Doing nothing a risk for NZ firms

Survey shows biggest risk for Kiwi businesses is not adapting to change.

Many New Zealand firms could become obsolete if apathy to change is any indication, a new business survey shows. This attitude – highlighted in the 2018 Suncorp New Zealand Business Success Index released this week – provides a fascinating insight into businesses approach to disruption, says Suncorp’s CEO Paul Smeaton.

“In a climate of disruption there is a strong possibility for many New Zealand businesses that doing nothing could be their greatest risk to future success.”

He says the index – which shows only 46 per cent of Kiwi firms feel confident in their ability to make good risk decisions – represents a broader conversation Suncorp wants to have about what success looks like for businesses, how they feel about risk and how they see their businesses evolving in the future.

Although the index showed there is an overall increase in business confidence - 78 per cent say they are confident about handling future disruption - around 57 per cent say they have no firm plans to change products and services to meet changes over the next five years.

This, says Smeaton, shows there is a need for a conversation on whether businesses are focusing on the right things.

He asks whether New Zealand businesses are prepared for the impact of disruption given that just 2.5 per cent of companies surveyed (down from 5.4 per cent a year ago) highlight technological advances as a key risk.

“We know you’ve got to take risks when growing a successful business,” he says. “But today’s environment is changing rapidly and businesses need to be thinking about how they will adapt to stay relevant.”

Smeaton says while the index shows there is a growing understanding that taking calculated risk is essential to business success, there is a corresponding reluctance to actually take those risks.

Business consultant Cameron Bagrie, former ANZ chief economist and now head of his own consultancy Bagrie Economics, says the attitude of some of these businesses is placing their survival in jeopardy and putting them at risk of becoming “zombie firms”.

“The fourth industrial revolution is increasing the pace of change,” he says. “Change is the new normal and the risk is some companies won’t survive; they have got to innovate otherwise they risk being cut off at the knees.”

Bagrie says company boards need an infusion of younger tech- savvy people to bring “a diversity of thought” to boardrooms.

“Boardroom discussions need to change,” he says. “Traditionally a board made sure a company had something unique to sell or produce and had a good culture. If you had those two things you were in good shape, but now there is a third factor: Businesses have to be innovative.

“There is a lot of learning possible by having people of younger ages on boards. We’ve seen both our major political parties - Labour and National – adopt ‘out with the old’ approaches and I think it is imperative the same thing happens on company boards.”

Bagrie says the fourth industrial revolution - a fusion of the physical, digital and biological worlds driving disruptive developments like intelligent robots, selfdriving cars and mobile supercomputing - is both exciting and challenging.

Smeaton says these changes and challenges are exactly what this year’s research has underscored.

“This year we wanted to take a deeper look at disruption, because although it is often said we are living in the age of disruption, I like to think of it as the age of risk and reward,” he says. ”At Suncorp we want to help grow business confidence to make good risk decisions.”

Overall the 2018 index was largely unchanged (down two points from 66 in 2017 to 64) with staff, leadership and management processes again seen as the most important success factors.

The research was conducted by UMR Research and shows most businesses remain positive about their own situation and the general business environment in New Zealand.

Other key points include:

• New Zealand businesses take a careful approach to growth and do not necessarily see it as the ultimate – or only – business goal.

• Although most firms claim to have a business plan, 32 per cent say they don’t have one or aren’t sure.

• Small businesses are less likely to take on risk or see disruption impacting on them. # The 2018 index surveyed 600 companies. For more information go to www. suncorp.co.nz