Rod Oram's presentation agenda included discussing the world, revolution, New Zealand opportunities and paradoxes facing companies. The key topics were around game-changing technologies, sustainable development, and business innovation strategies around issues like finite resources, positive footprints, and biomimicry. Oram argued that businesses need to radically transform operations through sustainability in order to meet human needs at global scale in complex, risky conditions.

1. Rod Oram’s presentation to
Intergen’s Dynamics Day 2012 Agenda
Auckland, October 31st, 2012
•! World
Game-changers •! Revolution
•! New Zealand
•! Opportunity
•! Paradox
Data-driven Business •! Companies
Kiwiki on Facebook / Twitter @RodOramNZ
oram@clear.net.nz / +64 21 444 839
Then…. …Now February 2012 - Brave words…feeble actions
•! 2007-09 •! 2009-20??
•! Sudden liquidity crisis •! Long-running structural crisis
•! Big, quick fix •! Big, slow fix
•! Pump in lots of money •! Restructure economies
•! Lots of political will •! Lack of political will
•! Lots of public support •! Lack of public support
•! Worked fast •! Will work slowly
•! Markets re-assured •! Markets fearful
•! Moved on to current phase •! Very, very stuck
1!

2. Saving Europe is simple September 2012 – Hope at last?
•! All it would take is: •! European Stability Mechanism – German Supreme Court approves
•! French reform •! European Central Bank – begins unlimited purchase of member gov’t bonds
•! German extravagance •! Pan-European Banking Regulation – EU Commission blueprint
•! Italian maturity
•! …as The Economist opined May 12
•! Main mechanisms required:
•! EU-wide bank regulation and deposit guarantees
•! EU bonds (so countries share the risks)
•! EU-wide investment in rapid enhancement of economies
•! National and collective commitment to change
•! Without these: the eurozone will strangle economies
LIBOR – dark heart of finance LIBOR –biggest scandal yet
•! London Inter-Bank Offered Rate The pre-crisis banking model
“was already looking tawdry; now, in the wake of
•! 10 currencies; 15 maturities
the LIBOR scandal, it looks even more tattered.
•! Global benchmark for US$800 trillion of
financial products (NZ$1,000,000 billion)
“The harsh lesson is that banks cannot be
trusted to perform any public function if it
•! Barclays fined £290m (NZ$570m) for conflicts with their own interests.
filing false reports to LIBOR-setting panel
•! Acted to hide its financial weakness
“Barclays staff rigged an interest rate used to
•! And favour its derivatives positions price the financial products they sold to
•! 20+ other major banks under investigation customers with a view to ensuring their own
•! Criminal and political inquiries underway in UK, US derivative bets paid off.
•! Customers, e.g. US cities and other borrowers, preparing
massive damage suits “It is hard to think of anything more corrosive of
•! Scandal greatly heightens probability US & UK banks will trust in finance – and indeed in capitalism itself.”
be split into separate commercial & investment institutions Financial Times, July 3, 2012, Editorial
2!

3. World Economic Forum: WEF:
Global risks Risk map
• To ensure human needs are met, we need radical
new technologies
• We need to develop and deploy them on a scale
and at a speed like never before
• …with much greater complexity and risk
• …with a need for public understanding and support
• …ways to respond far better when things go wrong
• This is a fundamental shift in
risk and risk management
WEF:
Risk relationships WEF: seeds of dystopia
• …e.g. is The Occupy Movement an anomaly?
• Or a harbinger of social unrest?
• ...the latter, it concluded
3

4. People, planet Finite resources
•! Vision 2050
•! A very challenging roadmap
for corporate development by
World Business Council for
Sustainable Development
•! …NZ version just released
w Innovation
•! q
How Green Will Save Us: September, 2009 edition:
There is no alternative to sustainable development.
Our research shows that sustainability is a mother lode of organisational and
technological innovations that yield both bottom-line and top-line returns…
…In fact, because those are the goals of corporate innovation, we find that
smart companies now treat sustainability as innovation’s new frontier.
4!

