Rocket Lab’s journey is undoubtedly one of New Zealand’s greatest entrepreneurial stories. Did you know that after America, Russia and Japan, New Zealand was the fourth largest player in space launches in the world last year? To achieve this Rocket Lab have amassed a team of over 1700 people and over 2500 suppliers here.
Rocket launches are exciting and make a great media story — but what has had little airtime are the 2500 small to medium businesses across New Zealand’s manufacturing supply chain that help make it happen.
In New Zealand we have diverse and deep advanced manufacturing capability for components, electronics and fabrication. Rocket Lab know this, so do other world leading hi-tech exporters like Fisher & Paykel Healthcare, Buckleys Systems, Hamilton Jet, Shotover Systems and Taska Prosthetics.
We need our government to know how important this capability is too.
We have a productivity problem — we’re ranked 29th out of 38 OECD countries for GDP per labour hour. Our approach to productivity is fragmented: we have various ministries, sector focused ITPs, strategies, departments and institutions coming up with their own plans and working groups to solve their parts of the puzzle, but from my firsthand experience no one is joining them up.
Solving productivity is not rocket science — we need to produce high value stuff, as efficiently as possible, and sell it at maximum margin.
Our education system tries to funnel everyone into becoming a "creator" or a "manager". We pursue the pointy end of research and technology, and then we sell that IP to the highest bidder overseas — leaving the value creation to overseas investors and companies with deeper pockets, then we import those products back and pay 100x the price we sold the IP or raw material for in the first place (think logs, milk powder, aluminium, carcasses and generally our science discoveries across all sectors ... . .).
This also means that we aren’t creating enough Rocket Labs, instead all those graduates who wanted to change the world can’t find jobs in their fields. So, 25% of them join the brain drain of graduates that move overseas.
A quick look over the top 10 OECD countries by GDP per capita reveals that those who aren’t tax and gambling havens, have economies driven by exports of advanced manufactured goods — pharmaceuticals, scientific and medical devices and instruments, machinery and high value food products. Switzerland, Ireland, Germany and Sweden, and the growing renaissance of manufacturing in Australia and America, realise technology and value creation doesn’t start and finish at design — they’re delivered on by commercialising through to production.
That production is delivered by trailblazing companies like Rocket Lab and their ecosystem of SME manufacturers hiring people — electronics and mechanical engineers, fitters, turners, fabricators, technicians, robotics and machine programmers, process engineers and production workers. High value jobs in our communities which keep our manufacturing wheels turning.
Global powerhouses in manufacturing Switzerland and Germany have this worked out, with engineering at 18% and 26% respectively of their tertiary enrolments. New Zealand’s is 9% — with the mechanical engineering and electronics engineering subsets each at 2%, and manufacturing engineering only 0.11%.
Advanced manufacturing has a massive role to play in improving productivity. As we shift to more automation and digitalisation we’re able to produce more with what we have. Which gives companies like ours the opportunity to lift wages and up skill our people — matching our capabilities to the rapidly growing cohort of hi-tech companies such as Rocket Lab.
But there’s an innovation gap that needs to be bridged to enable companies like ours to research and invest in process automation.
Our R&D agency Callaghan Innovation has been instrumental in helping companies like Rocket Lab fund research and development of novel IP, but they can’t fund any capital assets with residual commercial value — which is an oxymoron when the largest expense of any production innovation is capital equipment.
If we were a rocket, biotech, game or software, we could get funding for programmers and engineers who are literally developing the IP and prototypes. But if we want co-funding to buy a robot and trial an automation process to shift the rocket from prototype to production, no go. I hear the argument that shifting from IP to production is the role of investors — but for early-stage companies the only investors with deep enough pockets to do that are off-shore. For companies like ours, we’re a second-generation small family business leveraging our mortgage — so we’ll do what we always do, save up and wait until we can de-risk taking on more debt. We’ll wait along with the other 21,500 SME manufacturers in NZ — ultimately slowing down productivity.
The world has changed since the 90s, isn’t it time our policy settings did too? We need our education system to nurture the Peter Beck’s inventing high value niche products. We also need to be nurturing the makers that the Peter’s need to build the rockets.
And we need a government that’s clever enough to put policy in place that supports companies shifting from identifying high value innovation, to making it. It’s not rocket science.
- Sarah Ramsay is chief executive of United Machinists.
