Inspiring Innovation

Breakfast speech to Small Business Enterprise Centres of New Zealand Conference: Exploring Entrepenurship, the Sand Rock Café, Mt Maunganui, Thursday, October 9, 8.30am

Welcome and thank you all for your attendance here today – I know how difficult it is for small businesspeople to take time out from their busy workload to spend time looking at the big picture in forums like this, so I am particularly grateful to you for taking the time to do so.
I'd like to begin today by reflecting on some of New Zealand’s leadership challenges in the area of small business and entrepreneurship.
In 2001 a research team in United States, led by Jim Collins, published “Good to Great.” The purpose of the research was to understand what made some companies great but others only good.
The criteria for a “great company” was that it had maintained cumulative returns exceeding three times the market average over 15 years – achieving consistent, excellent performance over the long term. The research team was looking for insight to explain the factors that caused these companies to be great.
Some of the most interesting findings of that research were in the area of leadership. The leaders of those great companies are not names you are likely to recognise. They are not Jack Welch of General Electric or Richard Branson of Virgin. They are people who displayed personal humility and professional will. They were ambitious for the company, not for themselves.
They displayed “a compelling modesty, were self-effacing and understated. They are fanatically driven, infected with an incurable need to produce sustained results. They were diligent. They attributed success to factors other than themselves. When things went poorly they took full responsibility. They were not charismatic, table-thumping celebrities. They were hard working, committed people who valued the people around them.

When asked where to find examples of similar leadership, Jim Collins replied: “Look for situations where extraordinary results exist but where no individual steps forward to claim excess credit. You are likely to find great leadership there.”
This type of leadership is displayed everyday in many aspects of our own community. In our community we have people with those qualities: community groups, sports clubs, emergency services, social services. And business.
Wisdom is knowing what to do, leadership is doing it. And great leaders achieve consistent results, over the long term.
A shared vision is vital to any leadership. This government's vision for New Zealand was articulated in the Growth and Innovation framework released in February 2002.
That vision for New Zealand is:
·a land where diversity is valued and reflected in our national identity
·a great place to live, learn, work and do business
·a birthplace of world-changing people and ideas
·a place where people invest in the future.

An essential part of this vision is a high value-added economy, driven by innovation - the key to sustainable economic growth.

The goal of the government’s Growth and Innovation Framework is to return New Zealand to the top half of the OECD in terms of income per head. We will do this by focusing on the things that matter:

·doing better at turning good ideas into world-class products;
·developing the talents and skills of all New Zealanders;
·fostering our linkages with the rest of the world; and
·focusing on three sectors (biotechnology, information and communications technology, and the creative industries) that have high growth potential and can help grow other parts of the economy.

As a country we need to do more to improve our economic performance. At the same time our efforts need to complement the government’s broader set of sustainable development objectives.

First I'd like to share some general observations supported by various research sources, including the 2002 Global Entrepreneurship Monitor. Research shows that:
·Entrepreneurship is a vital determinant of economic growth
·Entrepreneurship means the commercialisation or exploitation of innovation
·New Zealand has one of the world's highest rates of business start up activity - but this hasn’t translated into consistently strong economic growth
·New Zealand is one of the world's most entrepreneurial countries
·New Zealand has a very high proportion of opportunity entrepreneurs compared with the OECD and developed countries.

When we look specifically at Maori entrepreneurialism, we can see that Maori are
every bit as entrepreneurial as Pakeha New Zealanders – if not more so. If it
wasn't for the entrepeneurial spirit of our forebears, they would never have struck
out from their Pacific islands and set sail on voyages of discovery that led them to
New Zealand. That entrepreneurial spirit is still alive and well today.

One research report noted that Maori (if ranked as an individual country) would
be the world’s seventh most entrepreneurial country. Maori and Non-Maori have
similar proportion of start-up. But non-Maori firms outstrip Maori firms in “staying
power” of new firms (those still in business up to 42 months).

The expert panel in the 2002 Global Entrepreneurship Monitor study included 15 Maori. Their comments included general themes such as:

·Maori society lacks business expertise, financial skills and experience in acquiring capital
·Maori businesses are often hampered by lack of experience in governance and management
·The experts saw disenfranchisement, alienation and assimilation policies as undermining Maori self-confidence, ambition, motivation, and independent thinking
·Maori intrapreneurs (entrepreneurs operating within large corporate entities) and entrepreneurs are increasingly realising visionary joint ventures that bring together Maori capital and human and physical resources. These resources include tribal land, coastline, fisheries, ownership of tourism facilities and mineral deposits.
·Maori entrepreneurship is a major contributor to the New Zealand economy. The more youthful and fertile nature of Maori means they will represent an increasing proportion of New Zealand entrepreneurs in the twenty-first century.

There are many examples of Maori entrepreneurship. Just one example I could give you is Maori Businesswoman of the Year, Wendy Bennett.
Wendy has been in the food industry for 26 years and is the owner of Food Queens Catering.

Food Queens offers such delights as hangi-flavoured chicken with watercress on a kumara pancake, wok-fired pipi and cockles with Tohu chardonnay and garlic. It's clients include such high-profile customers as Fonterra, and the crew and cast of films and TV programmes such as Once Were Warriors and Street Legal.
It is unique because it literally has a distinctly Maori flavour, in more ways than one, and it was justifiably chosen from among the 15 finalists as the award winner.

If we look at another area of entrepeneurialism of particular interest to me as Youth Affairs Minister, youth entrepreneurialism, the level of innovation and innovation is very encouraging for the future success of New Zealand business.

