Double down on five high-value areas to drive growth - Boston Consulting Group
Boston Consulting Group's (BCG) report on the future of New Zealand's economy highlights the need for a focused approach to industry development through high-value ecosystems. The report suggests that New Zealand must build new industries to drive wealth creation and overcome current economic challenges.
New Zealand's economic performance has lagged behind global peers, BCG points out, with declining productivity and eroding comparative advantage. The report states, "In the 1950s, New Zealand's per capita income was 88% of the US, while today it is 64% compared to 69% for Canada and 79% for Australia".
The country is also facing a growing talent gap, particularly in highly skilled industries.
"90% of New Zealand employers said they are struggling to fill vacancies and 71% said that highly skilled jobs were the hardest to fill," the report notes.
We also have to deal with the shockwaves of global challenges such as climate change, technological innovation, and geopolitical instability, which pose significant threats to New Zealand's major sectors and industries.
So what should we do about it? With the Government’s growth mantra in mind, BCG has taken a strategic look at the opportunities ahead for Aotearoa. It basically suggests we should pick some winners in terms of the sectors we want to play in - and focus on developing them.
BCG suggests that New Zealand should focus on developing 3 to 5 high-value ecosystems to drive future growth:
Agriculture 4.0: Supporting more sustainable and efficient food production.
Space and satellites: Designing and manufacturing componentry, launch vehicles, and satellites.
Green tech: Developing new technologies to support the global energy transition.
Future of medicine: Improving medical outcomes with new practices and technologies.
Creative industries: Leveraging New Zealand's unique talents to produce new content, products, and experiences.
The ecosystem approach
BCG emphasises the importance of concentrated ecosystems.
“By focusing on 3 to 5 high-value ecosystems aligned with its overall strategy, NZ Inc can more efficiently build scale and density in future industries, create comparative advantage and position New Zealand as a global leader while stimulating economic growth and skilled employment," the report points out.
It also outlines the components of successful ecosystems, including established industry players, universities, research institutions, start-ups and incubators, investors, and an orchestrator to connect these components.
High-value ecosystems are not just for world super-powers, BCG explains.
“In fact, they are even more important for smaller nations to develop a specialty and focus innovation and investment in an ecosystem built around that specialty. By focusing on 3 to 5 high-value ecosystems aligned with its overall strategy, NZ Inc can more efficiently build scale and density in future industries, create comparative advantage and position New Zealand as a global leader while stimulating economic growth and skilled employment.”
The report concludes with Michael Porter's 2001 advice on the importance of ecosystems and focused investment.
"NZ Inc needs to channel investment into high-value ecosystems where New Zealand has a strong right to win, and players across government and industry need to work together to set up the components required for these ecosystems to thrive".
In essence, BCG's report calls for a coordinated effort across various sectors to build and nurture high-value ecosystems that can drive New Zealand's economic growth and global competitiveness in the coming decades.
