Whereas Chemistry and Electricity were the sciences underlying the advances of the greater part of the 20th Century, economic growth is now being driven by developments based on the microchip and biotechnology.
Biotechnology
Given the biological basis of New Zealand’s economy and the existing knowledge base, biotechnology in particular would seem to offer a sensible focus for innovations which, rather than being globalised, can contribute specifically to economic well-being in New Zealand. The opportunities in biotechnology have been well articulated by Dr William Rolleston.
It is reassuring to see that the forestry,dairy, pastoral and wool industries have each in their way acknowledged the importance of biotechnology to the New Zealand economy, One third of government research and technology funding this financial year will be on projects on gene technology.
New Business Areas
Other potential new areas of business are being targeted through the New Economy Research Fund (NERF) which supports basic research where no industries exist. But commercialisation of any promising innovations will require technical and marketing development capital on a scale many times that of the initial research commitment. The challenge will be to ensure this funding comes from local resources so that the benefits accrue for New Zealand.
New Zealand has few substantial companies with a commitment to research and development and with the resources and the will necessary to carry ideas through to commercialisation. This situation is not helped by the sale overseas of substantial enterprises which have had their headquarters here.
Existing Innovative companies
However an increasing number of New Zealand firms do treat innovation as fundamental to their business success. A selection of these is discussed below:
Who are the current innovators?
What are the innovations which could add value for New Zealand in the new century?
The Dairy Board has a monopoly on overseas sales of dairy products.and contributes 20% of the country’s export earnings.. These facts suggest its activities should be of vital interest to all New Zealanders.
The shares in the Dairy Board are held by the co-operative dairy companies which in turn are owned by dairy farmers. The Board’s main R&D agent is the Dairy Research Institute.
For an industry which owes its position to technological innovation and still sells a lot of its product as commodities, the Dairy Board’s reported 1999 R&D expenditure of $51m in the latest year was a disappointingly low 0.7% of its $7.4 billion turnover.
However in August 1999 the chairman announced that the industry would commit an additional $30 million annually over a five-year period to research biotechnology.
The Dairy Board’s commitment to biotechnology has been crystallised with the formation of a subsidiary,ViaLactia, whose task is to identify genes in cows which give them desireable charactaristics such as high milk yields. ViaLactia is also concerned to understand the genetic structure of pasture species. Simon Collins has explained how the company will be structured in an NZ Herald story.
Fisher & Paykel is widely recognised as one of the most innovative of New Zealand companies. Operating in the whitegoods and healthcare sectors, publicly listed Fisher & Paykel had sales of $834m in its latest financial year and spent an estimated $13m (1.6%) on R&D.
International sales now dominate revenues in both the whitegoods and healthcare divisions.
F&P see innovation as core to their business success and use the concept in their branding.
Talon Industries holds a unique position as an electronics company, employing more than 100 staff involved in the design, development and manufacture of products, including GPS (geographical positioning system) receivers, chart plotters, fuel flow measurement devices, boat speed, depth and wind instruments, autopilots and fish finders.
Talon is also a world leader in the development and manufacture of high reliability GPS solutions for applications as diverse as commercial fleet tracking and low cost consumer "in car" GPS navigation products for the USA market.
A fast growing manufacturer of RF (radio frequency) products and systems including a remotely controllable cellular antenna, Wellington based Deltec telesystems has a turnover of $30 million, 95% of which comes from overseas sales. Innovation has an important place in the company’s philosophy
Scott Technology is a listed company (sales: $27M) that specialises exclusively in the design and manufacture of large scale automation systems for the major domestic appliance industries of the world. After making sales in Australia, Asia and the Americas it is now targeting the European market.
Although it did not list until 1997, Scott Technology became well established as a subsidiary of Donaghys, with the origins of its present activity being in the days of import protection. It is not an R&D company although it recently made a decision to establish an R&D group.
Scott’s success appears in part to be due to a policy of adopting the latest technology as it becomes available and to stable staffing which involves in-house training and promotion. The senior management have come from within the ranks. It has only a small number of "professional" engineers.
Newly listed on the NZSE, Wellington Drive is seeking to commercialise an innovative electric motor which gives manufacturers greater flexibilty in their product design.
After attempts to get into manufacturing, Wellington Drive has evolved a business model said to be similar to that of the semiconductor industry. It has an Auckland based development centre which provides support to manufacturers who incorporate motors to Wellington Drive designs in their products.
Wellington Drive is attempting to break into what is a long established commodity market for electric motors by offering a product which can add value for its customers.
The company’s path to profitability has been slowed by a recent decision to put most of its resources into a a new extra-quiet motor known as the RF 66.
Genesis is a listed biotechnology company with a staff of 80 and genomic programmes in human health, forestry and agriculture. . Genesis works with partners in these research areas to develop its gene technology-based platforms. Partnerships have been important for funding research to effectively develop potential products. In addition to the extensive forestry gene technology, Genesis has a psoriasis therapeutic, PVAC, in FDA-approved Phase II trials, in partnership with Corixa Corporation in the United States, and an asthma therapeutic in early clinical trials in Wellington,
Currently 85% of Genesis’ revenue streams are reinvested in research and development.