5. Agenda Business action
• World Business Council for Sustainable Development…member commitments
• World • http://www.wbcsd.org/rio-20/membercommitments.aspx
• Revolution
• New Zealand
• Opportunity
• Paradox
• Companies
Business action Voluntary action
• Business Action for • Business commitments
Sustainable to UN Global Compact:
Development • http://
• http:// www.uncsd2012.org/
basd2012.org/ voluntarycommitments.
html
5

6. Natural Capital Cradle to Cradle
•! Many global corporates committed to it at the UN’s 2012 sustainability summit in Rio •! One product gives rise to the next
•! www.naturalcapitalproject.org •! …waste, by-products and recycling of one, become materials for the next
•! …emulating nature’s cycles
McDonough Re-conceiving…footprints
& Braungart •! Positive footprints
•! …the insight of Michael Braungart
•! Founders of Cradle to •! www.braungart.com
Cradle systems
•! If we change our technology so our
resource use benefits the ecosystem
•! Then the more we consume…
…the richer the environment
•! Waste = food
•! Four positive footprints:
•! Fabric of Airbus aircraft seats becomes compost for growing food
•! Formway s bio-plastic chair
•! Carbon positive farming
•! Ants vs. Humans
•! Positive role in ecosystem vs.negative…how do we make it positive?
6!

7. Ray Anderson Re-conceiving…biomimicry
• Founded Interface in 1973 • Imitating nature
• …15 years later world’s largest maker of carpet tiles • …the technology discipline
pioneered by Janine Benyus
• His “mid-course correction” came in 1994, when he was 60
• 2020 goal: take nothing from the earth that could not be • www.biomimicry.net
rapidly replenished, produce no greenhouse-gas emissions, and no waste
• Fans, propellers like nautilus shells
• By 2007 Interface was about halfway up “Mount Sustainability” • Wire ropes as strong as spider webs…
• Greenhouse-gas emissions by absolute tonnage were down 92% • …made in cold biochemical processes
• Water usage down 75%
• 74,000 tonnes of used carpet recovered from landfills
• Savings of $400m each year from no scrap and no off-quality tiles more than paid
for the R&D and process changes
• As much as 25% of the company's new material from “post-consumer recycling”
• Sales had risen by two-thirds and profits had doubled
• Ray Anderson’s Economist obituary www.economist.com/node/21528583
Revolution Leader of the revolution
• Radical new technologies are • The Centre for Bits and Atoms at the Massachusetts Institute of Technology
inverting old dynamics…e.g. • Led by Prof. Neil Gershenfeld, www.cba.mit.edu
• Additive manufacturing
overturns mass production
• New materials overturn • The first Fab Lab…machines making machines
commodity constraints • Science & technology road map to micron-Lego assembly…
• Iterative design overturns …dis-assembly of products
linear product development
7

8. The next 10 years
…when information meets atoms • Finance and capital conditions
• Finance more expensive and less available
• Prof Neil Gershenfeld, MIT…TED talk http://bit.ly/MI7Eur • Market and regulatory constraints
• Less benign economic conditions
• Higher economic volatility; Increased risk
• Low carbon-economy
• New disciplines & technology
• Far greater resource efficiency
• Technology change accelerating
• Public losing trust in business
• Scepticism over Anglo-Saxon model
• More government intervention
“The Shape of Business”
Confederation of
• Social and demographic change British Industry
• New responses to retirement, pensions
• New business & government solutions www.cbi.org.uk
• E.g. more flexible working practices
Agenda Most of our export markets are holding up
• World
• Revolution
• New Zealand
• Opportunity
• Paradox
• Companies
8

9. Slowth Our economy is constrained
• We’re still recovering slowly… • Despite slow growth, the economy is
…helped by rebuild of Christchurch constrained by e.g.
• Skills and capital shortages
• Growth in year to June 2012 • Weak business investment
was 2.0%... • Limited government investment
..could peak at 3% next year
…dominated by Christchurch
• As a result “potential GDP”
(the rate at which the economy can
• But will then sink back to its grow without causing inflation)
long-run slow growth average is low
of around 2%
• Solution: business strategies and
• Why can’t we grow faster, longer by investment that build capacity, value,
earning a bigger living in the wages…
world economy?
• …to grow the economy and living
standards faster
Businesses Consumption…and income
• Recession and slow growth have been • Households have brought their consumption back into line with their income
very tough on businesses… • …and have resumed saving
• …and continue to be so
• Many are hard-pressed
• Business investment remains
very low
• But big behaviour changes…
• …e.g. retaining more staff than they did
in previous recessions because of skill
shortages in the economy
• Companies need a lot of help to raise
their skills, improve their operations,
increase their resilience
9

