I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
One of the people on the US Beachheads that I really enjoyed getting to know last week is Alan Nunns. Alan had a huge career in the energy exploration area, retiring last year as Manager of Technology and Strategy of Chevron’s Global IT function. (Andy Lark tells me Alan now drives a Prius.)
In my Beachheads talk on Thursday I mentioned that a very small proportion of our IT resources are used to create intellectual property. Our industry spends most of its effort charging time. Alan pointed me to these OECD figures on patents. This graph shows patents per country normalized by GDP.
It struck me during the week that many New Zealand technology companies seek funding really just for cashflow purposes. To expand to a new markets but really just doing the same old thing.
We need to ask ourselves, ‘what would we do if we had $5m dollars in the balance sheet?’ I suspect the answers would be completely different from current strategy and that we would take more time to invest in intellectual property for sustainable competitive advantage.
This of course leads into the chicken and egg funding issue, savings and creating an economy that encourages business investment.
In ICT we get such a huge reward from real research and development. We must introduce sufficient capital into our businesses, to buy the time, to do just that.
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The interesting thing about R&D in the ICT sector is that short time frames can achieve very acceptable results. Investment in biotech or traditional technology sectors (such as I used to see while undertaking my post-grad research at the CRI Industrial Research) require well (well) over 10 years to deliver the majority of benefit. Compare that to the benefits of an innovative idea in the ICT sector: a half to a third of the time from what I’ve personally seen.
Companies need to work harder at creating environments that can foster the inspirational ideas of the individuals working within them. Instead I see far too often barriers that knock down the creative people until they either succumb or leave to form their own businesses.
Interesting comments Rod particulary the comment about technology companies seeking funding for cashflow purposes. Probably most people who read your blog are in the IT industry and the reality is that with modern communication we can sell our services and products anywhere for little transport cost.
NZ has companies (and these are just the names of the ones that popped into my head - there are others) that compete on the world stage in areas just as competitive as IT who actually export physical (sometimes very large) products.
Tait Electronics Christchurch - employ 1000 people worldwide, 700-800 in Christchurch, I think they are Christchurchs largest employer (if you exclude WINZ and CYFs)and turnover $150 million a year; export everywhere.
Buckley Systems Auckland - make precision electromagnets, ion beam physics hardware etc. Every CPU made with their equipment; employ 150, turnover $50 million, factory is 120,000 sq ft.
Rakon - the world leader in manufacture of quartz crystals used in GPS units; beat the Japanese, beat everyone. Employ over 450.
Glidepath Auckland - make baggage handling systems for airports, post offices, courier companies. Export to 58 countries.
These firms are the best of the best anywhere. There are others. Its good to see what others are doing outside of our industry.
Don’t know how many patents they have but then you don’t need a patent to own IP and thats probably more true in IT than the above companies markets.
Someone add to the list of companies so we can all remind ourselves that in some areas we do punch above our weight.
Is it a funding problem or just mentality? Billable hrs is all what counts for so many Wngt businesses. Can’t speak for the rest of NZ, though.
I wonder what’s the ratio of IT project done as billable hrs to projects done as creating a product to sell/license?
Take Nokia out of Finland and 2 years worth of their local patents is gone (> 4000 come up under Nokia).
Fin/NZ ratios:
GDP: 1.7, patent apps: 2.4, granted: 4.8, population: 1.3, GDP per capita: 1.25
I’d question the graph presented here. Is it from any reviewed publication?
Check this page on Finland’s offical patent office website:
http://www.prh.fi/en/patentit/Tilastoja/Patentteja.html
The number of granted patents in Finland is hovering around 2000 a year since early ’80s, but the number of foreign patents validated in the country is on the up sharp.
Dermott your comment is exactly the attitude that I’m talking about … “the reality is that with modern communication we can sell our services and products anywhere for little transport cost”.
Creating a global company is much more than just using technology for cheap access to markets. They need real markting, real R&D, in market sales people, not just a few people sitting in Auckland and Wellington and a CEO doing drive-by sales. Sure there are some businesses emerging that don’t require massive investment but the many businesses that I look at, do.
Yes there are some great companies. But relatively few. I’d add Right Hemisphere, Wherescape, Eurekster, Peace etc to your list. Still, relatively few great software companies.
I’d estimate that less than 1% of our countries ICT resources are developing products that earn export revenue.
Rod, I think though too often in IT while we can create the software we are not always good at this - “real markting, real R&D, in market sales people”.
And at the end of the day, sales & marketing rings the cash register.
