International MBA

Creating a nation of entrepreneurs

Financial Times - Sep 17, 2001

WHY A NEW ZEALAND SCHOOL IS REDEFINING ITS EDUCATIONAL VISION BY JOINING FORCES WITH A SOFTWARE VENTURE, WRITES FIONA CARRUTHERS

With its tiny population of 3.8m, New Zealand makes much of its brain drain woes. From April 1 2000 to the end of March 2001, 63,499 New Zealanders left the country with the intention of being away for a year or more, heading for Australia, the UK and Asia.

But what of the corporate drain and its associated impact on business education?

Over the past 10 years, barely a New Zealand corporation has been left standing in the fertile soil out of which it grew. Most have broken up or moved their headquarters offshore. Since its foundation in 1988, Lion Nathan has drifted eastwards and most of its assets and earnings are now in Australia. Brierley Investments - founded in 1961 as a shareholding company focused on New Zealand and Australia - is now a Singapore-based international investment group. The successful science company Fernz Corporation (founded in 1916), also migrated to Australia in January 2000, changing its name to Nufarm.

"Forget the brain drain - the Kiwis who leave usually come back; the real problem we face is the corporation drain, the breaking up or moving offshore of our top corporations," says Mike Pratt, dean of Waikato Management School at Waikato University in Hamilton, south of Auckland in New Zealand's North Island.

"On current business trends, MBA [programmes] must recognise they are no longer preparing graduates for lifelong careers in New Zealand corporations, because they're simply not there," Prof Pratt says. "New Zealand's business future will be in small-to-medium-sized businesses that specialise in niche markets and we need to offer our business graduates training for that sort of career."

This year, Waikato Management School is beginning to redefine its educational vision by means of an "active" business venture included in the school's MBA programme after the signing in April of a joint venture agreement with a small New Zealand-owned company, Southfresh Limited Systems.

Over the past nine years, Southfresh has developed software to facilitate buying and selling perishable goods online. Waikato and Southfresh will now combine forces to create new spin-off business ventures for Southfresh, to be designed and developed by teams of Waikato MBA students. The new businesses will then be sold. Present guidelines stipulate that Waikato MBA students and staff will hold a 20 per cent equity share in the new venture they create and will have two seats on a five-seat board, with the remaining seats - and hence the final veto - to be held by Southfresh.

It is the first time such a venture has been undertaken in New Zealand and poses many questions. Waikato and Southfresh share a similar outlook as successful, young, "can do" enterprises. WMS, founded in 1972, ranks with Auckland and Otago among New Zealand's leading business schools. It offers an intensive one-year international MBA and a two-year part-time MBA.

Over the past few years, Waikato university's annual student intake has climbed by 10 per cent; and its international enrolments jumped by 50 per cent last year.

Southfresh has seen similar growth, with its staff increasing 100 per cent, and it is one of the few profitable New Zealand e-commerce ventures. But can WMS and Southfresh work together? And, more important, can Waikato's students pull it off?

It is difficult to imagine that Waikato could have chosen a more innovative partner than Southfresh. Toby Warren, Southfresh's chief executive and a lawyer by training, embarked on a career as a seafood wholesaler in 1981. With the rapid development of software, he began to visualise a far more efficient, cheap and comprehensive way of trading in perishables and in 1990 began Virtual Perishables, a company trading with software designed by Southfresh.

"I realised software was a lot smarter than selling fish - and that's where the value in the company lay," says Mr Warren. Today, Southfresh is developing similar software for trading other perishable goods, such as speciality kosher foods and even animal semen for in vitro fertilisation procedures. Yet his business comprises only a dozen staff, who are already stretched for time.

He hesitated to employ full-time staff, because he wants to create business spin-offs and sell them. Waikato's idea surprised him.

"Most universities don't want to get involved in the grubby financials of the real marketplace," Mr Warren says. But the idea made perfect sense. They wanted a business venture; we wanted to expand and they could offer us people with fresh ideas, vision and energy."

For Prof Pratt and other WMS academics, a successful SME started by a New Zealander and wholly New Zealand-owned was exactly the image that they were seeking. "Our emphasis is on e-commerce, hands-on experience and training New Zealand entrepreneurs," says Prof Pratt.

Ed Weymes, associate dean of executive education agrees: "With this venture, the academic walls come tumbling down: it's real-world experience, building a real company in real time."

John Tucker, director of the Waikato MBA programme, adds that not only will students kickstart a business-to-business scheme but the joint venture will also ground them in the dilemmas of ethics, transparency, accountability and establishing management structures.

To help create good entrepreneurs, both Prof Pratt and Mr Warren say they will stand back as much as possible to let students feel their own way.

However, despite the developing love affair between Southfresh and Waikato, Mr Weymes says, it is not an exclusive arrangement.

"This is a partnership for a part of our MBA. It's not a co-branded degree and it doesn't rule out us striking up similar arrangements with other companies or corporations."

As WMS embarks on the country's first MBA/business equity venture, everyone seems to benefit: Southfresh expands its business; WMS MBA students gain hands-on experience and everyone shares in the profits.

Yet questions remain. Not many students have skills relevant to Southfresh. Will they be able to develop them? Will they feel exploited? And with 60 per cent of Waikato MBA students receiving funding from employers to complete the MBA, will their employer tolerate their spending time working for another company?

One of the first group of 15 students to work with Southfresh has no qualms about tackling such a project.

"It's a big pressure, absolutely," says Ros Nelson, programme management consultant for Air New Zealand. "Time-wise it will be a lot of pressure," she says, "because research will be very important. But I think a challenge is the best thing you could ask for: to have a huge carrot dangling in front of you and the chance to make a success of it."

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