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It’s time to throw digital tools, not people, at our productivity problem

We went into the pandemic with a relatively healthy economy. An economy we had achieved through the brute force of hard-working people.

Kiwi small business owners are truly some of the most resilient and passionate people I’ve ever met. It takes a lot of courage to take the step to go out on your own, become your own boss and build something from the ground up.

In the face of countless challenges faced by the pandemic, small business owners have pivoted, adapted and coped.

But while our small business community has done extraordinarily well during the past two years of Covid restrictions, the reality is, our focus needs to shift from surviving today to setting up building blocks for the future.

When the pandemic first reached our shores, this was the kick many needed to begin investing in digitalisation.

Those who did saw the fruits of their labour – increased e-commerce capabilities provided access to new customer lines and the ability to pivot to remote work kept many operations active.

But for the most part, we threw people and long hours at the problem, rather than working more efficiently.

With 2022 well underway, many small businesses are feeling the sheer exhaustion of facing two years in a pandemic.

The simple fact is, a lot of SMEs weren’t adequately prepared to handle how long the wrath of the global pandemic has lasted.

Dealing with the unplannable

This is even more transparent as we’re back to the grind for another year – and a particularly unplannable year. And I’m not just talking about managing vaccine passports, capacity restrictions or staff shortages as staff are required to self-isolate.

There are other Covid-19 adjacent factors at play hurting Aotearoa’s small business community.

Supply chain issues and delays are causing costs to increase, resulting in high inflation and a rising cost of living.

This is being compounded by talent shortages and the fear of the ‘great resignation’, which is increasing wage pressure and will likely push inflation rates even higher.

The Ministry of Business, Innovation and Employment (MBIE) have estimated between 50,000 to 125,000 Kiwis will leave the country over the next year to head off as the borders reopen.

With unemployment already at record lows, and migrants moving to New Zealand unable to pick up the slack for some time due to the staged border reopening, it’s a perfect storm.

For businesses already struggling with the added pressures caused by the pandemic, it can be overwhelming. Once again, small businesses are left feeling the ever-increasing crunch.

So what is the answer?

Quite simply, digitalisation is the single most crucial thing small businesses can do to improve their productivity. Kiwis are working harder, but have less to show for it. At the end of the day, we’re spending too much time on tasks that can be easily digitalised.

In fact, before the pandemic we worked with NZIER to conduct economic modelling to showcase the productivity gains from digitalisation.

The economic modelling found a 20 percent uptake in cloud-based technology could increase New Zealand’s GDP by between 1.2-2.1 percent, adding up to $6.2 billion to the local economy annually.

This technology uptake could increase business output by $4.1-$7.3 billion, increase real wages by $1.8-$1.9 billion and grow exports by between $341-$618 million.

Without addressing this, we have little chance of rebuilding our economy for the long term, or improving our nation for future generations.

Related: Look after yourself as we head into the new financial year

Craig Hudson
Craig Hudson
Xero Managing Director for New Zealand and the Pacific Islands

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