It can be a tough call to continue growth plans during such turbulent times. But some NZ businesses doubling down on R&D are reaping the rewards.
As the struggle to contain the spread of COVID-19 around the world continues, one of the most significant global R&D efforts in history is gathering pace.
The Americans call it “Operation Warp Speed”, the massive effort to develop and produce an effective COVID-19 vaccine in record time. Similar efforts are playing out everywhere. Our own government has pledged $37 million towards vaccine efforts, including developing the capacity to manufacture a vaccine locally.
Based on the unprecedented speed and scale of COVID-19 vaccine R&D efforts, many commentators think the face of innovation in the life sciences will be forever changed. New public-private partnerships have been forged, scientific data shared, and obstacles overcome in a way never seen before.
But what about sectors of industry that haven’t had to mobilise to respond directly to the pandemic? Will appetite for R&D decrease as the economic outlook deteriorates and some businesses face falling demand and cash flow difficulties?
Not according to our latest COVID-19 customer impact survey. Callaghan Innovation’s second ‘pulse check’ survey took place in mid-May, as we were about to move to Level 2 lockdown, and attracted 474 responses.
Some 50 per cent of respondents expected to increase their R&D spending in the next year, and just 22 per cent anticipated a decrease. Government support schemes, such as the wage subsidy and low-interest business loans are helping businesses continue R&D as they face volatile cash flow and reduced sales.
Opportunities to double down on R&D
But some businesses, such as Aspect Productivity Technology (AspectPT) are not only continuing with growth plans, they’re doubling down on R&D, partially through accessing Callaghan Innovation support.
The Auckland-based business makes software and technology to allow manufacturers to digitise their factory floor, eliminating manual scheduling of jobs and data entry. AspectPT accessed a Callaghan Innovation Project Grant to support their R&D activities.
AspectPT has had a strong quarter since COVID-19 hit, but director and founder Allan Orr is realistic that the business’ 30 per cent year-on-year growth can’t continue as orders slow down.
“There’s likely to be a 12-month pause on growth as prospective customers sit on their hands due to the economic outlook,” says Orr.
“But that’s an excellent opportunity for us to ramp up more research and development than we’d be doing normally.”
AspectPT staff usually fully involved in production and serving customers are now working on product development and research.
“Those people work so closely with our customers, they know their requirements very well. We are putting that knowledge towards enhancing the products,” explains Orr.
50 per cent of AspectPT’s business done in Australia, a market rapidly adopting the Industry 4.0 technologies and Orr believes the larger R&D push will set up the business to gain more market share there in the next 18 months.
One of the country’s largest investors in R&D, Fisher & Paykel Healthcare, has shown the benefits of a sustained commitment to innovation. The business has received Callaghan Innovation support with developing its respiratory products, including through a Growth Grant.
Fisher & Paykel Healthcare achieved record profit and revenue in its financial year just closed, as global demand jumped for its OptifLow nasal high flow therapy devices to treat COVID-19 patients.
This is a business that last year invested 9 per cent of its revenue in R&D – $118.5 million.
Support is available to continue R&D
Many businesses, big and small, face immediate challenges due to the pandemic that may force them to consider pausing R&D, and they’ll need assistance if they’re to continue to innovate.
High-value R&D activity is critical for a faster economic recovery. That’s why the Government allocated $150 million towards R&D support in May’s Budget, and that’s now being used for Callaghan Innovation’s R&D Loan Scheme. R&D-performing businesses impacted by COVID-19 can apply for a loan of up to $400,000 to support R&D activity.
If we’re smart in our R&D efforts now, we can use this disruption to explore new ways of operating, improve our products and gain a competitive advantage when the global economy recovers.
Visit callaghaninnvation.govt.nz to find out more about the R&D Loan Scheme