10. Household savings We’re growing our exports slowly
•! Households have done a good job chipping away at debt…
•! Government programmes and investments are not shifting the needle…
•! …their debt has fallen since the recession
•! Treasury forecasts they will still do that and increase spending.. •! …e.g. composition, volume and rate of growth of exports are unchanged
•! …but that will only happen if wages rise reasonably strongly
Current account What we owe the world
•! …so our current account deficit deteriorates further •! …likewise our net international liabilities keep getting bigger….
•! …2011 an aberration driven by inflow of earthquake reinsurance payouts
•! We are one of the most indebted of developed countries
•! We need to earn a bigger living in the world economy…
•! …Treasury forecasts no change in our performance
10!

11. NZ’s exports remain far too small a
…we must double growth contributor to the economy….
•! We need to more than double our growth rate to at least 5% a year …and have stagnated at 30% of GDP
•! …but our non-inflationary growth rate has dropped to 1.9%
•! …and the growth trend will remain weak out to 2014, Treasury forecasts …government goal of 40% by 2025
The real Value creation
growth
•! World Economic Forum – Global Competitiveness Report
issues
•! Competitive advantage measured on a scale of:
•! Our strengths & •! 1 = low cost of natural resources to 7 = unique products & processes
weaknesses…
•! …according to the
World Economic New Zealand scores 3.7
Forum’s global
competitiveness
rankings Ranks 48th
11!

12. Value capture Value creation & capture
• Value chain measured on a scale of:
• 1 = role in chain mainly confined to one step, eg resource extraction • 1 Fonterra plant in NZ makes infant formula for Pfizer
• …to 7 = involved all the way down the chain, capturing extra value
• 8% Pfizer’s Chinese market share for infant formula
New Zealand scores 3.7
• US$12bn Nestlé paid for Pfizer’s infant formula brands
Ranks 59th
= 3 x Fonterra’s net asset value
Government Strategy Mk II: Economic Growth Agenda
Cri,cal
Sectors
Cross
Cu'ng
Ac,ons
Poten,al
Sector
Contribu,ons
2025
Some simple maths
Stronger
Interna,onal
Connec,ons
• We need to double the size of the economy in 15 years in real terms
Grow
&
diversify
exports
-­‐
NZ
Inc
regional
&
country
strategies
2025
exports
Goals
of
knowledge
intensive
$9b
-­‐
China
and
Australia
• To maintain its role, the primary sector needs to double too
manufacturing
&
services
-­‐
NZ
major
event
fund
$29b
• Government wants primary sector to treble…grow, say, 12%-15% a year
-­‐
Air
ConnecKvity
-­‐
Outbound
Direct
Investment
Income
Export
more
high
margin
$20b
Parity
• The primary sector can:
food
&
beverages
Be4er
Business
Innova,on
-­‐
Investment
strategies
aligned
across
agencies
$58b
With
• Grow volume a bit…but real physical constraints in New Zealand
-­‐
refocused
to
address
be=er
innovaKon
needs
of
Australia
• Grow productivity a bit…but historic rate of NZ agricultural productivity
high
value
sectors
A=ract
more
high
value
increases about 2% a year
$8b
tourists
Smarter
Capital
$14b
• Benefit a bit from higher world prices…but commodity prices moderated
-­‐
Improved
flow
of
quality
foreign
investment
-­‐
Stronger
firm
management
capability
Increase
overseas competition and politics
exports
• Earn a bit of a premium for NZ quality and brand…but it would need to break
Create
Wealth
from
Compe,,ve
Ci,es
$??b
To
40%
of
free from retailers’ stranglehold
$4b
-­‐ Economic
development
strategy
and
spaKal
plan
GDP
minerals
&
petroleum
for
Auckland
and
other
ciKes
too
• Stave off overseas competition a bit…but the competition gets ever better on
cost, volume and quality
Economy
and
the
Environment
-­‐
Advisory
group
to
recommend
ways
to
develop
• So, the primary sector’s current commodity model fails on simple maths
and
leverage
New
Zealand’s
clean
green
brand
• Government’s primary sector strategy: incremental growth of current model
12

