Lessons from New Zealand
New Zealand and Belgium may be on opposite sides of the globe but they do have some interesting parallels from an entrepreneurial perspective. Both economies are dominated by SMEs who are hampered by a small domestic market and the need to duplicate their operations (Flanders vs Wallonia; North vs South Island). Both countries may have a comfortable standard of living but both have come to realise that they need to stimulate more entrepreneurship if they hope to secure that welfare for the next generations. Andy Hamilton is CEO of the country’s best known incubator, the ICEHOUSE, in Auckland. As a result, he is right in the middle of the country’s entrepreneurial ‘ecosystem.’ Andy explains the lessons that New Zealand has learned over the past two decades.
“You need to see entrepreneurship in its historical context here. In the early 1950s New Zealand was a top 5 economy in per capita GDP; today we don’t make the top 30. By the 90s people began to realise that we had lost our way and that we needed to pay more attention to entrepreneurship and export. You could say we woke up during that period. That’s when we opened up our economy internationally and started orientating it towards Asia. We’ve made a great deal of progress since then. I think most people today—or let’s say an important minority of the population—recognise the importance of entrepreneurship and export but in a way we’re still struggling to figure out how to actually create more entrepreneurship and export. We remain hampered by the fact that our economy is so small and that our export markets are all so far away.
The biggest shift is in people’s attitudes about entrepreneurship. We’re seeing a lot more interest among school leavers and students to become entrepreneurs. At the universities there is a clear trend to create spin-off companies—professors are becoming entrepreneurs. Over the last ten years there’s been a lot more business plan competitions, the emergence of angel investor networks, tech transfer offices being set up at universities and incubators being created. To help our exporters, the government has helped set up ‘beachheads’—advisory boards of Kiwis and Kiwi-friendly business people—in all our major export markets: London, Dubai, India, China, Singapore, Japan, Silicon Valley. Ten years ago if you asked people about our innovation system they’d probably look at you funny. Today we’ve got a pretty sophisticated innovation infrastructure in place.
But the impact of all this on our economy is not yet conclusive. For example, we can’t really say that we’ve seen an impact on GDP growth, the number of patents, the amount of Venture Capital deals, and other such ‘output’ metrics. On the other hand, we’ve benchmarked ourselves against other smaller countries and have come to realise that we’ll never be like Israel or Taiwan. Our culture and lifestyle is too laid back. Hence we need to adapt to what is appropriate for us, culturally speaking.
The strength of our economy is that it is one of the most open economies in the world; it’s very easy to do business here. But our fundamental problem is the fact that we’re a small market. Also the country is narrow and long, covering two islands, with the result that much needs to be duplicated.
Another advantage is that as people we’re very internationalised. Twenty percent of New Zealanders live abroad—that’s one million people! As a result the New Zealand expat network is huge. A lot of New Zealanders have done really well abroad. But simultaneously we haven’t managed to build really big international companies. We do have some large commodity players like Zespri and Fontera, and some emerging high-tech companies, but one should expect more from this country. On other hand, given our small market and remote location, will it ever be possible?
The ICEHOUSE, an incubator in Auckland
We founded The ICEHOUSE in 2001 as a partnership between the University of Auckland Business School and a number of consulting companies and corporations. Our mission is to help small companies grow and export. About 70 companies have passed through the incubator and received about 70 million NZD in investment. We’ve got our own seed-fund and we facilitate the largest angel network in the country. But I’d say our biggest impact is via our education programmes. More than 2500 SMEs have used our training programmes. What we’re seeing is that those companies grow their earnings by more than 30% on average after they’ve gone through our programmes. That’s a tremendous result.
Our main focus is to improve the international capabilities of our SMEs. We realise that our relative wealth in this country will only increase if we export more. But the vast majority of our SMEs don’t export. We need to change that. At the ICEHOUSE we do that via our training programmes but we’ve also developed an international network of advisors and partners across Asia. Often these are our alumni. We’re building this network specifically for smaller companies (the ‘beachheads’ referred to earlier are designed more for larger companies) and it involves very practical support like giving access to a desk and a phone for a couple of days or giving advice about the local business environment. You have to appreciate that many of these companies are really quite small when they first go abroad—our domestic market is simply too small.
Success criteria for incubators
Compared to other incubators abroad I don’t think we’re really unique. We’re active in much of the value chain of a typical incubator, although I’d say that our trainings programmes for SMEs are strikingly successful. The key to that success is probably because we’re letting business people design the training programmes. Sure, we leverage the expertise of the university but it’s the entrepreneurs who drive the programmes. Our focus is a real strength—we’ve built tremendous expertise in SMEs, especially the owner-managed SME. We’re also quite expensive, but that way we’re able to deliver a good product. It’s an important lesson that: charge a market price for your service; it keeps you competitive. Finally, there’s our network, both here in New Zealand and abroad. For example, we have a partnership with one of the main banks in New Zealand. They promote our services to their business customers which is great for us, but also good for the bank because their customers end up growing faster. But the informal network is important too—I can ring up any CEO in New Zealand to ask for help. It’s all very exciting work—we all feel like we’re nation building.
About Andy Hamilton
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