Diversifying Wellington’s economic base

Opinion piece by Dr Richard Norman, School of Management, Victoria University of Wellington

 
Not putting all your eggs in one basket is an old truism. When the Prime Minister told an Auckland audience in May last year that “Wellington is dying and we don’t know how to turn it around”, it was a good reminder of the importance of continuing to diversify Wellington’s economic base beyond a traditional dependence on central government.
 

The diversification of Wellington into film and information technology (IT) industries has been well-profiled by the media. Weta, TradeMe and Xero have become household names. What is not so well known is that they are part of a much broader knowledge economy in the Wellington region. A recently published study by Victoria University has painted a picture of a well-established and diversifying knowledge industry that, far from dying, is using the networking opportunities of a compact and well educated city to match the pace of change in centres such as San Francisco and Seattle.
 

This knowledge industry includes businesses in the health, energy, engineering, telecommunications, environment, finance, insurance, marketing and consultancy sectors, as well as in the digital media and IT sectors. Wellington has diversified greatly over the last 30 years and, as a result, is more resilient to shocks in one or two sectors. Even after high profile departures, in the late 1980s and 1990s, of companies in the banking, insurance and telecommunications sectors, there still are large businesses with their head offices in Wellington. These include Kiwibank, RaboBank, Co-operative Bank, Farmers Mutual Group, Infratil, Contact, Meridian and Opus and major support functions for the ANZ and BNZ banks.
 

But new small and medium-sized business, particularly IT-based companies, are also emerging in sectors such as health. The Victoria University study, which was based on 113 in-depth interviews with knowledge economy businesses, included 11 health companies. It found the health sector has been growing and consolidating corporate offices in Wellington to be close to specialists and decision-makers in government. A number of the largest contract health providers in home care and care of the elderly are now based in Wellington. However, they find it more difficult to attract senior talent because Wellington is perceived primarily as a city of government with strong IT and film sectors.
 

A CEO of a large energy company observed that it is important for Wellington to attract diversity. (And, by the way, the energy sector in Wellington remains strong, despite the relocation of BP to Auckland last year—Wellington companies include Z Energy, the Todd Corporation, Meridian and Contact.)
 

The study found that companies were struggling to hire suitably skilled workers across most knowledge economy sectors with more than a third unable to find many of the workers they needed from within the Wellington region. Attributes such as enjoying a challenge, being self-directed and motivated were valued as highly as skills.
 

Seventy percent of companies saw the complexity and speed of technology change as a major issue which was altering the nature of work and making it challenging to find people talented enough to cope. With customers doing much more for themselves online, more specialised people are needed to establish and run such customer-focused systems. What hasn’t changed though is a demand for workers who can develop powerful ideas that will solve people’s problems.
 

The 113 companies interviewed were well-established—one-third had total sales of over $50 million for the most recent financial year and nearly half had operated in the Wellington region for over 20 years. Their observations are important for the economic future of the region and are being captured in the ongoing research Victoria is carrying out.
 

Far from dying, Wellington is adapting rapidly and the Victoria study aims to assist employers, government, local authorities and educators to engage effectively with the changing nature of work.
 
 
Read the report on Wellington’s knowledge economy at www.victoria.ac.nz/som/researchprojects/working-capital
 
Dr Richard Norman teaches Human Resource Management and Training and Development at Victoria University. This is one of three articles on findings of the study, ‘Wellington’s knowledge economy – coming to grips with technology change’. The study was developed in partnership with Wellington Regional Council, with support from Grow Wellington and Wellington City Council.