Promoting innovation in business

Goal

To enhance the contribution ICT makes to New Zealand’s overall business productivity.

Targets

• To contribute to lifting the growth rate of the ICT sector towards 10% of GDP by firm-focused industry development.
• To deliver a world-class business portal that assists capability development in New Zealand businesses by June 2008.
• To assist an initial 30 small businesses to become skilled broadband users and develop their export potential by June 2006.

Challenge

To respond to three issues:

• small businesses need help to secure the benefits of ICT
• productivity gains from ICT need to be captured right across the economy.
• New Zealand’s ICT sector is being held back by demand constraints.

ICT is important because it drives productivity and innovation in other sectors of the economy. New technologies such as broadband are opening up new markets, new opportunities, and new ways of doing things faster, better, more cheaply. Businesses grow, and the whole economy prospers. Large businesses are already aware of the benefits of investing in ICT, but small businesses often struggle with ICT.

The feedback we received on the draft Strategy confirmed that small businesses need particular help. They need to know what ICT can do for them, and they need mentors to help them do it.

Businesses identified some barriers to making fuller use of ICT:

• lack of management know-how about how to apply ICT in their business
• the risks posed by viruses, hackers, or Internet fraudsters
• slow or unstable connections.

In particular, feedback on the draft Strategy told us to:

• raise awareness of ICT and promote its stimulating effect on industries to raise firm productivity
• target programmes to support small business needs
• help improve businesses’ ICT management capability
• lower business compliance costs using ICT
• address issues of affordable high-speed access and security online.

The ICT sector is a leading growth sector in the New Zealand economy. Of the top 50 fastest-growing firms in New Zealand, 25 are ICT firms or Internet-based businesses.³⁷ The ICT sector has significant export potential and is supported by New Zealand Trade and Enterprise programmes (including Investment New Zealand).

Even more importantly, ICT holds the potential to unlock productivity gains right across the economy. Our key challenge is to help all businesses gain maximum benefit from what technology can offer.

For example, ICT has already had a transformative effect on banking and financial services. Lower banking charges and better services such as EFTPOS and Internet banking benefit all businesses. The government wants to see similar gains made in all sectors – particularly those sectors that dominate the New Zealand economy, such as agriculture and tourism.

The agriculture sector plays an important role in New Zealand’s economy, providing 16-18% of GDP, with 6-7% generated on the farm. Broadband has the potential to increase innovation and productivity on the farm. With pasture management, stock management, biosecurity, and traceability imperatives, ICT applications combined with accessible broadband are essential tools for competitive advantage.

Through Project PROBE and the regulatory work of the Commerce Commission, coverage of basic broadband has increased to above 95%. Broadband is becoming steadily more affordable for farms in rural areas, but there are still service issues and coverage gaps in remote places that need to be addressed.³⁸

The ICT sector is also important to the creative content industry, especially film, multimedia, and interactive design. Collaboration within the sector is as important as competition. Moves by ITANZ, the Wireless Forum, the Internet Society, HiGrowth, and others to improve industry collaboration are welcomed by the government and are being supported by New Zealand Trade and Enterprise.

The government is a big ICT customer, spending up to $2 billion each year on ICT (once the spending by central government, local government, health boards, universities, and other Crown entities is taken into account). The government’s procurement practices are therefore critical to the domestic ICT market. In partnership with the ICT industry, the government will introduce programmes to ensure a more competitive domestic ICT sector and more cost-effective procurement for government. Ongoing policy initiatives will address small supplier procurement issues.

Link to Boosting Productivity on the Farm Case Study

Actions

³⁷ Deloitte Fast50 – Unlimited November 2004.

³⁸ The Connection and Communities sections of the Digital Strategy also address this issue.  

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