Kiwi Hulme Supercar makers aim low – the perils of 100% Kiwi-owned Not so fast

Hulme Supercars is seeking investors in its supercar, but only ones from New Zealand need apply.

There maybe some legal or financial reasoning behind this (in particular Hulme wants nothing to do with US investors), but shutting out international investment, and associated engineering and marketing expertise will, judging by history, stop the supercar project in its tracks.

[26 June - It has been pointed out that there are strict rules governing capital raising in New Zealand and in most overseas jurisdictions, especially the US. For small NZ issuers, meeting these offshore rules is cost prohibitive. BigCake would add that his concern was that Hulme also appears to be ruling out other forms of international investment, such as direct investment.]

It is destined to be underfunded, undermarketed and underbuilt – it will go nowhere – the fate of hundreds of other 100% Kiwi-owed businesses with global potential.

This is not just an issue of the lack of spare capital lying around NZ to fund global growth, but a whole bunch of other stuff NZ is short of, such as:
• international financing skills
• international marketing expertise
• global connections and
• resources such as skills and technology.

And ambition.

All these things often come as part of an international investment package.

Do the Hulme Supercars guys want to, as they say, “fill a strategic gap in the competitive but potentially profitable international Supercar market” or not? [Actually that’s an underwhelming pitch for investors].

Anyway if they’re serious, they’d be open to international investment.

It’s not as if being 100% Kiwi will give them a serious marketing edge. Bugatti owners still think they’re buying an Italian a French car (founded in France by an Italian immigrant), even though the company is owned by the Germans.

Ownership matters a lot less than history, where the IP sits and how something is marketed. All that stuff can stay in NZ. Hell, we can even make things here.

To be fair, the Hulme people have set a pretty low initial production target of nine (that’s a small strategic gap), climbing to a projected 20, so maybe they realise their limitations.

But there’s a visible lack of ambition here.

BigCake wishes the Hulme team well – their business model based on (very) high value add manufacturing in NZ could work, but it is at risk for the above mentioned Kiwi deficiencies.

It’s possibly unfair to pick on them. Blame Hulme’s slick Kiwi marketing I guess for bringing them to my attention.

Not so “rugged individual” – are we weak-kneed shadows of our forefathers?

Are Kiwis scared of change, like more afraid than other countries?

Our ancestors, willing to head out to settle in an unknown land, for sure weren’t.

“The lust of a pioneer will acknowledge no frontier.”

But have we since evolved into weak-kneed shadows of our forefathers who see ever present danger in change, risk in opportunity? Realising we are a bunch of lucky sh!ts, have we spent most of the last 150 years wringing any further uncertainty out of our lives?

Harsh? Dunno.

Certainty has a lot going for it, but it can weaken the lust of a pioneer.

BigCake found a survey of New Zealand business managers that showed they ranked in the top 25% in terms of “uncertainty avoidance” in an international survey.

Uncertainty avoidance was measured by stuff like how many laws or rules we have to cover most situations, the tendency to lead structured lives and an emphasis on orderliness and consistency.

If Kiwi managers in the survey were more uncomfortable with uncertainty than their international counterparts, it’s a reasonable guess that it’s a national trait.

You don’t have to look too hard to find evidence of this “nanny state”, say from 1890s labour laws through to ACC.

And on an individual level it is behind a lot of what BigCake calls “growth scepticism” – the sceptical reaction to claims that economic change this time will make a difference.

The uncertainty measure is in the Global Leadership and Organizational Behavior Effectiveness (GLOBE) project which I came across while researching the poor state of NZ management.

GLOBE interviewed 184 Kiwi middle managers in finance, food processing and telecommunications and found that by the standards of other countries, these managers were:
• Very focused on performance
• Collectivist and
• Uncomfortable with uncertainty.

The associated report on New Zealand was written in 2006 by Jeffrey Kennedy, now Director Open & Custom Programs at Nanyang Technological University in Singapore.

Kennedy says NZ’s society is “characterised by a reliance on social norms, rules, and procedures to reduce unpredictability and uncertainty”.

Kennedy comes up with a couple of pieces of hard evidence of this. In a 1990 Survey of Values Kiwis ranked life’s qualities as follows:
1. Security
2. Accomplishing things
3. Comfort and prosperity third.

