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Maharey - Capitalising on Research

31 October 2006

Capitalising on Research – opening address

Comments to the opening of Capitalising on Research

Welcome to Capitalising on Research and particularly to today’s Research Organisation forum.

This is an important event. It is the first time leaders from our research organisations and businesses have met in the same room to focus on such a crucial issue - the role of R&D in creating more globally competitive firms and transforming our country's economy. I thank you all for your willingness to take part.

I invited you, the research managers and the commercialisation managers of your institutions, specifically because I wanted to have the people who actively build the research programmes and engage with commercial clients.

We could have filled the room many times over with people who have a deep interest in how we create value from our world-leading science. But I wanted to draw from your experiences and build on your knowledge – for example the four speakers who will talk to you later this morning about their experience of research/industry partnerships – Dr Dieter Adam (Director of STP Bio), Derek Fairweather (Chief Executive of Waikato Innovation Park), Dr Richard Furneaux (General Manager of IRL spin-off company Glycosyn), and Dr Peter Lee (CEO of Auckland University’s UniServices).

The government wants to help business prosper by strengthening the links between businesses and research organisations - Creating value and advantage for New Zealand companies on the world stage.

Business New Zealand, our partners in this event, share this vision.

New Zealand faces some unique challenges. While Kiwi businesses have a strong history of innovation, our private sector investment in R&D remains low in comparison to other OECD countries. The reality is that many of our firms are small and don't have the capacity to invest in R&D.

Our challenge is to make research and innovation a practical option for all businesses. We need to think about how we provide an innovation system around smaller firms, to lift private investment and support a culture of R&D.

OECD data shows a strong correlation between economic performance and R&D. Research also shows that businesses that work with other organisations - including research institutes, government, and universities - increase their chances of successful innovation while reducing costs.

When I think about how we respond to these challenges I ask: what sort of company are we trying to build? It’s companies like this one!

The story of this company, believe it or not, starts with a horse on a Waikato farm and a solution to a problem – the animal’s favourite scratching post was the founder’s car.

This company is wholly New Zealand owned but is well connected internationally.

Its sales in 2004 were over $100m. It currently employs more than 500 people in New Zealand.

More than 70% of its revenue comes from exports and it sells its products in more than 130 countries.

The growth of the business has come from a commitment to R&D and a focus on innovation to deliver globally competitive products and services that meet market demand.

To get where it is today the company has gone from R&D that, according to its CEO, “was really knife and fork on the kitchen table… every night and weekends” to now employing 70 people in R&D and investing more than $5m pa.

This was spurred by a Government grant that, according again to the CEO, “made sure you were doing it properly, not doing it on a shoestring and that really made quite a difference”

The company has built on world-leading research from a New Zealand research organisation, research which has added hundreds of millions to the New Zealand economy, through this and other companies.

The company now has collaborations with two CRIs and a university as it diversifies its products, building on the experience it has gained operating its core business.

The company has most recently bought into a New Zealand start-up company working in a brand new area of technology – giving the start-up company access to the marketing power of the parent company and expanding the parent company’s innovation potential.

The company is, of course, the Gallagher Group.

What started as a simple idea in the 1930s to dissuade the horse from scratching itself on the car, Bill Gallagher has seen the company he founded grow into a diversified company. It’s base remains animal management systems such as electric fences, but it has now branching out into security management – in 2004 a Gallagher Group company designed, manufactured and installed an electric security fence around Buckingham Palace.

And the company is now looking beyond security fencing to developing the latest in biometric identification technology that could be used at security-conscious airports around the world.

Earlier this year Gallaghers bought a stake in start-up company Biometrics Technologies Ltd in a move designed to ensure it continues to be at the forefront of technology in the 21st century and in a world where identity verification has become a priority.

The Gallagher Group is a great example of how one man’s ingenuity was supported by leading New Zealand science. The result was the development of a company that now has top-class research of its own and is a world leader in its field.

Having got as far as its own technology would take it. Gallaghers adopted electric fencing technology developed by Doug Phillips, one of New Zealand’s leading agricultural scientists at Ruakura Research Station (the fore-runner of AgResearch) and took it to the world.

In partnership with IRL, Hort Research and Waikato University the Gallagher’s R&D staff are continuing to create value from market-led innovations. We’ll hear more about how this works from their Marketing Manager, Mark Harris when he speaks to us tomorrow.

We need more companies like Gallaghers, companies that work with our world- class research institutes to add value to their products.

We have many other success stories that have resulted from strong connections between research and industry. We’ll hear about some of them today in the session on “Research working with Industry”. Many more will be attending tomorrow to relate their stories – companies such as Tait Electronics, New Zealand Pharmaceuticals, Ancare and Fitzroy Engineering. Companies I am sure that a number of the people in this room have worked with.

We know from these examples, and the others I have not had time to mention, that partnership between research and industry can transform a company.

If, however, these partnerships are to transform the New Zealand economy we need many more of them.

Research by Statistics New Zealand and other research carried out with Business New Zealand especially for this conference shows that too few businesses turn to the research sector for ideas when they innovate.

Our research also shows that companies see many barriers in working with New Zealand’s research community. Some of these barriers are matters of perception, but others are real.

Small companies in particular have trouble finding resources, in terms of time, expertise and financing, to commit to research.

But, remember, being small didn’t stop Bill Gallagher from seeking out research to grow and diversify his company in those early days.

And that’s why we’re here today – to explore how we can help more people to follow the lead of those like Bill Gallagher, to take the plunge and tap into our excellent science system and become innovators.

We also need to address the challenge of boosting the amount of money for research by increasing industry investment.

Creating value is not all about just doing what industry needs now. If we are to have high quality research to meet industry needs we need to maintain capacity in areas that New Zealand needs now and in the future.

Of course we need to be realistic here. Industry has a short-term focus while research is a long-term business. We need to keep a balance between “blue skies” research that will open up exciting new possibilities and opportunities for the future and research to meet the immediate concerns of business. But we also need to raise industry’s sights and open the eyes of business to the long-term possibilities of research.

These are big challenges and we are not going to crack them in two days. Tomorrow we will have the chance to tell industry how the research sector can work with them and, together with those business participants, develop a shared agenda for how we can create value and advantage from government and industry financed research.

You can see that industry takes this opportunity seriously because of the number of people who have accepted the invitation to be here tomorrow to hear what you have to say. (And that is not to mention the many others who would have liked to be here but, for various reasons, could not attend.

I know that all of you present in this room take the challenges of creating value from research seriously.

I can assure you that I take it seriously too and the number of my Cabinet colleagues who are attending is evidence that the Government as a whole takes it seriously.

We have a number of advantages in New Zealand when it comes to research:
o Our CRIs span the key industry sectors and have a well-proven track record of research success.
o Our universities are world class and have a strong record of commercialisation with 13 spin out companies per year from 2001 to 2005 – which exceeds the United States in terms of spin out per dollar invested in university research
o We have a record of highly successful research institution/industry partnerships in our traditional industrial sectors as well as in new areas such as biotechnology.

But if we are to transform the New Zealand economy we need to work together even more effectively.

I am sure you will take advantage of this Summit to make that happen.


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