A game of two halves

Why is it that a country that can produce this sort of ingenuity has become so poor? In a more serious context, answering that question was the motivation for our research. We set out to discover whether there were other factors apart from resources, country and size that was behind the country’s abysmal economic performance.

Innovation is a game of two halves. In fact it could even be seen as two overlapping games played on the same field at the same time. Different rules apply and different resources, knowledge, skills, attitudes and motivation are necessary for each half. Somewhat chaotic!

The first half, the initiation stage is where things are invented, discovered, created. The second half or implementation stage is where those are turned into practical applications and wealth.

The measure of the success of a nation’s innovation is the wealth created, specifically GDP per capita. New Zealand scores reasonably well for the initiation stage but for wealth creation our record is dismal; third in the world in 1951, eighth in 1955, and 22nd in the OECD in 1991, which is where we remain. Over all nations we are now 50^th.

We see a similar picture for entrepreneurism. Second out of 36 in the GEM Study 2005 for early stage entrepreneurial activity. Thirtieth for high growth businesses! New Zealand, it would seem, creates and captures less wealth from a similar amount of innovation and entrepreneurial effort than do the countries that we compare ourselves with.

Innovation has been described by Peter Drucker as the “specific tool of the entrepreneur”. So how can it be that we appear to be so innovative and so entrepreneurial but not turn that into wealth?

The first reason is that the terminology we use is confused. Being inventive and being innovative are two different things. We use the #8 gauge wire mentality as a metaphor for our innovativeness but it is really about our practicality and resourcefulness and adaptability and that disguises reality. Being inventive does not automatically lead to wealth.

Probably the most outstanding example is the Industrial Revolution. Many of the inventions were made in France, but it was Britain that turned that into wealth and came (for a while) to dominate the world. The same applies to entrepreneurship. Having high early stage activity does not automatically translate into high growth and wealth creation.

We have traditionally attributed this to industrial structure, capital density, research and development infrastructure, resource endowments, our small size, our distance from market etc. Those are all relevant but I want to suggest that my fellow speakers [Annette Presley (Sligshot), Bruce Plested (Mainfreight), Suzanne Paul, and Bill Day (Sea Works)] did not achieve their success from having access to unlimited resources. They worked with the limited resources that they had available and it was their vision, ideas, their intellectual assets that enabled them to turn those limited resources into the success that they enjoyed. They have the right stuff — the right combination of thinking and behaviour to achieve success. That is not entirely common within New Zealand.

It is how people think, and particularly how Kiwis think, that I want to talk about. People from different national groups literally think differently. And that effects how they go about invention, innovation, entrepreneurship and management in general.

These all vary in important ways between nations. And this is almost never taken account of in policy design, management styles, business models etc. And it is this I suggest that is the critical limiting factor on the creation of wealth in New Zealand.

The way that we think is a product of our unique life experiences — that make us different — and our national culture that provides our shared identity. National culture has been described as ‘software of the mind’ and provides the framework by which we interpret the world around us and determine how we should respond to particular situations.

People from different cultures can and do interpret and respond to the same data set quite differently. We can measure national culture as dimensions and there have been a number of international studies that have all included New Zealand and produced remarkably consistent results despite using different methodologies.