And in an international study of entrepreneurship, New Zealand ranked 15th out of 29 countries in tolerance for uncertainty.

And there are real consequences of this in the world of business. Off the top of my head:
• The whole export gig is shot through with uncertainty so we don’t export as much as we should or could
• When trading with the world we like to deal in hard contracts rather than engage in the soft (and unpredictable) world of relationship building.

The tyranny of distance is stopping the cavalier.

Most of us like to think we are now more grown up than the conformist, boring, predictable image of New Zealand from mid last century, but as author Malcolm Gladwell says cultural legacies have deep roots.

Crap management (4) – supply and demand the problem?

There’s no shortage of training programmes for NZ managers with a mind to improve their leadership skills to tuck into.

A MED report in 2009 identified 546 programmes run by 59 organisations.

On the demand side there is also quantity wise no problem. In a Massey University survey more than 80% of small business manager/owners said they saw managerial skills and leadership as key to company growth, performance and competitive advantage. (2% didn’t see any relationship)

But as a University of Technology Sydney (UTS) report points out many larger business owners (and most likely smaller ones as well) are delusional about their abilities – they think they are better than they are.

So judging by the fact that at best our managerial quality is marginally improving, though still mediocre by international standards, somehow supply and demand are not connecting.

And this disconnect has been known about for sometime.

But not all the issues behind NZ’s poor management performance can be fixed bv sending managers back to the classroom. A big factor is that NZ’s economy is dominated by small businesses and it’s hard for these business’s owners and managers to find the time and capacity (though too often also the inclination) to do some training.

Other issues not amenable to a training fix include:
• The best managers leaving.
• Difficulties in getting rid of bad managers.
• Lack of ambition.

The Government has a Skills Strategy, one stream of which is improving management and leadership capability. This includes trials of training partnerships between tertiary organisations and industry along with a commitment to streamline government training activities and improve links with the private sector.

Government agencies offering training include Trade and Enterprise, MED, FoRST, the Department of Labour, the Tertiary Education Commission, the Ministry for the Environment, the Ministry of Social Development, Te Puni Kokiri, the Ministry of Agriculture and Forestry and Treasury.

Hah, but this issue is primarily the responsibility of businesses and their representatives to fix, though there’s also an argument that there’s a market failure going on here.

Spanning the public and private sectors is the Business Capability Partnership which represents government, businesses and unions.

In the private sector trainers include Business NZ, Employers and Manufacturers Associations, Chambers of Commerce, the NZ Institute of Management, the NZ Council of Trade Unions, ITOs etc etc

The 546 programmes teach:
• Communication skills – 228
• Leadership skills – 196
• Employment relations – 122
• Influencing skills 110
• Team building 94
• Workplace culture 63…

Funnily enough given the above’s focus on soft skills, our managers do most poorly in people skills according to the UTS report.

And while we do relatively well in process skills in that report, on the ground there’s a dearth of training programmes that focus on this.

So …maybe the training market is sorting itself out, though no one seems to have a clue about the how effective many of these programmes are.

Crap management – the elephant in the office (3). More evidence of the size of the problem, but maybe what we are ignoring is not the problem, but the solution

When BigCake started this series on the disastrous state of business management in NZ, he thought of the elephant as being a problem.

Which it is. A report out yesterday shows more of our firms are poorly managed than well.

But maybe a better way to view our beast in the office is to think of him as a solution. That’s what we have really been ignoring.

And in terms of kicking business growth up the arse, it’s bigger than tax cuts.

A report commissioned by the MED indicates that basic improvements to management leadership, capability and skills would be massively more beneficial to business productivity than big increases in staff numbers or capital.

And our managers are delusional about their management skills. The report found managers consistently overrate their firms’ management performance. Also their self assessments “do not align well” with an external tests.

The report, Management Matters in New Zealand – How does manufacturing measure up? Findings from the New Zealand Management Practices and Productivity global benchmarking project, shows that NZ business managers are a lot like our school kids – at the top as good as anybody, but with a long ‘tail’ of mediocrity.

It was written by University of Technology Sydney using methodology developed by the London School of Economics and McKinsey & Company that is in use in 16 other countries. It was paid for by NZ Trade and Enterprise, the Department of Labour and Treasury.

The authors point out businesses and managers themselves must take primary responsibility for upgrading their management skills and improving their practices.