13. Government Strategy Mk III: Government
Strategy Mk III
Business Growth Agenda
•! The Economic Growth Agenda….is morphing into… •! “Business Growth Agenda”
•! The Business Growth Agenda… •! 6 ingredients of business
•! …led by Steven Joyce growth
•! Minister of most things economic…except the money
13!

14. Government Strategy Mk III: Agenda
Business Growth Agenda
•! World
•! Some issues arising:
•! Revolution
•! Is Joyce too dominant?
•! Is Joyce strategic enough?
•! New Zealand
•! How strategic will the shift be? •! Opportunity
•! How realistic will the targets be?
•! How business-centric will it be? •! Paradox
•! …there’s much more to the economy than just business •! Companies
•! How committed is the government?
•! How committed is business?
NZ 2050
•! …by a group of young leaders…
•! …under the NZ Business
Council for Sustainable
Development…
•! …which morphed into the
•! Sustainable Business Council
•! Download at:
•! http://bit.ly/PxiG1B
•! NZ site coming soon at:
•! http://www.vision2050nz.co.nz
•! Vision 2050 Global report at:
•! !http://bit.ly/Ox0HsK
14!

15. Agenda Paradox
•! World
•! Revolution
•! New Zealand
•! Opportunity Abundance Scarcity
•! Paradox
•! Companies
15!

16. Re-invention Poverty
Scarcity Abundance Cows Scientists
How about creating global centres of excellence in:
Wealth a
-! Dairy nutrigenomics
-! •!Earthquake prediction, rescue & recovery
•a
-! 21st century city systems
-! Antarctic research
Lacto-pharmaceuticals
Milk powder
16!

17. Poverty
No.8 Game-changers
17!

18. Wealth
Game-changers No. 8
18!

19. LanzaTech…clean tech leader YikeBike: radical reinvention
•! Commercialisation agreement with: •! Grant Ryan’s radical re-think of the bike
•! Chinese Academy of Sciences •! All-electric; no pedals; 10kg; 20 km/h; 10 km range;
•! Baosteel; next pilot plant in China ABS brakes; regenerative braking; 45-minute recharge
•! Folds in 15 seconds; Guinness Book of Records
•! Makes biofuel from industrial waste gases
China produced
•! Turns greenhouse gas liability into profit 22m electric bikes
•! World pioneer of the science last year
•! Auckland-based; NZ Steel pilot plant
•! Big venture capital backing
•! US$100m of capital so far
•! NZ: Stephen Tindall
•! US: Vinod Khosla
•! Chinese and Malaysian investors too
Poverty Wealth
-&$.15(1>525.: -&$.15(1>525.:
Weak Strong Strong Weak
19!

20. Zespri Zespri
• Established brand • April 2009: Published its carbon life cycle analysis:
• Built marketing • Orchard operations make up 17% of total emissions for EU exports
• Innovated – gold • Packhouse & coolstore processes account for 11% of total emissions
• Innovated – orchards • Shipping accounts for 41% of total emissions
• Innovated – intellectual property • Repacking and retailer emissions amount to 9% of total emissions
• Clever, 12-month supply chain • Consumer consumption & disposal comprises 22% of total emissions
• 40% - 100% premium in EU
• 1/3 world supply… • Bottom line: resource efficiency builds a more profitable, resilient business
• …but captures 2/3 of value
• E.G. Kite-assisted ships save 22% of their fuel bills on average
• …and lots more science yet
From exporter to global leader…
…decommoditising a commodity
Our future Poverty
• NZ Land: 270,000 sq km
• Australia’s 28x NZ
Simplicity
• NZ Oceans: 5.8m sq km
• 5th largest in the world
• Australia’s 1.4x NZ’s
Complexity
• Huge responsibility:
• …to nurture
• …to use responsibly
• …to sustain us
• We need new values, systems, collaboration:
• …to be sustainable
• …to offer hope to the world
20