Fletcher Forests was a foundation shareholder and Wrightson who believe that "biotechnology will be crucial to the future of New Zealand Agriculture " have also formed a link with the company. The CEO was recently interviewed on national radio by Kim Hill. Recent publicity for the mapping of the human genome has fostered interest in the company.
Wool scourer and carpet maker Cavalier seems an unlikely R&D participant but it has established a subsidary, Microbial Technologies Ltd, to "complete the development and pursue the commercialisation of a new remedy for the control of flystrike and lice infestations in sheep. The remedy employs a naturally occurring biological control agent.." Development work on the flystrike preventative is now complete but large scale field trials are necessary to support the commercial registration process. The company is moving to carry out such trials in Australia. "Commercialisation is still some way off."
A listed electrical and electronics manufacturing company, PDL has suffered in recent years from a reduction in margins. However it has now divested its plastics business to concentrate on hi-tech, high-value products based on its core strengths in research and development. PDL is a company which has always seen the necessity to be innovative and has a well established R&D tradition. In 1999 PDL spent $2.7million on R&D, 0.84% of its $319m sales.
Schneider Electric Industries s.a., a French-based multinational electrical equipment and electronics manufacturer has now acquired a majority shareholding in the company.
New Zealand Pharmaceuticals Ltd extracts and purifies biochemicals from by-products of the New Zealand meat processing industry. It has become one of the major manufacturers and suppliers of these products to the worldwide market. The company fosters innovation throughout its operations and, in particular, places a high importance on research and development. NZ Pharmaceuticals has a research and development team of 10 scientists.
A private company, New Zealand Pharmaceuticals is expected to have a turnover of $25 million in the year 2000.
ANDAR is a Timaru-based private company which manufactures wool scouring and other early-stage wool processing machinery. Over the years ANDAR has established close relationships with research institutions (WRONZ and CSIRO). An estimated 70% of the world’s wool is processed in ANDAR plant.
Hamilton-based Gallaghers has an international business specialising in electric fences and security sytems. About 70 of a staff of 420 work on R&D, spending more than $5 million annually. Gallaghers is a private company. Gallaghers has entered into a partnership with the CRI, Industrial Research, which hopefully as well as providing a commercial focus for the CRI’s activities will enhance Gallaghers technology.
Animation Research was founded in Dunedin over ten years ago. The company has won numerous national and international awards for its work in computer generated television commercials and is a leader in real time sports graphics. In 1991 ARL developed Virtual Spectator , the first real time yachting graphics package, for the Americas Cup. More recently ARL has delivered 3D animation graphics for the world wide coverage of the Whitbread Around the World Yacht Race and has developed a revolutionary 3D computer graphics package in live to air golf coverage
In contrast to many venture capital firms IT Capital is listed on the Stock Exchange. With a modus operandi based on the American model, the company focuses on small IT firms in high growth areas. Its portfolio includes Virtual Spectator (18%) the 3D imaging technology, Deep Video Imaging and e-business company Golden Orb. It also owns the web development company Terabyte Interactive.
In keeping with the early stage of development of most of its investments the company does not expect to be profitable in the near term though a sale of a 33% interest in Exo-net to Solution6 has brought profitability closer.
In October 2000 IT Capital and Stephen Tindall each committed to invest a further $2.5 million in Deep Video Imaging over the next 12 months. This will bring each partner’s share to 41.8% of the company.
Virtual Spectator has apponted an American CEO and established corporate headquarters in New York though R&D will stay in New Zealand.
Former Fletcher Energy shareholders now each have an interest in new electricity generation technology which runs on natural gas. Capstone makes microturbines with only one moving part; a high speed compressor-/rotor that spins at up to 100,000 rpm. An Economist article recently high-lighted "The dawn of micro-power". The potential market for the Capstone turbine includes hybrid electric vehicles suitable for buses and light rail as well as static applications. The emmisions from the turbines meet high quality standards.
Wellington-based but internationally focused, Compudigm produces data visualisation software which creates high value information maps by utilising existing data. Its work to date has been in the gaming, financial services and telecoms sectors. Compudigm has a strong R&D focus. A research partner is the SIRC (Spatial Information Research Centre) at the University of Otago.
Auckland based SLAB® Sound is primarily a research & development organisation specialising in flat panel speaker development. The company’s proprietary systems are co-branded by a number of leading suppliers of audio products worldwide. In early 2001 it had an injection of $10 million of Venture Capital from AMP Henderson Private Capital and Caltech Capital Partners. The company’s patents are under attack by British firm NXT.
A Christchurch venture has its origins with its inventor’s fascination with the Stirling Engine. By succesfully harnessing the Stirling cycle for electricity generation WhisperGen has made a commercial entry into one market and is on the verge of entering a second. The first application is as a battery charger for yachts, houseboats and remote homes. It provides silent, all weather battery charging using diesel or gas and in addition offers the opportunity for water and space heating. The second market is domestic. An AC unit has been designed as an appliance which, in addition to generating an 800 watt output, can replace gas-fired boilers used for water and home heating in Northern European homes.