I am not surprised to see Finland is up there in the top spot. In IT area, Helsinki University (Computer Science Department) is one of the leading research institute into cutting edge new technologies. You can only judge that from the number of peer review publications that they have published over recent years. I have to say, that there are more research papers (in my rough estimation) being pumped out from Helsinki University Computer Science Department, than perhaps the total combination of Auckland & Victoria per year. Peer papers are not just submitted and then expected to be published. They are vetted by an expert group in that specific area to decide of its originality and its quality. If it is upto a high standard, then it is then published, if not, it would be rejected. I frequently do request some of the papers that their (Helsinki) authors had published if those titles are not available yet from their site for free-download. Authors are very generous, in answering question related to the algorithms described in their papers, even they would give you their proto-type codes if they have already developed them. The codes are frequently made available as open source from their website. The reason they make their codes (including other researchers from around the world) is that their publication which described the algorithms can be reproduced by other researchers from around the world in order to verify their claim, critique their methods or made improvement and then publish that improved version in the next issue or so in that specific journal.
Rod said…
To expand to a new markets but really just doing the same old thing.
I agree with this comment here. I think that our local IT companies are very reluctant to associate themselves with researchers from our Universities. There are perhaps some who do use Universities to do research on their behalf, but I believe it is not widespread. In my opinion, most of the cutting edge stuff in IT, do actually come from University based R&D. It is regrettable that most of our IT companies don’t want to fund Universities to do research for them. For IT companies, who cannot afford to fund University research, then perhaps use University resources as the library to do their own research. For example, at Auckland University, a representative from any IT company, can just check out the weekly new display section of both the General Library and the School of Engineering library for IT peer review journals that come in regularly. That rep or anyone else would have a chance to see first hand of what is happening around the world in terms of research for a particular domain which is of interest to their product development. There are tons of different computing publications available from libraries at Auckland University. They also do allow company library membership so they are able to loan books, periodicals or journals. I think that membership for companies is around $500 annually.
In one of Rod’s example of a top local IT company, Eurekster, I think that their CIO’s are already into research by scouring the vast number of computing peer publications available from literatures. The point I am trying to mention here, that if you don’t fund university to research on your behalf or perhaps not interested in scouring the computing literatures, then it is predictable that you’re going to get stuck doing the same old thing as Rod has pointed out. If you get stuck doing the same old thing, someone out there from somewhere might launch a product similar to yours with more advance functionalities that would squeeze you out of your market. I see that the development that Eurekster is doing is similar to what Helsinki is doing here in the area of information retrieval.
“Is it a funding problem or just mentality? Billable hrs is all what counts for so many Wngt businesses.”
Let me stick up for billable hours for a second or two :-)
Billable hours are the life blood of IT and many, many successful products come out of billable hours. Ask Bill Gates who paid for his first works. He didn’t write stuff for free. Easy to look down your noses at services companies but even Rod would have to admit that through Glazier’s sale they set him off on his current direction.
Ironicly, I received an email today from an ex-employee about a product he has been building which has just been released in Europe.
http://www.openamq.org/
The original work was paid for by JP Morgan as nothing else in the market met their needs.
Billable hours also drive investment into new companies and R&D. At Catalyst most of it goes into Open Source systems that we use and like. We also build our own systems and libraries which may or may not find a use in the future. The problem is, there is no incentive to measure R&D (unless you are preparing to sell). Very little in the way of tax inducements, etc. I sometimes wonder if the tax regime changed whether NZ wouldn’t, as if by magic, find itself rather higher up the R&D and IP type rankings.
As for the universities, if you want our money for research, chase us. Get out of your ivory towers and show us what you have. Better yet, give us what has been done already and let us cherry pick what we want to commercialise. Proof in the pudding and so on.
Finally, I agree with a poster above, patents these days are so abused that they are really a very poor measure of R&D and IP.
As for the universities, if you want our money for research, chase us.
Don, I am not a University researcher or a staff member; however I do know a few academic researchers from Physics, Mathematics, Statistics, Engineering, Computing, Business & Commerce, which I can call upon requesting to give some hints about a concept that I want to know more about. I do also use the library a lot. I am just pointing out, that some of our IT companies, don’t seek help from University, because they think that there is nothing new to add to their product development if they approach the commercial branch of any University research division (Uniservices for Auckland University) for advise or do some fact findings. This can be true in some sense, but most IT companies never always know all the concepts which might give their product an edge over their competitors (local or international) or same par with them, simply because they have never heard of those or come across them previously. I am aware that local IT companies such as Right Hemisphere, Navman, Orion Systems, Peace Software and others do fund Universities do R&D on their behalf, for areas that they have less expertise on, and ROI is starting to appear.