Tech firms missing out on high growth
Successful companies focus on fewer markets and sell through partnerships.
Thursday, October 06 2011 || News || BY Marta Steeman, Businessday.co.nz
The third annual market measures survey of more than 150 technology firms shows a focused approach to sales and marketing is most likely to deliver results for the country's hi-tech companies.
The survey was organised by Christchurch and Auckland marketing companies Concentrate and Swaytech and sponsored by PricewaterhouseCoopers. It is their third annual survey.
"The top performers have a relatively simple recipe for success – it is all about focus and intensity," Concentrate managing director Owen Scott said. The highest growth firms focused on fewer markets with fewer products than the average, generally sold through partners and aggressively promoted to market segments using a mix of traditional and new tactics, he said.
A key weakness was an over-reliance on direct sales. Just over half the companies had staff in export markets, such as in sales and marketing, installation and training and customer support. Only a minority used distribution channels.
"High growth is associated with partnering, but not enough exporters are using channels to get their products to offshore markets," the report said.
The 2010 and 2011 reports depict the hi-tech and information technology companies as "brave pioneers out there in international markets alone".
"It is likely the tech industry overall will achieve greater growth and scale if firms place greater emphasis on developing effective channels."
PricewaterhouseCoopers partner Owen Gibson said continued revenue growth and a rise in the number of companies exporting were encouraging signs.
The report said the companies' turnover grew 48 per cent on average in 2011, compared with 40 per cent growth on average in 2010. Even established technology firms recorded 21 per cent growth on average in 2011.
"Despite some cutbacks in sales and marketing spend, growth and exporting seem to be back on the business agenda and some businesses are investing in partnering to help them get offshore," Gibson said.
The report said most of the tech companies were constrained by a lack of capital at every stage of their growth and often found qualified and highly skilled staff difficult to get.
Of those surveyed, 38 per cent brought in less than $1 million in revenues a year, with about half between $1m and $9.9m, and only about 18 per cent over $10m.
To compete, their pricing was good but often cheaper than niche international rivals, large multinationals and local businesses in their export markets.
The companies also focused on slow-moving sectors such as health, utilities, community services and defence, and not many on agriculture, which was the most closely aligned sector with New Zealand's brand. Only 4 per cent of the companies sold high-tech products to agriculture companies.
Most went overseas quite quickly to sell their products, with 64 per cent of startups selling in export markets, shattering the myth that companies tended to build capability and resources in New Zealand first.
On average, about 42 per cent of the firms' revenues were from overseas sales. Most focused on selling in Australia first, with the United States a clear second, and startups were increasingly selling in tech-savvy Asian markets.
