People or tech? NZ’s productivity dilemma

Published on the 09/08/2023 | Written by Heather Wright

People or tech? NZ’s productivity dilemma

New survey highlights lack of tech ambition…

New Zealand’s businesses are looking to adding to and upskilling their teams, rather than technology, to bolster productivity in a move telco 2degrees has dubbed ‘concerning’.

New Zealand has long had poor productivity figures. The latest productivity report from the Productivity Commission shows Kiwis work more hours but produce just 68 percent of the average OECD country.

“Be curious and brave.”

The Productivity Commission report notes how critical innovation and technological change are for productivity growth. A new report from 2degrees, however, offers little cause for celebration on that front, particularly among the small to medium businesses which drive much of the Kiwi economy.

The Shaping Business Study, which surveyed 700 local businesses, shows an increased focus on upskilling existing staff, rather than investment in technology to improve overall productivity. Business leaders who prioritised productivity cited motivating staff and employing more highly skilled people as the two top ways to achieve higher levels of productivity in their business – despite ongoing issues with skills shortages.

Andrew Fairgray, 2degree’s chief business officer, says the results are ‘concerning’, and also highlight an uncertainty on the part of many small and medium-sized businesses as to how to harness technology most effectively.

We saw during Covid with our partner, the Chamber of Commerce, how challenging it was for many businesses to get access to educational material on what tools they could be using for productivity. In many ways the pandemic taught us all that you can work remotely, but it didn’t really address how could you use some of these tools in a better way,” Fairgray told iStart

“It’s a theme that has been running through the survey for the last four years – that overall, businesses in New Zealand holistically find it challenging to find the time to educate themselves on what tools they should be using.”

Not having time was the key barrier to upskilling in the digital space, followed by not having the digital skills required and not knowing where to look.

“We need to address those challenges because we need to support all businesses in New Zealand to be more productive because we can’t simply tax ourselves to wealth,” Fairgray says.

“If we can uplift productivity, that will flow on to wages and flow through society as a whole and everyone will benefit.”

He notes that the cost of compliance and the time it takes to comply with requirements were also key concerns for those surveyed – and concerns that could, potentially, be addressed by technology.

Indeed, the report does hint at the role technology can play in improving productivity. Seventy-six percent of businesses who described themselves as thriving (an area dominated by larger New Zealand businesses, rather than the smaller businesses who were significantly more likely to be merely ‘surviving’ ) said digital technology improved their productivity. For 64 percent of those deemed to be ‘reviving’, digital technology was a productivity booster. But just 50 percent of those who described themselves as ‘surviving’ felt technology improved their productivity.

But just 31 percent overall planned to invest more in IT this year, with 27 percent planning increased investment in digital upskilling and 20 percent planning to pump more funds into data and insights. Adding staff, however, was an area 43 percent said they planned to increase investment in, with training, learning and development an investment focus for 42 percent.

When it comes to the digital tools being harnessed, social media remained the front runner, at 56 percent, up two percent on last year. Software as a service, such as accounting software, took a drop from 52 percent down to 48 percent, as did cloud computing and storage, dropping seven percentage points to 41 percent, and remote working tools, also down seven percentage points to 30 percent. Also on the downward slide: Business insights and analytics, dropping from 27 percent to 23 percent.

Growing segments included online advertising, up from 39 percent to 42 percent, sales tools, such as e-commerce offerings, up three percentage points to 28 percent; and customer engagement tools up from 22 percent to 25 percent.

Perhaps even more concerning was the decline in security infrastructure use. It dropped from 23 percent to 21 percent, highlighting an overall trend which sees significantly less businesses concerned about security this year.

The results for the tools businesses are actually using fly in the face of the tools tyey say their businesses will need in the next one to two years, with 19 percent saying new technologies such as the internet of things will be needed, and 18 percent citing business insights and analytics – up from 11 percent a year ago. Construction (23 percent), professional, scientific and tech services (28 percent) and education and training were significantly more likely to think they will need business insights and analytics.

Also making big moves was website development and management, up from 13 percent to 17 percent.

Remote working tools continues to decline, reflecting the current external environment and driven across all business sizes.

Larger businesses were significantly more likely to claim to need new technologies, at 30 percent, while one quarter of businesses say they don’t need any of the digital tools.

The more tools used the better the company appeared to be doing too: Those businesses who are ‘thriving’ use on average 4.4 digital tools. Those who are just surviving are using 3.7 tools, while those ‘reviving’ are on 4.1. The one exception is companies just starting out, who used the most tools on average, at 4.7.

Fairgray says 2degrees is ‘looking to transform into a software business that enables applications for businesses to improve their overall productivity, leveraging our assets’.

Next week the company, in conjunction with the Chamber of Commerce, will launch a 10-point questionnaire to help businesses ascertain where they are on the digital journey and what they can do to accelerate the process.

It is, Fairgray says, a small piece in the equation to ‘crack’ the productivity dilemma for New Zealand.

But he admits 2degrees can’t convince companies they need to spend money on technology to get a productivity boost.

“It’s up the them to do their business case looking at whether it creates value for their business. I believe it will create value, but ultimately that’s for them to choose.”

Convincing businesses of the longer term return of technology over a quicker value creation from adding staff or upskilling remains a challenge, he notes.

“In a simplistic way, if you invest in a productivity tool and leverage the benefit of software, that tool can be used across multiple people in your organisation as you scale and grow. If you invest in one person and their productivity that is harder to scale than software, as an example.” 

He says companies looking to more effectively harness technology for productivity should, first and foremost, ‘be curious and brave’. 

“One of the things we want and should celebrate is that we have great business leaders who are great at what they do, but may not necessarily know what the best tech solution is. So how can you find partners who can support you? NZ has a lot of IT partners or telco partners who can help you so don’t be afraid to ask where to start.  

“And you don’t have to start addressing the problem as a big problem. Take snack-sized bites and look at the value you can generate for your business. 

“Look to consider the value creation that you can create for your business and that in itself will build momentum and ultimately flow through to NZ Inc.” 

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