Based on a survey of management practices in 152 medium and large sized manufacturing firms in NZ during mid 2009, the report shows the average New Zealand business, in terms of management performance, is below the top 59% of Australian, 64% of Japanese and 75% of the US manufacturing firms.

That’s three of our top four export markets. Our average business is also below the top 30% of Indian and Chinese firms taken together.

The report’s findings suggest that firms would need to increase labour by 41% or capital by 77% to increase their output to match a lift in their management score from the 25th to the 75th percentile of the other 16 countries.

Surprisingly what mostly lets us down is our managers’ people skills. They are not so bad at operations and performance management.

The key drivers behind this situation according to the report are:
o Firm size – larger New Zealand firms significantly outperform smaller firms. BTW – The New Zealand economy is dominated by small and medium sized firms.
o Ownership – multinational corporations adopt and spread better management practices compared to domestic firms. Publicly listed companies are also better than privately owned firms, family owned firms and cooperatives. Family run firms tend to under perform.
o Higher levels of education and skills among both managers and non-managers makes a difference.

The results show better managed firms are likely to be more productive, larger, and have greater sales.

Other survey results include:
o We rank 10th out of the 17 countries for operations management.
o In performance management, New Zealand comes 9th out of 17.
o In people management we’re on par with France, Ireland, Italy and developing counties such as Brazil, India and China

There’s interesting stuff on which sectors do better than others:
o Overall petroleum, coal, chemical and associated product manufacturing perform significantly better than other sectors.
o Machinery and equipment manufacturing is tops in operations management.
o Printing, publishing and recorded media and other manufacturing are the worst in people management practices. (Haven’t seen any mainstream media coverage of this report!)

Still to come – what’s being done to fix all this.

Crap business management – the elephant in the office (2). Where’d he come from?

Probably the bowls club. The bad manager elephant we like to ignore at our cost is likely to be male, and an old one at that.

Woman and the young (well, under 55 – nice to be called young) are more inclined to improve their management skills than anyone else, according to a Massey University study into management capability in NZ’s small businesses.

Nearly everyone who took part in an associated survey said they didn’t do much formal management training (with woman doing slightly more), but when it came to the more popular “informal” and “incidental” training, woman were much more committed.

Same for age. The so-called young were into it, those over 55 markedly less so. The age thing is concerning because a large percentage of our managers and owners (62% for larger business) are “old”.

If our managers were as crap as everyone else in the world, it wouldn’t matter, but they are, despite apparent improvements of late, at the back of the field.

There are reports of international business deals falling through because of a lack of confidence in the New Zealand management end. New Zealand businesses are seen as having low business capability and acumen by their foreign counterparts according to New Zealand Trade and Enterprise research into perceptions of New Zealand businesses in leading international markets.

So why so bad? In no particular order or attempt at completeness (basically just what BigCake finds interesting):

• Do it yourself: The predilection for informal and incidental training – good old Kiwi DIY – must be part of it. According to the Massey survey, 61% of small business owner-managers learn by doing and being a bunch of tight wads spent an average $1000 a year on developing their managerial skills. The Massey report comments that this cold-shouldering of formal training in large numbers is of continuous concern for policy makers, but it adds the informal stuff also needs to be acknowledged.

• The best managers leave. Too many of the most competent, most ambitious, most forward thinking just scarper. This is mostly anecdotal, but BigCake’s seen it in many enterprises. The best leave and all too often, because the talent pool is so shallow, are replaced by lesser mortals. New Zealand is seriously haemorrhaging managers. Specialised managers topped a list of occupations of Kiwis heading for Australia by 30%.

• Businesses can’t get rid of bad ones. Even “reasonable” employers shy away from sacking incompetent managers because of the fear they’d lose any challenge to the dismissal. Most small businesses don’t have the resources to put up a fight, so they just suck it in.

• The 3Bs. I’ve got my boat, BMW and bach so ‘why the hell would I need to go to the trouble of doing any training?’

Soon I’ll look at what our managers are bad at.

Crap business management – the elephant in the office

Are our business owners and managers deserving of the faith – and dosh – the Government handed over in last week’s Budget?

Don’t think so. There’s stacks of evidence that too many are just not very good at running their businesses.

