What do we need from the Labour government for innovation to thrive?

Cat Mules

Cat Mules

Government’s innovation approach won’t change overnight - at least not the way things are now, says Aware Group’s CEO.

Last year saw many incredible milestones for New Zealand’s technology industry. The TIN Report analysis shows New Zealand’s largest tech exporters breaking the $12B mark in total revenue, with $8B in export earnings‑‑building on repeated double-digit yearly sector growth. Research and development reached over $1B for the first time, 11% of total revenue from these leading companies.

Technology is critical to New Zealand’s success.  It is essential for helping companies to pivot, to produce more and produce better, to overcome inequalities, and grow our economy. But technological innovations and start-ups are reliant on funding. What can we learn from Brandon Hutcheson, CEO of Aware Group, about government as an innovator?

Suggestion: Provide an equal playing field, be honest and provide a path to success “on paper” instead of baseless proof of concepts.

Take a longer view of innovation. Emerging technology is one potential stream of innovation and amazingly this typically starts off as start-ups exploring and finding opportunity. The thing is corporates have large levels of “Incentive Funding” where they can invest into opportunities regardless to a degree of outcome, while start-ups usually have 1-2 opportunities to get a customer and are typically bootstrapping as they go. Governments approach favours the corporate self-investment model but from a start-up perspective there’s no point getting the tick of government support (and self-investing) if you have no customers or no income streams.

Suggestion: Reduce taking advantage of start-ups or organisations for the point of “Tech Tourism”.

It shouldn’t be a test. A core principle about talking about innovation about emerging technologies or concepts, is that it is a two-way street. Starting with a conversation about a concept or idea is the first step and low investment on both sides, and only then if there is an equal opportunity or equal benefit, there should be a path to success or a path for outcomes. Otherwise, all you’re doing is you’re just leading somebody on for a free dinner.

This benefit of this is you will get real answers and reduce the chance of someone peddling vapourware or the answers you want to hear. Yes, organisations are wanting to see what’s possible before they invest fully, but they must also join in the conversation about how applications do or should work while the vendor wants to feel secure that a single feature misalignment won’t destroy the chance of working together.

Suggestion: Spend the time and money on hiring a lobbyist and get the conversation started as soon as you can.

Too often, technology is seen as an add-on or disposable feature. Even after going through various funding rounds, taking the big idea overseas, and gaining hundreds of thousands or even millions of outside funding, there’s always somebody who goes ‘that’s not a priority at the moment’.  Innovation may be the cool buzz word that goes around, but it’s always the first on the chopping block and from a budget cut perspective.

People have a tendency to treat innovation like we treat our highways or motorways – we still only build one extra lane when we need another two or three. Granted, it’s challenging for government agencies. Their priorities change quite frequently so it is hard for middle management to innovate, or get projects across the line. As is innovation is always the first to get cut (PS. I don’t advise this). It’s fairer to the taxpayer and other investors to make innovation an investment.

Most innovations or emerging tech companies will provide proof of concepts at low cost as long as there is a commitment to purchase afterwards. It is essential for government agencies to provide this level of confidence back to the vendor. It becomes a win-win situation–thereby reducing the risk for the agency.

In our work with both private and public sector agencies around New Zealand we have to clearly know what is actually available, and what is possible.

I’m one who sees very little value in government incubator programmes, and more value in getting straight into trialling.  A lot of the opportunity from these programmes are tailored around focussing on providing the agency PR and marketing opportunities rather than a path to production.

Suggestion: Provide opportunity on a limited risk model, by maintaining an attitude of running proof of concepts with no pathway you are essentially promoting new companies to fail and that doesn’t support the economy to grow.

Is it time to rethink ROI and funding? From a cost perspective, there’s a lot of start-ups or medium sized corporates that will completely fund a proof of concept or remove all risk away from the agency. The one thing is government doesn’t do though is commit to a successful commercial outcome afterwards. So if I said to one government agency, for example, we want to try out this I will front the $100,000 to prove it out on one condition. This condition is that we all agree on the success criteria, and if it meets those criteria then you are obliged to pay for this whatever the contract term defined. Then it’s up to the agency to obviously go for this, whether it has legs or not, but it reduces all the risk at the start and provides a near guaranteed positive outcome.

The need for this approach is clear during Covid-19 to improve risk taking within agencies and to provide opportunities. Over July/August this year the biggest reduction of contracts was not from international nor the private sector but from NZ government agencies cancelling many projects in favour of moving money into infrastructure projects – we lost millions through proof of concept level projects all the way through to production releases.

Suggestion: Develop new frameworks around innovation application that make considerations for “non status-quo” projects that allow the chance of failure.

