First, let me congratulate the Mayor and Committee of Auckland, Simon, for actually the drive that's now picking up to think about Auckland as a city of innovation - this is overdue.
Auckland has a lot of the basic elements to do it, but we also have some gaps that need to be addressed. There's a limit to what I can say about the government report, which I delivered to the minister only a couple of weeks ago. But the reality is that New Zealand needs to use growth and innovation - technology-based innovation - as a core element in its pathway to achieve economic and social growth.
While governments can do so much by setting frameworks, R&D grants, etc., the reality is that around the world, cities are the units of innovation, not countries. Therefore, we need to focus today on: What are the elements, and why are cities the unit of effective science and technology-based innovation?
Why Cities Drive Innovation
It happens simply because effective innovation requires effective communication and relationships between a vast range of actors: business (big end of town, small end of town), academia, and all sorts of other players in an effective ecosystem. What we need to build in Auckland is an ecosystem which is still too fragmented. That's where the role of the Committee for Auckland, the proposed Innovation Technology Council, the Mayor's office, and so forth come together.
If you look at cities I would want to compare Auckland to - like Geneva, Waterloo (Canada), Tel Aviv, Bangalore, Toronto, Paris (particularly Paris with Station F) - they've all worked hard to create that innovation ecosystem with all actors involved, rather than being territorial with "this is my bit or your bit." I think that's the key difference, and that's why economists talk about agglomeration effects.
Agglomeration Effects
Agglomeration effects happen only in cities of about 1.5-2 million in population or above. They have to be cities that are globally connected. The reason they work is that they're big enough for the ecosystem elements to come together.
Agglomeration effects mean that the amount of GDP produced per capita is disproportionately higher in such innovation-focused cities - it should be in the order of 10% or more differential. But depending on the numbers we look at, we sit somewhere between 3-5%. We've got a long way to go.
Why does agglomeration work? It works simply because relationships can be sustained at the interpersonal level between people with different skills. We all know that innovation happens at the interface between skills, between different systems. As it grows, it reinforces itself because people leave big firms to set up their own companies, companies merge to create bigger companies. It becomes a positive feedback system.
You get situations like in Waterloo, Canada, where investment gurus sitting in New York literally ring Waterloo to say, "What can we put our money into?" because they know there's a hub of innovation working there.
Auckland's Current Position
Why has Auckland not yet got there? I think we've got, all said and done, much of the substrate:
Strengths:
Enough well-educated, diverse people (diversity is a real strength)
Well-connected population with the two biggest growing economies: India and China
About 50% of the country's intellectual assets (three universities, CRIs, public research organisations)
Financial capital of New Zealand
Manufacturing base for New Zealand
Several innovation incubators
Growing med-tech sector
Many startups in digital space and gaming
Rocket Lab has shown success in deep technologies
But we still don't show the innovation agglomeration effect we want to have, which I think we're now in this room driven to actually make happen.
Why We Haven't Succeeded Yet
First: Until very recently, I don't think Auckland made its case to central government about what government needs to do to help Auckland succeed in this space. But in developments for the regional plan, we've seen Auckland now stand up to take a lead in saying it can show greater effect.
Second: I hate to say it, but there are an awful lot of people in this room who are remarkably insular. We do not have the effort to bring together the different parties - universities, defense sector, private sector, investors, etc. - in a way that brings stakeholders together strategically.
That's what Grid AKL was originally intended to do. I don't think it's brought all the people into the room. Those competitive cities I've talked about all have different mechanisms, whether physical or digital, to actually ensure relationships are developed. Simply put, it's a giant dating game - it's about relationships being formed and sustained.
The Path Forward
The Innovation Council is an important first step, but it will only work if it:
Aims for complete inclusivity
Works closely with the Mayor's office to advocate in Wellington
Fosters that "dating game" needed in Auckland to see different players come together: universities, venture capitalists, lawyers, IP lawyers, small companies, big end of town, international players
There will be initiatives in Advanced Technology announced by government - Auckland is key to that. We need to wait to see how government puts it together, but Auckland must be ready to jump when those announcements are made.
What Auckland Can Do Now
On top of that, there are things Auckland could do that only a mayor and council can do:
What do we do to attract more large companies like Apple to be based in Auckland?
Could the city give rates relief to companies that move R&D centers to Auckland?
What else could it do without waiting for central government?
I actually think, given that Auckland can get its act together (and Wellington may not be able to), it might be easier for Auckland to take the lead on initiatives that work to attract R&D-intensive companies. We need to take advantage of the fact that Auckland can be a global city - it has the global connectivity, scale, and necessary infrastructure. It just needs to get its act together.
Thank you. Sir Peter Gluckman