Of course there are some great managers out there who’ll repay the Government’s faith and others will have more reasons to get their act together. In many cases though, it’ll be trust,expectation and money down the tubes.

A screed of reports and surveys show many of our bosses can’t foot it internationally, though there is evidence that the situation is improving.

For some reason this issue largely gets ignored in debates about how to drag this country out of its economic rut.

Evidence of the problem includes:
• “Few firms have yet to match leading international benchmarks – no more than 2-3% of firms appear to be approaching international standards of performance on practices such as strategic planning and leadership, supplier relationships, employee performance management and benchmarking, or actively pursue strategies of innovation.” (MED)
• “New Zealand suffers a dearth of high quality managers and entrepreneurs. This lack of managerial talent could be affecting both a firm’s ability to internationalise and also the average firm’s ability to identify new opportunities and grow.” (Treasury)
• “[Despite some good news] the downside is that the Canadians have now joined a slowly growing list of countries whose managers outperform ours.” The New Zealand Institute of Management.

We also rate poorly in international surveys such as the World Economic Forum’s Global Competitiveness survey.

And then there’s the circumstantial stuff:
• “What is holding New Zealand back is a widespread lack of management and leadership skills among SME owners, which translates to disengaged workers and low productivity,” (Grant Hally, chairman, Independent Business Foundation)
• “The low productivity is mostly from significant mismanagement: The greatest differences identified here are in: GroupThink; “number 8 wire and not learning from others”; hostility to constructive criticism; discounting of formal qualifications; ignorance of both quantitative management and systems-approach management; “the old boy network”, and many more.” (2025 Taskforce)
• “Something I have noticed peculiar to New Zealand is a lack of commercial impetus due to dire motivation. I am frustrated by the isolatory and timorous attitude of NZ’s senior management who appear closeted within a fall-out shelter of “tried & tested” cladding, as if sticking their heads above an imagined parapet would render them terminally radioactive.” (UK immigrant to New Zealand commenting on the NZ Institute’s NZ Ahead website)

Over the next few days I’ll post on what may be behind this situation and what’s being done to fix it.

What’s with farm leader hostility towards clean and green? Farmers want to win race to dirty bottom.

The questions in the Sunday Star Times’ “Dear PM” piece in yesterday’s paper revealed more than  John Key’s answers.

Brian Tamaki asked him about getting advice from spiritual leaders, Oscar Kightley about the future of Pacific peoples and John Banks asked if the PM saw Auckland as the “aspirational capital of New Zealand?”

Presumably the questioners could ask PM whatever they liked, so what does Fed Farmers President Don Nicolson ask? A loaded question about clean and green:

“Do you categorically know if our assumed “clean and green” and “sustainable” brand is a primary reason why consumers in the growing markets of Asia, the Middle East and Africa buy New Zealand food products and if not, why not?”

Key gave a pretty much standard (and correct) answer about ignoring environmental concerns of customers at our peril, citing the UK, US and Europe, then saying the customers in the markets Nicolson mentions will eventually have similar concerns.

Consumers in Asia (not sure about the Middle East and Africa, but it’s a fair bet it’s the same) don’t particularly buy our food and beverage products because they are seen as clean and green, they buy them because they are regarded as safe.

Food safety is the big issue. But it’s wrong to see clean and green and food safety as somehow two different issues.

Food safety is hugely tied up in clean and green. You can’t be dirty and safe.

And New Zealand’s brand is clean and green in these countries – this is not assumed.

And as countries in Asia, the Middle East and Africa become more wealthy, they’ll become less concerned about food safety (like Kiwis now, they’ll regard it as a given), and will be following Western countries in concerns about carbon foot prints, how water is used and other sustainability issues.

New Zealand’s farmer leaders – well mostly dairy ones actually – seem determined to stay in (and win) the race to be the world’s lowest cost producer, cramming more cows into every available hectare, regardless of the consequences to the environment and the clean and green brand.

It’s not a war they are going to win.

Clean and green is not seen as an asset to be protected and built on, but one to be shat on on the way towards an imagined farmer salvation in land where the cow rules.

To be fair, not all farm leaders see it this way. Fonterra CEO Andrew Ferrier predicated his question on the need for an international consensus on how to increase economically and environmentally sustainable production. He asked how can we do both?

Which is a much better question.