Artificial intelligence (AI) presents both a risk and an opportunity to New Zealand’s tech sector, which is now the country’s second biggest offshore earner. Will the industry struggle to keep up? Or are we about to experience a massive boost that will finally break our decades-long productivity slump?

“AI has the potential to be as fundamental as the shift from steam to electricity,” says Richard Cotman, tech sector lead at New Zealand Trade & Enterprise (NZTE), the government agency that supports exporters. 

“It’s not just about adding a chatbot to your website. There are AI tools emerging that can advise CEOs on decision-making. There are tools for lead generation, finance, inventory management. AI means that businesses will be increasingly automating these kinds of functions. Almost every aspect of running a business will be changed.”

The speed of that change is jaw-dropping. Launched in November 2022, ChatGPT achieved a million users in five days, 100 million in two months and more than a billion within a year. By the middle of last year, McKinsey had sized the potential global economic value of AI applications at NZ$4-8tn, perhaps even double that. 

Money has moved fast, too. According to Crunchbase, the share of American venture funding going to AI-related startups last year jumped to 26%, up from 11% the year before. AI startups raised almost US$50bn of funding last year – although $10bn of that was Microsoft’s partnership with OpenAI.

Last year, exporters working with NZTE brought in more than NZ$4bn of sales. Tech was our second biggest offshore earner after dairy, with 34 New Zealand tech companies recording revenue north of NZ$100m. Failing to stake a space in a landscape newly reshaped by AI could be economically significant for New Zealand. 

Cotman can’t see New Zealand firms competing with large, well-funded US-based AI enterprises any time soon. But he can see a near-future where our tech companies “find killer applications for AI in particularly lucrative niches.” 

“Finding and growing competitive advantage in high-value niches is something we’re really good at in New Zealand,” he says. 

Straker and UneeQ are two New Zealand companies playing big in the AI space. Grant Straker (Ngati Raukawa) founded Straker in 1999 on the promise of machine learning. Today it has a $30.56m market cap on the ASX and combines AI with other technologies to enable multinational corporations like IBM, Walmart, H&M and Nike to produce multilingual marketing content, HR resources and other requirements at pace. Straker describes this current moment as “probably the most exciting thing that has happened for a long time.”

“Prior to the explosion of ChatGPT, we were going into large corporates and telling them that this is the way the world’s going, and that they should be thinking about all this stuff, but it just wasn’t front and centre. Now they’re all going, ‘OK, these guys are right, how do we talk to them about what we need to do?’”

Straker sees a similar uptake curve to that which greeted cloud computing a decade ago – and, crucially, similar benefits for local companies. “In the early 2000s [people] did it the hard way of having to fly around the world and install servers, maintain them and work with technology teams,” says Straker. But as soon as the cloud came along, tech companies became remote operators, and this opened the door for New Zealand’s growth into leaders in the market. The business and growth opportunity now, with the systems already in place to sell this tech internationally, without “the tyranny of distance,” Straker says, could be even greater than ever.

“It makes the world smaller for us. We really want to be able to capitalise on that, because it will be a world of opportunity over the next two or three years.”

Danny Tomsett’s company, UneeQ, has been building something more like what your mum thinks AI is, since 2013. Based in Grey Lynn, Austin and Melbourne, his groundbreaking company creates “digital humans” that can dialogue with customers online, making them far more likely to engage, find and buy stuff. “Nadia”, voiced by Cate Blanchett, helps disabled people access information about Australia’s National Disability Scheme, for instance. Digital flight attendant “Sama 2.0” can answer customer questions while embodying Qatar Airway’s luxurious, dignified brand.

With American venture capital, UneeQ has grown to become a key player in a niche expected to be worth around NZ$200bn by 2035. “This is a significant moment in our history,” Tomsett says. “In 2016 the market was asking ‘why?’ Now, the market is asking ‘how?’, which makes it a very exciting time for our business.”

“Competitors in large markets have access to a lot more capital and a broad, diverse customer base across multiple industries,” says Tomsett. New Zealand companies need to consider where their advantage can be gained, be hyper-focused, and then start to export when they’re ready to scale.

Both Straker and UneeQ have noticed increased competition from what might be called commodity AI. “Large language models (LLM) have sort of lowered the drawbridge,” Straker says. “A lot of people can build very simple apps with large language models.”

Rather than eating into his business, though, Straker says cheap, ubiquitous LLM systems just highlight where his business’s value really is. “What we’re selling to customers is process automation – and trust. Our customers want to take a complex process and make it simple, and they want to know the outcome can be trusted.”

Tomsett agrees, but notes the extra competition can still create a distraction. “The presence of these companies and their messaging creates noise and confusion we need to deal with.”

Cotman says businesses need to focus on how they handle pricing for new AI-based services they bring to market, experiment to get it right, and keep a close eye on international regulatory frameworks, as governments are likely to want to protect sovereign AI capability within their own borders.

The AI landscape is complex and NZTE offers support on these kinds of issues via content, courses and events, and expert advice from the private sector. “For many businesses and boards right now, the challenge is to raise their baseline knowledge about AI,” says Cotman. “Earlier this year, an AI workshop for export businesses in Auckland sold out in four hours. Another workshop, open to all exporters at the beginning of their AI journey, is being held in Christchurch in June. Further, joined-up support from government agencies like NZTE and Callaghan Innovation is in development, as well as initiatives led by industry bodies like the AI Forum and the University of Waikato’s AI Institute.”

But winning isn’t solely about being quick to innovate. Ultimately, the game might be won or lost due to much older problems. 

“Success still relies on the business fundamentals of really knowing your customer, understanding their needs, understanding the data you are generating about them, and understanding where the value is in applying AI to that data in quite specific and unique ways,” Cotman says.

“Smart tech exporters are already working on where AI is helping them to unlock new value for customers or solve pain points they couldn’t address before, but now can thanks to AI.”