UPFRONT R&D – the skiller app?

New Zealand tends to take pride in its innovative streak – but the reality is we’re falling sadly behind the global benchmark when it comes to putting money behind this self-belief. That in turn impacts on our ability to hang on to skilled workers.
It’s bit of double whammy, says KPMG partner for audit and risk advisory, Paul Kiesanowski.
“There is very strong global competition for skills and there’s been lot of comment about the talent that is leaving this country to go to Australia or further afield. I think that links in with relatively low level of R&D spending [in New Zealand].
“The thing is that skilled people want to do challenging work – they want to be in organisations where they’re working on exciting new projects or developing new technologies. And if those opportunities are increasingly overseas, that’s where those people will head.
“It’s not just about paying people more but giving them great things to do.”
The issues around talent shortages and R&D spend were highlighted in recent survey commissioned by KPMG International and carried out by the Economist Intelligence Unit. While this focused principally on EU countries, Kiesanowski took the opportunity to plug in local data to see how we compared.
Not well, it seems.
Turns out our business investment in R&D is less than third the OECD average. And while New Zealand’s total R&D expenditure (including the Government’s contribution) has increased in the past few years, it still only tots up to 1.17 percent of GDP. That’s about half the OECD average and well behind countries like Finland (3.46 percent) or Sweden (4.27 percent).
That low level of R&D spend leaves local industries vulnerable to commoditisation and substitution from low-cost manufacturing powerhouses like China, says Kiesanowski.
“A lot of local companies are competing with imports from countries that can churn out manufactured product so cheap you wonder how they do it – and that’s not just low-end products but electronics. It’s all about the volume of manufacturing out of China and we’re never going to compete on that.
“However there are opportunities for local companies to focus on manufacturing niches – such as supplying top level componentry or technology – if they lift R&D investment.”
There are some good local examples – such as Fisher & Paykel Healthcare which puts around seven percent of its annual revenue into R&D – or Navman, notes Kiesanowski.
“That’s company that spends helluva lot on R&D – it also attracts and retains skilled people because they’re working on exciting projects.”