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Many New Zealand SMEs say technology had no impact on their business, Westpac survey shows

Wednesday 22nd April 2015

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Nearly one third of New Zealand small and medium sized enterprises say digital technology has had no impact on their business over the past five years and 27 percent don’t expect it to in the next five years.

That’s one of the findings of the 2015 Westpac Grow New Zealand survey of nearly 1,200 SMEs ranging in size from $250,000 to $5 million in turnover.

Some 38 percent had bought new hardware or software in the past five years and 36 percent intended doing so in future but less than a third had used that new technology to change their marketing approach or online processes and 10 percent and under had changed their logistic and distribution processes, organisational structure, or suppliers as a result.

Around 10 percent had hired new staff as a result of the new technology and a further 13 percent expect to do so in the next five years while 3 percent had laid off staff as a result.

Westpac chief economist Dominick Stephens said the lack of impact from digital technology was surprising along with the fact many SMEs were also not confident about securing the right staff to capitalise on it.

“In the US, productivity gains have been made by altering business structures to suit the new technological reality,” he said. “There doesn’t seem to be as much pressure for New Zealand firms to adapting quite as quickly.

The Productivity Commission’s report into New Zealand’s productivity, which has improved of late but remains low by OECD averages, said that was due to weak international connections and companies underinvesting in knowledge based capital.

“There’s no point just buying a computer, having a website or buying a smartphone, you have to also look at technology and what opportunities are presented by this stuff and completely re-engineer your business,”  said Commission  chair Murray Sherwin.

A report last year by the Innovation Partnership, a group of private and public sector individuals facilitated by Google that want to drive greater innovation in New Zealand through the internet, said the capacity and capability of the Internet, particularly with the ultra fast broadband rollout, can be at the centre of New Zealand’s drive for economic growth. Businesses should be making effective use of the Internet to add billions of dollars of productivity and export gains to the economy, it said.

It pointed to businesses that make substantial online sales are up to 25 percent more productive than the average firm in their industry, yet only 12 percent of businesses are taking online payments via their website.

The Westpac survey also showed only 56 percent of respondents have a website, 60 percent were using social media, and 82 percent had a smartphone.  Only 15 percent had dedicated apps for their industry and a similar number used other cloud based products or services.

The survey also found more than a third of Kiwi SMES hadn’t improveD the position of their business in the last four years since the bank last surveyed them, despite New Zealand’s strong economic growth relative to the rest of the world.

The improved economic position didn’t change investment intentions with there being little to no change around expanding businesses, maintaining the size of the business, or looking to sell.

Westpac chief executive David McLean said “we don’t want to be the tallest Hobbits in the room. There is a big opportunity for businesses."

The lifestyle mentality of many SME owners towards their business seemed to be a key driver with 31 percent saying the biggest barrier to growth was their desire to maintain their work-life balance or retire, which is up 10 percent on 2011.

Sherwin said other countries also had the same issue with what they call leisure companies whereas in the US the attitude was more “you have to be on top of your game or you’ll be swallowed by someone else. It’s a more competitive, dynamic environment."


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