Young people are almost by definition innovative. Whether those of us of an older generation like it or not, it is the ideas and energy of the younger generation that will shape the way we conduct ourselves in future. Whether or not we admit it, it is young people who will shape the way we speak, the clothes we wear, the music we listen to. And they will also change the way we do business.

I am constantly amazed by the great ideas and enthusiasm of our young people. For instance 14-year-old Linwood College student Natalie Crimp, who last month won Environment Canterbury's Wrybill Trophy, is a great example of the sort of innovative ideas that young people come up with. Natalie won the environmental award for her project which worked out how to turn disposable nappies into usable compost within weeks.

Natalie's interest in the issue was sparked by an ongoing row over the cost and siting of a landfill in her area. She knew that landfills were filling up with disposable nappies – 90 per cent of New Zealand babies use disposable nappies, getting through 572 million nappies a year. As nappies would normally take an estimated 500 years to break down in landfills, they cost Christchurch City alone about $400,000 a year.

So Natalie worked out a process in which nappies were shredded and composted – producing good quality compost within six weeks. Lab tests showed that any dangerous bacteria were completely removed in the process – the compost was so clean it was "safe enough to eat". Selling the compost would not only pay for the process, it would also turn a profit.

Perhaps young people like Natalie are more motivated about creating innovative solutions for the future because they are likely to be around for a lot more of that future than some of us. Perhaps it is because young people have fantastic levels of youthful enthusiasm and energy. Whatever the reasons, I congratulate Natalie and young innovators like her for the contribution they will continue to make to the success of our nation.

Finally, with yet another ministerial hat on, as Minister for Small Business, I want to look at the contribution of small business to innovation and our economy.

The performance of the economy as a whole largely depends on the performance of businesses. If businesses are not actively seeking economic growth, the economy’s cycle of growth will remain stagnant. If New Zealand is to achieve the government’s aim of returning to the top half of the OECD, close co-operation and partnership between central and local government, the private sector, and community groups is essential.
This government is getting serious about small business. It is getting more sophisticated in thinking about small business, helping create new businesses, making small business productive, and growing small business.
Small-medium enterprises or SMEs (defined as businesses with fewer than 20 full-time employees) make up 97% of all New Zealand companies. They employ 43% of all employees and produce 39% of all the goods and services produced in New Zealand.

We know that vibrant SMEs are important for New Zealand’s successful economic and social development, and sustained economic growth requires a pool of capable, talented and innovative SMEs.

Globally connected SMEs with international networks of customers, competitors, suppliers and research and development networks can grow faster than those solely focused in the domestic market. But they also face challenges managing the growth and taking full advantage of the resulting opportunities. Improved growth by SMEs, as well as larger firms, will drive the improved economic growth envisaged in the Growth and Innovation framework.

We recognise that many of businesses have the potential and desire to grow into larger companies. Such companies will be assisted by the integration of Trade New Zealand and Industry New Zealand into New Zealand Trade and Enterprise. NZTE will be able to provide seamless support for such companies from start-up to the time they go global.

Other SMEs will always be small businesses. For some, being compact, fleet-of-foot and focused on their main product is their competitive advantage. Others, while small, provide essential products and services that support successful larger businesses. These firms are supported by government business information and training services and will benefit from our continuing focus on reducing government imposed compliance costs.

As a government, we need to understand the attitudes of small business owner if
we want to support and encourage their business aspirations. We need to get
smarter in our dialogue with business owners. We are working on this in a
number of ways:

·Small Business Directorate: This year a directorate within the Ministry of Economic Development has been established specifically to support and champion small business initiatives.
·Small Business Advisory Group: The government is also establishing a Small Business Advisory Group to give SMEs a greater “voice” in policy development and to advise Ministers of issues facing SMEs. The nine members of the Small Business Advisory Group will be drawn from the business community and will have experience as an SME, or with SMEs. The appointment process is now in its final stages, and the group will soon begin its work providing ongoing advice to Ministers on any issues affecting SMEs. The Group will work with and advise the new SME Directorate.

·Ministerial Group for Small Business: Overseeing this enhanced SME focus is a group of Ministers led by the Minister for Small Business. The other Ministers are Finance, Economic Development, Commerce and Labour. Associate Ministers for Economic Development and Small Business are also members of the group.

·SME Summit: We’ve also provided funding to enable more regular communication between the government and SMEs. A feature of this will be the Small Business Focus events to be held in various centres during February to April 2004. This initiative was announced as the SME Summit in the budget. The events in main centres will be preceded by a series of visits by Ministers to small businesses. The Small Business Focus will review government initiatives and acknowledge small business achievements. Based on the dialogue generated during these events we will reset the priorities for our efforts, focused on how government services can be improved or enhanced to help small business grow and lower their costs of doing business.

·Additional support for research on New Zealand SMEs and analysis of the potential impacts of proposed Government decisions on SMEs is also provided for. Research projects contribute significantly to our understanding of SME performance and key issues. Research reports are widely used by SMEs, academics and government agencies.

The government’s new approach is developing a coherent, aligned policy and service focus across the whole of government. The focus for small and medium business is consistent with the broader vision and framework of the Growth and Innovation framework and the Government’s sustainable development objectives.

There are many challenges for small businesses (both Maori and non-Maori) and for government in building a business environment conducive to growth.

SMEs may be smart when it comes to taking opportunities. But SMEs need leadership: leadership from government, leadership from larger corporations and leadership from kindred entrepreneurs. The kind of leadership that creates great enterprise, enterprise that consistently sustains great performance.

As a government, we are committed to providing that leadership, and we look forward to continuing to share that commitment with the many leaders and entrepreneurs throughout New Zealand.