What is Knowledge Based Capital and why is it important?

Recap of previous article ‘Why New Zealand is heading for a Productivity crisis’:

In my last blog I mentioned that New Zealand has struggled to lift its productivity in relation to other OECD countries over the past forty years and that we have slipped in our ranking of competitiveness from 15th to 23rd out of 63 countries. The lowest ranking in 30 years.

But why? There are several anecdotal reasons for New Zealand’s poor productivity record.

What is Knowledge Based Capital?

Knowledge Based Capital (KBC) refers to investment and adoption of Software to improve efficiency, expenditure on Research & Development, implementing new business models to make best use of efficiencies created by new software and Organizational Know-How from well- rounded management.

How does New Zealand perform in this area?

In 2016, the New Zealand Productivity Commission released a report that showed the speed in which new technology is adopted by New Zealand firms has slowed since 2001 compared to OECD countries.

But why?

Anecdotal evidence suggests three factors;

  1. New Zealand’s culture of “I’ll do it myself” (i.e.) Number 8 wire mentality
  2. An abundance of cheap labour from overseas to do menial tasks.
  3. Lack of overseas competition

You may snigger at the first point but here is a real-life example of what I am talking about.

A real-life example of NZ’s “I’ll do it myself” mentality.

My company EDIStech, which is a bespoke provider of a fully managed Electronic Data Interchange (EDI) software solution, was asked to quote on an EDI solution for the NZ division of a large international company in 2016.

The solution was to eliminate the need for the warehouse manager and support staff from manually entering orders into their computer system coming from their customers. Our solution was quoted at $8,000 plus some ongoing monthly fees. Two years later after trialling all sorts of solutions themselves, they have come back to us to restart talks.

Although we sometimes detest Australians (of which I am one), when doing business with them, if they can see a logical ROI (Return on Investment) they just go for it. Simplistically, that is why their productivity is 20% better than ours currently. It’s a different management mind-set!

As managers of businesses, we need to be more like the Australians and Americans, and just spend the money when it makes sense, rather than stuffing around, trying to come up with all sorts of ‘make-shift’ solutions to avoid spending money.

Kiwis are great innovators, which is fantastic when we are selling the solution. But we are so bad at adopting software solutions ourselves, be they Kiwi or overseas solutions.

Join me as I continue to discuss Kiwi management in my next blog.

Look out for my next article ‘Should New Zealand business spend more on R&D and Innovation?’

After I have completed this series of blogs, you will be able to Download the full Whitepaper containing full information and analysis of the Productivity Crisis in New Zealand for FREE on our website.

About Me
I have been the General Manager at EDIStech since April 2015. I have gained extensive leadership and strategic planning experience, having worked in general management, regional sales and operations management and senior finance positions.

My career has covered positions in retail, manufacturing, importing as well as in the service industries – Public Relations and now IT. I hold a Bachelor of Business Degree from Deakin University in Australia as well as MBA modules in Marketing and Strategic Planning.

I invite you to read my coming blogs in this series about the connection between technology and productivity in the EDIStech blog.