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Value of Internet services to New Zealand businesses


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My presentation to the Innovation Partnership's launch of research into the business impacts of the Internet in New Zealand.

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Value of Internet services to New Zealand businesses

  1. 1. The value of internet services to New Zealand businesses Hayden Glass March 2014
  2. 2. 2 Outline • Introduction • Internet use not just connectivity • Beyond the ICT sector • A positive economic impact with more to come • What next
  3. 3. 3 New Zealand broadband connectivity is already high… Source: OECD Broadband Portal 0 5 10 15 20 25 30 35 2002-Q2 2002-Q4 2003-Q2 2003-Q4 2004-Q2 2004-Q4 2005-Q2 2005-Q4 2006-Q2 2006-Q4 2007-Q2 2007-Q4 2008-Q2 2008-Q4 2009-Q2 2009-04 2010-Q2 2010-Q4 2011-Q2 2011-Q4 2012-Q2 Broadbandtakeupper100inhabitants New Zealand OECD
  4. 4. 4 …especially among businesses Source: Statistics New Zealand Business Operations Survey 2012 Proportion of firms saying they are connected to the Internet 100% 98% 97% 98% 100% 98% 97% 96% 97% 96% 100% 97% 91% 98% 98% 98% 84% 91% 60% 80% 100% Professional, scientific & technical services Financial & insurance services Information media & telecommunications Education & training Wholesale trade Health care & social assistance Administrative & support services Rental, hiring & real estate services Retail trade Arts & recreation services Other services Transport, postal & warehousing Mining Manufacturing Electricity, gas, water & waste services Construction Accommodation & food services Agriculture, forestry & fishing
  5. 5. 5 96% 90% 77% 77% 45% 30% 69% 62% 19% 12% 34% 11% 10% 0% 20% 40% 60% 80% 100% At all For finance For making government payments For online ordering For receiving orders Using email At all With information on goods and services Ordering goods and services Taking online payments At all Internet is more than 10% of total sales Have sales outside New Zealand UseinternetHavewebsite Making internet sales We wanted to understand the impacts of use of Internet services Source: Statistics New Zealand Business Operations Survey 2012 These are firms with more than 6 staff. Figures for smaller firms are (usually) lower. Use firms make of online services
  6. 6. 6 We were interested in firms outside the ICT sector Tourism Retail trade Dairy/Agriculture Professional services Four focus sectors Use Greater than 80% of staff have access to internet Website Whether firm has a website or not Procurement Purchase goods via the internet Sales More than 25% of sales via internet Connectivity Used a fibre connectionVarying industry structure, sophistication online, exposure to competition Five questions
  7. 7. 7 What we did Quantitative analysis • Internet use plus financial performance data for 5,589 firms from Stats NZ to quantify impacts Interviews • Interviews with 76 firms in sectors of interest to understand why Case studies • Four articles to give practical examples of firms doing interesting things Scenarios • What if for the future
  8. 8. 8 High users of Internet services are more productive than the industry average 6% What we found (1) • Compares the productivity of firms who make significant use of internet services with average industry productivity • The productivity gap between heavy users and low users is more pronounced Previous broadly comparable studies calculated 5-10% impacts from connectivity to fast broadband (Fornefeld 2008,Grimes 2012) • All interviewees in all sectors said Internet services were important and will be more so • Just about all (6+) firms have a website and are buying online • Hugely diverse impacts, from simple social media for retail, to automated milk-testing and reporting on water usage • Some firms getting started on transforming their business processes – this is where the value comes
  9. 9. 9 What we found (2) A maturity journey Can the internet help • Basic connectivity • Phones to VOIP • Email communications • Website, basic social media How can I make it more useful • Online sales and service • Analysing website and e- commerce data • Cloud services for systems • A single backend Can I get sustained competitive advantage • Sophisticated online campaign management • Data analytics • New organisational forms If low-users became as productive as high-using firms 34bn • A ballpark estimate of the future benefits to give a sense of scale • Not a forecast or prediction, nor any particular timeframe • General point: substantial opportunities available for the nation
  10. 10. 10 So what • No one needs to be convinced of the economic importance of the Internet itself • Much to do to help businesses figure out how best to take advantage of the opportunities (and minimise the threats) • A challenge for business, especially sector organisations
  11. 11. 11 Contact details Hayden Glass +6421 689 176 If you are interested in the business and economic consequences of the internet for New Zealand @moxiesessions
  12. 12. Appendix
  13. 13. 13 How we calculate economic impact Greater than 80% of staff have net access Have a website Purchase goods via the internet Make more than 25% of sales via internet Use a fibre connection BOS questions Value-add per employee in firms answering yes Value-add per employee on average in industry AES questions divided by • Novel to look at use (rather than just connectivity) and at industry-level • We try to control for selection bias by comparing heavy users with industry average productivity
  14. 14. 14 Tourism – descriptive statistics Variable Measure Tourism All sectors Use Greater than 80% of staff have access to internet 40% 42% Website Whether firm has a website or not 82% 81% Procurement Purchase goods via the internet 88% 81% Sales More than 25% of sales via internet 28% 7% Connectivity Used a fibre connection 24% 27% Tourism has reasonably typical internet use figures, but buy and sell more online than others
  15. 15. 15 Tourism – what we see from interviews • Some tourism businesses exist solely because of the internet and rely on it entirely • Internet is empowering to some small-to-medium sized operators, improving geographic reach, tailoring of offer and trackability • Some concerns about new costs of online marketing, but overall online booking engines and channel managers save time and cost • Clear sense of positive impact on marketing and on operations, but interviewees generally struggling to quantify • Main barriers to adoption are knowledge, time to get up to speed, and network coverage (for some) • Start with online inventory and move to a single system