Interview with Michael Cusumano
Date Added: 5th April 2011 from Ministry of Science & Innovation
Michael Cusumano is an author and professor at the Massachusetts Institute of Technology’s (MIT) Sloan School of Management. He specialises in strategy, product development and entrepreneurship in the computer software and electronics industries.
The Ministry of Science and Innovation (MSI) brought Professor Cusumano to New Zealand in March to run a series of seminars at the Auckland University Business School. MSI also regularly sends New Zealand entrepreneurs to MIT to take part in its Entrepreneurial Development Programme.
- What is your view of the role of innovation in business?
Michael Cusumano: Innovation is largely about change and doing things in a different way. Innovative products, services and innovative business models are very important. In some ways they are the life blood of companies. If companies stagnate, they die. But you don’t need to keep re-inventing the wheel. Doing something better than the competitor is what it’s all about.
- What are some current key ICT trends in the US that can affect New Zealand business?
Software as a service and cloud computing – taking computing from machines to the web and delivering through remote services. Because of the little investment needed in infrastructure, this trend has given a real boost to entrepreneurs. New Zealand is participating in that.
- What do you think New Zealand businesses do well?
New Zealand is very good at science and innovation. Companies seem to come up with products that are highly sophisticated.
- In what areas do you think New Zealand businesses lack?
Weak management and venture capital (VC) investment. There’s a lot of ambition, but not always the know-how. Almost every company I have met complains about not having enough capital.
The fact that many New Zealand businesses don’t necessarily see the world as their market is also limiting.
- What does New Zealand need to do to build a better high tech industry?
If NZ wants to move up the OECD wealth ranking it needs to continue to invest and enhance its business schools. The Auckland Uni MBA programme is only part time and attracts mainly older students and people who are not necessarily entrepreneurial. New Zealand needs a full time, world class MBA School that seeks and trains young ambitious entrepreneurs.
- Has anything considerably changed in the New Zealand business landscape since your last visit in 2009? If so, what?
I think Auckland Uni is making some very positive steps with its Entrepreneurs Club and the Spark business competitions.
- If NZ has a strategy of being an “incubator” – exiting businesses early – how can it become a wealthy nation?
In markets where there is not much private venture capital and not a surplus of experienced manages, the Government can play a special role. We saw this historically Japan, Taiwan, Korea, and China. One approach is to pick the best IP companies and protect and invest in them, with the hope that some will become large multinationals and new sources of jobs and wealth for New Zealand. The government also needs to bring in more overseas VC to address lack of capital. These VC firms can find overseas CEOs to run companies until you build a world class MBA school and find other ways to grow management capabilities.
- Do you think the fact that NZ has a small venture capital industry affects the growth of NZ firms?
Yes, it affects things negatively. Every company I have met here complains about a shortage of capital. This restraints growth and results in companies moving away to where the money and bigger markets are.
- Tell me about the work you are doing with New Zealand businesses during this visit.
I gave three presentations at Auckland Uni Business School to around 200 CEO’s of hi- tech companies on strategies to lift their capabilities.
I’m also working with about eight manufacturing and software businesses in Auckland and Wellington. This has involved workshops and presentations on high growth strategy to improve strategic thinking and making introductions to venture capitalists and potential partners.
- Given you have discussed business strategy with many NZ companies, do you see a common strategic perspective that limits what NZ companies can achieve?
New Zealand businesses have a tendency to focus on the local market. This is not necessarily bad because every firm needs to start somewhere. But companies from other small countries like Israel or Finland have achieved global success because they quickly come to think of the world as their market. That’s something New Zealand businesses need to work on if they want global success.
- How much of business success can be attributed to superior strategy? Does it really make a difference to most businesses?
Strategy is very important. But even more important is to develop deep, distinctive capabilities and expertise that distinguish firms over long periods of time and translate into value that customers around the world are willing to pay money for. This is something I look at in great detail in my latest book, Staying Power.
- Kiwi businesses are often concerned about not being taken seriously by larger US companies. What are the main mistakes that Kiwi companies should avoid when approaching these larger partners and/or customers?
It’s a common mistake to come across as too humble. New Zealand businesses should be more confident in their science and technology, as well as products, services, and capabilities. As I have argued before, the NZ market is very small, but it is sophisticated. So products that find a market here often have global potential.
- If you were the NZ Government, what would you do differently?
One, I would make a deliberate effort to recruit major VC companies to come to New Zealand. Second, I would take equity in companies that the government invests in, and use any returns to build up a broader investment fund for different purposes related to management education and economic development. Thirdly, I believe New Zealand needs to invest more investment in its Business Schools to make it the centre of a lot of business development activities.