Change conservative culture and build in room for failure. The question is will the new Labour led government align with a strong future for New Zealand’s technological innovation? As yet Labour doesn’t have a clear technology policy, and even National’s was murky. It’s not usually about government agencies lacking the innovation capability, it’s more about conservatism from company CFOs and financial controllers. Meaning it’s very hard for any start-up or corporate to even get involved in the conversation with government to begin with.  This on top of budgets that are usually only signed off annually or over three month plans, leaves innovators with very little room to move or at a pace that matches technology maturity.

Take the country’s greatest innovation challenges of building innovation into tertiary projects. For years it was practically impossible to do med-high risk innovation projects and code as capital expenditure (CapEx) and was often confused as research rather than project. Emerging tech needs the opportunity to fail, otherwise you’re essentially bottlenecking creativity. Yes, with any new idea you should perform correct due diligence but experimentation with high risk and high reward should be still on the table.

Suggestion: Change the approval and operation model of status-quo roles to include additional leniency for more individualised decision making. This will attract additional high skill talent that is not solely focused monetary compensation.

Invest in people. Government agencies typically can’t pay private sector rates but something that government agencies can do is target individuals with significant experience, financially secure but provide them a greater sense of freedom to “make an impact”. This is a benefit government agency can take advantage of within hiring that private sector will always struggle to match (If correctly executed). This crossed with promotion of diversity of innovation meaning “Technologies”, “Applications” and “Providers” will result in developing an economy that improves everyone’s lives a lot better.

Secondly, referring to an earlier point. If NZ Government agencies don’t play there part in providing opportunities for NZ Start-ups to trial, collaborate, integrate and productionise – mostly generate a revenue source, the start-up and staff will simply move to a market that is more approachable and partnership friendly i.e. Singapore. Boosting our economy means investing in our people. This will lead eventually to additional export opportunities and boosting of the tech sector.

Suggestion: Stop implementing policies because you had one bad experience. It stumps growth, prevents innovation and silos peoples thinking.

Provide greater independent signoff within organisations. Being forced to go up four levels to sign off on a $20k proof of concept provides a scenario where there are just too many cooks in the kitchen. For example, if you review the New Zealand Police new innovation policy that stated that no police officer, or any member of police, is allowed to engage with emerging technology or AI without sign off from several different departments. From their perspective this is to improve control, accountability and perform PR management – but from our perspective this kind of stance makes things difficult for innovation or progress to take place especially from individuals that are conservative by nature. Allowing people to take risks, to trial and fail will allow individuals to shine in their role, and bring diverse thinking into an organisation, this is critical to growing our economy but mostly improve our state of thinking in regards to technology adoption and empathy for people taking a risk.

Suggestion: Find alternative ways to assess the stability of a company that doesn’t simply involve the time of existence as a key metric to boost growth and progress.

Remove barriers of procurement. Government agencies with a six-month procurement cycle for a start-up will mean that the company is not going to survive long enough for the project to be completed. One of the requirements which I’ve always considered ridiculous is the amount of government agencies that require a vendor to provide three years of financials up front – it’s impossible and unrealistic given the pace of change of innovation. So you’ve got government agencies wanting to really push Innovation or emerging technologies, and emerging technologies springing up from start-ups around them. It’s like posting a job advert that says we want 15 years’ experience with the technology, it just doesn’t account for the market reality.

Innovation should always be a contributing factor

Don’t just consider what is, think what are the possibilities. Innovation needs to be high on the list of at least questioning the status quo. Government can be innovative – many agencies certainly already are. They drive change, they go into communities and try to understand what is needed. But application of innovation or being progressive doesn’t move rapidly in the state sector.

There are some absolutely fantastic agencies which are really, really fun to work with – and they are innovative. They move fast, and are willing to try things. The ones with the biggest budget – those are the ones that it’s takes a lot longer to get over line. In New Zealand we have the opportunity to grow up very, very fast through technology.

At Aware we operate across 14 countries with three offices globally, so we get a good sense of how other countries are adopting innovation and supporting technology and start-ups.  Singapore’s innovation support model wins in every case on this one. Singapore has a centralised policy that supports the use of Partnerships with government and start-ups actually genuinely provides opportunities for start-ups to test or trial procure technology, which is a big thing because if you can build up a small company eventually becomes a big company big companies employ more people, make a larger impact and contribute more towards New Zealand.

About the Co-Author: This advice to government on innovation from a New Zealand-led AI and data innovator spanning 14 countries. Brandon Hutcheson heads up Aware Group, working closely with the top 20 percent of New Zealand top-level government as well as multi-nationals globally.  Aware Group has always been proud to support the New Zealand start-up community and access towards growth.

Cat Mules

Cat Mules

Umbrellar's Digital Journalist, coming from a background in tech reporting and research. Cat's inspired by the epic potential of tech and helping kiwi innovators share their success stories.

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