Digital Boost, Productivity Commission and living standards

On Tuesday small business minister Stuart Nash kicked off the Digital Boost Alliance. On Thursday a report from the Productivity Commission (no longer online) told us why business needs a digital shot in the arm.

The Digital Boost Alliance is a group of 20 companies. It was pulled together by Craig Young who heads Tuanz.

There are multinationals like Microsoft and AWS in the mix. You’d expect that.

Business support

The local companies in the alliance are more interesting.

Money, an important part of the digital equation, is represented by the five main banks operation here. Then come local tech companies: Datacom, Xero and, if we accept Australia as local, MYOB.

New Zealand’s telecommunications sector is represented by Spark, 2degrees and Chorus. Vodafone is a notable non-starter.

CertNZ and MBIE are in the mix. So is The Warehouse. While founder Sir Stephen Tindall is a keen personal supporter of initiatives like this, the Warehouse Group sells a lot of technology and supporting products to small business.

Mindlab is a member. It hosted the launch event.

Access and training

Alliance members aim to improve small business access to digital technology. More important they will help businesses get the training needed to make use of technology.

Each partner offers something different. There are offers of discounts of products and services, extra support, employee training and research.

It’s a big, ambitious goal.

World beating

Nash says he wants New Zealand to have the world’s most digitally-enabled small business sector.

We have been here before. Other initiatives have had similar goals. The difference this time is there is more money, broader industry support. It is a public-private joint venture.

Nash says the government kicked-in $44 million for digital training and advice in this year’s budget.

He singles out cloud computing. He says it has great potential. “A 20 percent increase in the uptake of cloud computing could be worth another $6 billion to the economy.”

Small business web sites

One industry speaker said only half of NZ small businesses have a web site. The implication being this is a measure of how much further we need to go.

Having a web site can help small businesses. It’s an efficient way of finding and retaining customers.

Yet it is not always appropriate. Many small businesses are subcontractors. They don’t need to sell themselves online. Nor do they need to spend money advertising with Google or Facebook.

Their digital needs are elsewhere.

Small business barriers to digital

MYOB surveyed small business owners. The results are revealing.

• 41 percent say cost is the barrier to technology adoption.¹
• 22 percent say staff training is the barrier
• 21 percent say a lack of knowledge is the issue.
• 23 percent say the problem is the time taken to implement.

At the event I spoke to a couple of blokes from Innate Furniture, a Christchurch small business who flew up for the launch.

I assumed their story was going to be about how they built a website and sales took off. Instead they told me how last year they moved all their backend systems to the cloud and how that made a real difference to the business.

This is where there are huge benefits.

Why Digital Boost matters

First, New Zealand’s economy is more dependent on small business than many other economies. Small business accounts for a larger share of our GDP and a bigger proportion of jobs.

Larger companies can afford to have technology specialists on the team. With smaller firms responsibility might be with the owner. Most likely it will be with someone without training or experience.

Second, New Zealand small businesses are smaller than you find in other countries.

We’re talking about companies with a less than a couple of dozen employees and the majority are much smaller than that. In other countries these would be called micro-businesses.

Productivity gap

Third, our productivity lags other countries. Today’s Productivity Commission report says New Zealanders work longer hours than people in other rich-world countries and produce less in each hour they work.

• 34.2 hours a week compared with a 31.9 hours average in the OECD.
• $68 of output an hour compared with $85 average elsewhere in the OECD.

These numbers affect our living standards.

Innovation is key

Commission Chair Dr Ganesh Nana says: “Innovation is the key to unlocking New Zealand’s productivity. There are only so many hours in the day that people can work, so creating new technology and adopting new and better ways of working is critical to achieving effective change.”

Which means the Digital Boost project is timely.

If there’s one area both the Digital Boost project and the Productivity Commission agree on is that we need to do more than move people to digital tools.

Show how

The key here is to show people how they can use these tools.

There is an echo with cyber security. Many managers and business people think spending money on security products will solve the risks.

It can help, but without educating employees on how to think in more security conscious ways, that spending is wasted.

Spending money on new computers, software and services is a start. Yet it’s crucial to set aside part of the tech budget for training.

Skills essential for digital boost

Skills are essential to unlock the potential.

Likewise, it is important to use technology where it has the most benefits.

It’s no accident that Xero and MYOB are behind Digital Boost, moving to digital account keeping, tax paperwork and electronic invoicing can have an instant pay-off for a small business.

If Digital Boost delivers, Nash says it can be worth billions of dollars each year to the New Zealand economy.

That’s great, but meaningless to individuals, what matters more is that it has the power to lift everyone’s standard of living.

1. I’d dispute this. Modern productivity tools are not expensive. ↩︎