Few questions could be more important for New Zealand’s future. Whatever political or economic doctrine we adopt, our prosperity as nation depends on our ability to build companies that can take on the best competition the world has to offer – and win!
In book published this month, we tackle these important questions, and highlight exemplars of success, 10 of New Zealand’s leading global competitors. Companies like Tait Electronics in Christchurch, the Gallagher Group in Hamilton, Auckland’s Montana Wines, or Dunedin’s Scott Technology. Among the 10 are companies with global market shares approaching one third.
Foundations of advantage
Why are these firms such effective competitors? We know that the hardest advantages for competitors to copy are the ones that are difficult to build in the first place.
For example:
? solid customer reputations for product and service quality;
? win-win relationships with the workforce;
? relationships of trust and mutual benefit with networks of suppliers and distributors;
? product innovations that so capture market that they catapult company to positions of leadership that competitors take years to claw back;
? organisations that integrate all that they do to deliver coherent value package to the customer.
What is striking about these firms is that they have established not just one or two of these advantages, but most of them. And more, they draw all of these competitive capabilities together into coherent whole that creates an unbeatable value package for their customers. This – they tell us – is the key: getting it all to come together; and keeping it all in balance.
The other striking feature of these firms is that their success offshore invariably stems from their New Zealand roots. Apparent disadvantages of small market size and isolation have been turned by these firms into sources of advantage:-
? an ability to do more with less;
? people with broad-based skills and experience who can structure and solve customer problems much, much faster than larger, more specialised competitors;
? people who are unimpressed by differences in wealth or status and can get along with – and do business with – anybody;
? world-beating proprietary innovations.
Above all, in every case where these companies have reached position of global leadership, it has been due to their proprietary New Zealand-developed technological innovations and designs.
Growing New Zealand world-beater
To grow more world-class competitors like these, we need to understand how they got to be as good as they are. Here too, we found that these firms have had to develop in ways that respect their New Zealand roots. These firms are in no sense small-scale copies of overseas success formulas.
For example, the experience of growing offshore from tiny home market presents special challenges you just won’t read about in overseas textbooks or business magazines. Scott Technology’s first US order was for system 20 times larger than anything it had done before. Upscaling 20 fold – and quickly – carries great risks to the new exporter’s fledgling reputation for quality and delivery. Overseas success catapults firms into intense periods of very rapid growth, when sales double and re-double every year for period of three to four years. We call these experiences “the gusher”. Gushers can carry firm to glory – or they can blow business to bits. When Intel or Nissan open branch plant in Geelong, quite different issues are at stake.
In fact these New Zealand companies have built their overseas operations in manner quite opposite to the international theory. The more globalised firms have all kept their manufacturing at home in New Zealand and it is the Australasian-focused businesses that have plants offshore. Likewise, the global players are more likely to work through independent distributors, and it is the trans-Tasman firms that prefer to sell to the customer directly. Read the US and European textbooks and you will get the exact opposite story. Base your strategy on them and you can expect problems.
In looking at the development of these firms over their history, what is most striking is that they have re-invented themselves several times over. Criterion Furniture had leading share of the US market for stereo system cabinets until midi-systems came along and Criterion’s OEM customers cut it loose. The company has re-established itself around whole new business model with broad range of ready-to-assemble furniture for the Australasian market under its own brand name. Experiences like the gusher have the same transforming effect.
What these companies have managed to do in these transitions is always find ways to build on past strengths, leveraging one source of advantage into another. So when Bill Gallagher first entered Europe, he quickly used his technological advantage in mains-powered electric fence systems to establish European-wide network of independent distributors. This gave him an advantage over Danish competitor that he enjoys to this day.
For these firms, strategic change is not an exercise in wiping the slate clean and starting again, but of finding new ways to turn old strengths to advantage as the business grows. Indeed it is in these periods of re-invention that we see these firms first establish new competitive capabilities that give them advantage for years to follow.
The leaders
It takes some special personal qualities to lead company through this much change. What is really remarkable is that these firms have typically been led by the same person through several decades of transforming growth. Fred Holland has seen Nuplex grow from small joint venture with British resins maker in the 1950s to become the market leader in the chemicals industry on both sides of the Tasman, active in dozens of specialised markets and with product range in excess of thousand.
The leaders of these firms seem to us to be gifted with unusually high reserves of energy. These people are physically resilient: Svedala Barmac’s Andi Lusty played squash professionally until business career beckoned, and Bill Gallagher was keen diver.
Leaders are truly international in outlook. Many have gone for years spending third of each year offshore, keeping close to their distributors and customers, and keeping on top of the competition.
These leaders are great people people, inspiring trust and commitment from everyone who works for and with the company.
And they seem to us to have remarkable capacity for personal growth and change: willingness to let go of the past and embrace what is new – indeed to create it.
Competitive Advantage New Zealand
It has been privilege to work with these exceptional people over the past two to three years and to learn as best we could what it takes to be “World Famous from New Zealand”. We have been well-guided too by an advisory panel that includes the NZIM’s national director David Chapman. Our work is continuing with studies of New Zealand firms that have achieved success in the age of the Internet, and since the transformation in New Zealand’s competitive landscape of the mid-1980s.
We are now quite large team of 10 researchers in wide range of management disciplines. We are attracting international interest in our work – an entire symposium at last year’s Academy of Management in Toronto was devoted to our project. Our project is called Competitive Advantage New Zealand – CANZ (www.vuw.ac.nz/fca/research/canz/)
Can New Zealand grow world-beating competitive businesses? Yes it can! But our study has taught us that we must do it our way, using strategies that respect the distinctive realities of growing out of tiny economy on the edge of the world. We suggest that New Zealand will prosper to the extent that it takes its own realities seriously, respects the models of
