Punching above our weight – the Americas Cup

Well we have done it again – pulled off a famous victory in the Americas Cup against everything that Larry Ellison and the rest of the world could throw at us. Us being small, insignificant, New Zealand. And it was not just a narrow victory. The margin was large in terms of wins v losses and New Zealand clearly had the best and fastest boat, the best crew and the best skipper. And as Grant Dalton keeps reminding us it was all done on the smell of an oily rag.

The victory tells us something about New Zealander’s in particular settings. What this success tells us again is that New Zealanders (particularly in some settings) are not only very innovative, but are prepared to take risks, and are particularly adept at turning innovation into products or devices that work – that perform at or above expectations. It was that innovation and performance attribute that helped keep Team New Zealand ahead of Oracle. To some extent, this “knack” is a relic of our colonial past – The No 8 fencing wire story and so on. But it is, even more, a function of our ability to find solutions when relying on our own resources rather than big company support.

And size does seem to be important for us. New Zealand enterprise seems to function best in smaller sized enterprise units. A good rule of thumb seems to be sizing the organisation so that the boss (chief executive or whatever) knows every staff member by name and values their potential contributions. This can cover quite large organisations (by New Zealand standards anyway). Small can encompasses 10s or even 100s of staff – the America’s Cup New Zealand Team was quite large, but of course, the only part that was visible was the team out on the water. However, overseas even moderately sized overseas organisations can consist of staff numbers running to the 100,000s or more.

In the New Zealand context, once the organisation is too large for that personal element to be practicable, there seems to be a significant impact on performance. There is a huge reluctance to lose the personal touch. Large overseas organisations, on the other hand, are well versed in applying the kinds of structures and approaches that make the best use of a large staff resource. It is thus no accident that on a proportionate basis New Zealand has the largest number of small to medium-sized enterprises (SMEs) in the world because for us SMEs seems to work best.

New Zealand does, of course, have large companies, some of which are household names and have been very successful. Many of these companies have come from small beginnings. But when we do grow large companies, the wheels tend to “fall off” more often than they should. The fate of large financial companies have been well documented as have the quite serious miss-steps at times by companies like Fonterra. The construction sector has also had more than its share of problems.

There are some companies that seem to break the rule and my favourite example is Xero – in terms of people this is now a large company on world terms, and it continues to pick up market share (but no profits yet). I think a large part of the explanation is that inside the company there are self- managing groups, so the smallness factor is retained despite the large overall size.

Another great large company New Zealand success story is Air New Zealand and there are several others in the primary sector.

Should we perhaps make more of an effort to convert the small successes into larger (still successful) companies? On the face of it, the answer is yes. But I am not so sure – the small and successful format seems to be working well for the bulk of our enterprise so maybe we should keep and encourage it rather than try to go in a different direction. Also, larger but successful companies seen to be a particular target for overseas takeovers.

The power of the small size approach has been demonstrated particularly in the IT sector where there many areas where we lead the world and/or are advisers to some large and wealthy companies. Many of these people involved are either “lone wolves” or work in small groups. Maybe the right path for us, at least for the time being, is to encourage that kind of small scale entrepreneurship rather than think in terms of larger organisations.

I think the situation will eventually change as the character of the population changes, including the results of normal inter-generational change and the impact of immigration. However, that is no reason not to continue with what works best at present while keeping an alert eye open for changes that indicate that our approach may be changing nor may need to change to reflect changes in market conditions.

By Bas Walker

This is another of Bas Walker’s posts on GrownUps.  Please look out for his articles, containing his Beachside Ponderings.