie with business.

Lifting the game
New Zealand’s return to the top half of the OECD per capita income rankings by 2011 requires step change across the economy. The goal requires an increase of 24 percent to current values. With OECD countries unlikely to accept nil growth, growth rates per capita of 5-6 percent over an extended period will be required. This looks challenging when we consider growth of four percent exceptionally good – much of that driven off increases in population.

Business is the creator of wealth and for national wealth to grow business must also grow. But how? M&A is no longer the automatic solution for chief executives looking to take their businesses to the next level. less confident climate and the historical difficulties of actually reaping the benefits merger promises have led business leaders to look elsewhere – and for many, innovation is now seen as the big growth driver.

So what should we be doing to boost our levels of innovation?

An important point first: New Zealand’s rates of base-level innovation are not bad. Our overall start-up rate is very high – the 2002 Global Entrepreneurial Monitor named New Zealand as one of the most entrepreneurial countries in the world, with 14 percent of the New Zealand adult population “entrepreneurially active” and sitting fifth in the list of countries with the most start-up businesses. However, many start-ups don’t grow far beyond initial establishment. These are not the innovative businesses that will take New Zealand back to its targeted place in the OECD tables.

It is hard to avoid the sneaking suspicion that lack of ambition is all that might be holding us back. New Zealand has many economic fundamentals that encourage business. We have skilled population with good ideas. But for many of us our ambitions don’t extend past having an income that takes care of our home comforts. There don’t seem to be enough incentives for people to strive to maximise business performance and value.

Risk averse?
Great gains don’t come without some risk, and this is second area where New Zealanders may be culturally ill-suited to the challenge of the high-growth economy. greater tolerance for failure – within businesses, schools, government and society at large – may be what’s required to give us all the confidence to take the risks needed to jump-start growth. Perhaps we should do more to celebrate heroic failure.

And finally, we need to celebrate our successes. Businesspeople whose ideas have made successful companies must join the ranks of role models we point to when we ask ourselves what we want for New Zealand. Very few are lauded for creating wealth, especially if it is their own.

Results of recent Industry New Zealand survey into public attitudes toward business are alarming. Only six percent mentioned business or the economy as being factors likely to achieve their “ideal” New Zealand. And while people identified benefit of higher living standards from well-performing economy few people associated growth industries as contributor to such an economy.

So business needs to do better job both in harnessing innovation for growth and in explaining the vital role this growth plays in increasing living standards for all. We need to lead and we can only do this by publicly demonstrating our commitment to growth and the benefits of growth for us all.

Nick Main is chief executive of Deloitte Touche Tohmatsu.

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