21. Accounting Management matters
•! Fra Luca Pacioli •! NZ government-funded study of
•! …Venetian monk, polymath, friend of the clever, large and medium NZ
creative, rich and famous manufacturers
•! …including Leonardo da Vinci •! Study by London School of
Economics and McKinsey…
•! Published in 1494 …sub-contracted to University of
Summa de arithmetica Technology Sydney
•! …which included the first full, public description of •! Comparisons with 16 countries
the secret double-entry book-keeping system
used by Venetian merchants
•! Basically, we’ve been double-entry book-keeping
(assets/ liabilities; credits/debits etc) ever since
•! Financial accounting…
•! …brilliant but limited, thus flawed
Raising laggards has huge economic impact
Best & worse skills
21!

22. Wealth New management disciplines
• Relationships: from transactions to partnerships
• …particularly highly strategic ones
• Innovation: from incremental to radical
To meet new needs…in new ways
Complexity
•
• Open innovation and other forms of collaboration
Simplicity • New opportunities for NZ companies to partner with global ones
• Sustainability: from fringe to mainstream
• Measuring and managing environmental flows through our businesses
• Push down the road to true sustainability
• Management: from tactical to strategic
• Need to collect, interpret and act on real-time data
• Everything we do today is a piece of our big picture
Integrated Reporting Agenda
• The next big initiative by corporates
and accounting bodies • World
• Seeking to make financial, • Revolution
environmental and social
measures… • New Zealand
• …much easier, • Opportunity
more accessible and
more useful to corporates,
investors and the public • Paradox
• Companies
• www.theiirc.org
22

23. Vanguard NZ companies Quadruple B businesses
•! An exciting new class of NZ companies is emerging: •! Building
•! Billion $
•! Hallmarks: •! Businesses from the
•! Inspired products & services offering unique value •! Beach
•! Originality born of NZ roots
•! Rod Drury…
•! Smart strategies for international markets •! …serial entrepreneur
•! Astute management skills to acquire & develop •! …founder of Xero
human & technology skills; capital
•! Confidence & skills to collaborate with
partners, suppliers, customers abroad
•! Across the economy: domestic; import; export
Rakon: Sweet spot in value chain Comvita: High science, high value
•! World leading supplier of •! 250gm of honey
radio frequency crystals
for GPS and mobile phones
•! …until recent years, all from Mount Wellington •! Clover honey…………………………….. 1
•! 1967: Warren Robinson starts it
•! 1972: Singapore subsidiary starts •! Comvita wound care……………………. 25x
•! 1989: First cellphone crystals
•! 1991: Large volume GPS crystals
•! 1994: New factory •! Comvita wound dressing………………. 55x
•! 2001-02: Ground-breaking manufacturing process
•! 2004: 3.2mm x 2.5mm crystal package
•! GPS crystals: mid-1990s: US$35 each to under US$0.70 today
•! 12-year sales growth averaged 66% per year
•! 2006: Successful float
•! 2007: European acquisition
•! 2008-09: Indian and Chinese joint ventures
•! 2011: Hi-Tech Awards: Company of the year; Company of the decade
23!

24. Obo: Global community NZ’s distinctive management style
•! Why did General Motors pick a New Zealander as CFO?
•! Chris Liddell chosen for his range of experience;
management style
•! We are skilled generalists
•! Simon Barnett was an importer…
•! We are multi-taskers with knowledge
•! Became a manufacturer & experience across a range of functions
•! From 0% to 85% of world market in 15 years •! Creative, fast-moving, self-starting, team-working
•! Not expert specialists
•! Intimate internet relationship with users •! Narrow skills; working in silos; hard to co-ordinate
•! Its global fans are its R&D dept. •! Typical of large companies overseas
•! All from Palmerston North
•! Impact:
•! On our companies:
•! Makes them quick, innovative, lateral thinkers
•! On multinationals:
•! NZ subsidiaries pioneer new skills, products to take globally
www.3000.org.nz … Johnny Rotten:
“You’ll have no future…
…if you don’t make one
for yourself”
24!

25. … Johnny Rotten:
“You’ll have no future…
…if you don’t make one
for yourself”
25!