Warning signs NZ’s digital innovation slipping

Warning signs NZ’s digital innovation slipping

New Zealand continues to be among the world’s top 50 countries for digital development, although a slow decline in innovation, particularly start-ups, is a sign that more investment is needed.

These are among the findings of the latest Digital Evolution Index, compiled by the Fletcher School at Tufts University in the U.S. and recently published in the Harvard Business Review. The index is set up to understand how the strengths, weaknesses, and changes from 2008-2013 have affected digital economies across the world.

New Zealand was assessed in the top category, ‘Stand Out’, having shown high levels of digital development in the past which remains on an upward trajectory. Others in that category include Singapore, Korea, Israel, and Ireland.

Australia was assessed in the ‘Stall Out’ category where previous high digital development was losing momentum and the country risks falling behind.

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Four broad drivers form the base of the index:

  1.  Supply factors (i.e. access, fulfilment, transactions infrastructure)
  2.  Demand factors (i.e. consumer behaviour and trends, financial, internet and social media savviness)
  3.  Innovations (i.e. entrepreneurial, funding ecosystems, extent of disruptive forces, start-up culture)
  4. Institutions (effectiveness of Government and its role in business, laws, regulation and promoting digital ecosystem).

What does it mean to ‘Stand out’?

Caroline Troein from the Fletcher School specialises in business and policy strategy in technology contexts and worked on compiling the Index. She explained it is comprised of 83 indicators under four drivers: Demand, Supply, Institutional Environment, plus Innovation and Change.

“These indicators are grouped in components to help answer key questions about the digital economy, such as ‘what is the state of the ICT infrastructure?’ and ‘What are enabling economic factors for business start-ups?’” she explained.

“In New Zealand, supply and demand remains stable with on-going investment into building infrastructure and changing consumer behaviour. This is partly due to the nature of the inputs for these drivers: building infrastructure, and changing consumer behaviour, takes time. Also, for mature economies, we do not expect big swings on the demand side.”

The slight institutions upswing isn’t due to any single indicator improving; rather, it is the sum of many small, incremental improvements across components. This is encouraging, as it signifies broad, more stable progress.

Troein explained that innovation is the driver with the most movement and has been on a downturn in New Zealand since 2011, and a couple of elements contributing to this could be worrying:

  • With innovation, there is a slow but noticeable drop in the quality of the start-up environment. Start-up costs, both bureaucratic and in set up, as well as the start-up culture, all contribute to this drop.

  • There is also a slight drop in the extent of disruption. This looks at the potential for new digital technologies and systems to have an impact on people. New Zealand should keep an eye on this.

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What about our neighbours?

Across the Tasman supply and demand are also fairly stable, although there has been a slow but worrying drop in support from Government.

“The decline in business protections, and legal efficiencies, has led to a less conducive environment for businesses. Definitely something worth looking further at for Australians,” Troein said.

The extents of disruption and start-up culture components of the index have both been in decline in Australia.

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For both countries, Troein believes innovation is the defining challenge. From 2010 to 2012, New Zealand outdid Australia on creating an attractive ecosystem for innovation and consumers. However, during the past year Australia has seen a resurgence of investment.

“Based on our current data, unless New Zealand can attract investment, Australia will outpace New Zealand in innovation in the longer term,” she said.


Dig deeper

Check out the full Digital Evolution Index executive summary for more information.

Follow Fletcher School at Tufts University on Twitter: @Fletcher_eBiz

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