Last night I was invited to attend the New Zealand International Business Awards 2012. The finalists came from a very wide range of industries – some that you might expect like the dairy industry (Westland Milk) and others that you might not, like the largest supplier of cinema ticketing and site management software in the world, Vista Entertainment.
I’m not the first person to notice it, but there are some very obscure business niches dominated by New Zealand companies. If you can be the world’s biggest anything, chances are that it can be big business – Vista Entertainment’s 83 staff generated $24.1m revenue in 2010.
But this is a lawyer’s blog, so what’s my angle? Your position in a market correlates to your ability to control your own future and deal with risk. So if you look at a company like Apple, it has achieved market dominance as much by having a brilliant business model as it has by designing cool gadgets. In my view, the iTunes Store and the Apps Store are the truly genius parts of the business – getting other people to create content and write applications so Apple can make more money is one of the most effective commercial models ever devised. Apple doesn’t have to buy stock for its e-stores and there is really no limit on how much content these stores contain. Developers even give Apple’s customers software apps for free. This creates the virtuous circle of making Apple’s hardware even more desirable at no cost to Apple.
Because Apple dominates the smartphone and tablet markets, it has been able to write its own rules. That’s a great position to be in. While you may eventually be the subject of attention from competition regulators (like our Commerce Commission) most companies that dominate their markets make a lot of money.
Who are the NZ companies dominating their niches? One example is Konnect. It collects the medical information for life insurance policy applicants on behalf of insurers. In just under 3 years of operation it has signed contracts with all but one of the life insurers operating in NZ. It invented its own market and promptly signed up 90%+ of the potential customers. It is executing its plans to extend the range of services it offers to those insurers. Because most NZ life insurers operate on both sides of the Tasman, its customers are insisting that its services are also available in Australia. Konnect controls its own destiny. Although it is currently a tiny company compared to the insurers it deals with, it offers a service that all of its customers believe they have to buy just to compete with other insurers on an even playing field. That means Konnect has real bargaining power in contract negotiations and can control its risk.
There seems to be no industry that doesn’t have an undiscovered niche that a NZ business could dominate. Maybe that’s what small countries and small countries can be best at – identifying an opportunity that others have missed (or is too small for big companies to bother about), devising the solution and selling it to a global market.
Judging by the results at last night’s awards, NZTE and the government has started to recognise the importance of these niche companies to our future economic prosperity.