By Marion Tasker, Senior Manager R&D, KPMG and Scott Olding, Director, KPMG

The Government has introduced a R&D Tax Credit regime with effect from the beginning of the 2008/09 income year. This regime is designed to promote R&D within NZ Industry and to improve NZ’s competitiveness worldwide. The tax credit is valued at 15c for every $1 of qualifying R&D expenditure incurred on an eligible project after the start of the 2008/09 income year (the project itself could have started prior to this date).

The NZ regime incorporates a number of key features of the Australian R&D tax concession, which has been operating for over 20 years. The NZ credit is set at twice the value of that of our Australian cousins. Another very positive feature of the NZ regime is that the credit is a “cash” credit (i.e. the credit will offset your tax liability if you are paying tax but will be refunded in cash if you are in a tax loss or if you are a tax exempt entity).

It is very important to appreciate the “R&D” definition as used in the NZ legislation. Discussing your activities with a qualified R&D tax adviser may assist you determine the boundaries of this definition in the context of your business. It is possible that the R&D definition is broader than the activities that many organisations internally class as R&D.

The R&D credit is claimed from the IRD as part of the tax return filing for the organisation. There is also an additional supporting statement that must be lodged with the IRD before the benefit of the credit is made available.

A checklist for your assessment:

• Consider your activities against the R&D definition and seek advice from a qualified R&D adviser. Taking this issue out of finance is important - “what is R&D” is a technical issue. Therefore your R&D adviser needs to have sound technical and industry experienced people to really assist you in this process to identify the maximum amount of eligible R&D activities. 
• Read up on the legislation, discuss and understand terms such as “novelty”, “scientific or technological uncertainty”, “supporting R&D”, “listed research provider”, ”eligible and ineligible expenditure”. 
• Identify all potential R&D projects within the business and compare them to the criteria for eligible projects set in the legislation. 
• Educate all stakeholders across the business. The nature of this regime will typically require a sponsoring group made up from technical, finance, and senior management. 
• Collate and monitor on an ongoing basis all relevant information for each project, including all costs incurred, not forgetting peoples’ time. This may prove to be a challenge as not many companies are using full project based costing methods. 
• Talk to your R&D adviser about the various ways to meet these evidentiary requirements, especially as you are required to separate “core” from “supporting” R&D activities. 
• Check or review your internal systems and record keeping processes to test whether they are sufficient to meet the IRD’s documentation standards. 
• Remember you will want to ensure record keeping is such that each project claimed will pass an audit by the IRD - they may audit up to 4 years after the tax year the claim has been lodged in. 
• Once you are satisfied that your systems work, monitor projects and costs throughout the year. This is better to do as you go rather than to look back after year end. 
• Substantiate your projects, and meet the supporting statement requirements. 
• Lodge the claim with the IRD, and conduct an internal review of your process to make improvements going forward. 
• Receive the cheque and celebrate!

The new R&D Tax Credit regime is an opportunity not to be missed for NZ organisations undertaking R&D activities. The objective of eligible organisations should be to maximise the value of the credit but minimise disruption and risk of challenge from the IRD. KPMG has established a Technical R&D team where experienced R&D professionals work alongside Tax professionals and experienced R&D tax staff from our Australian practice to assist organisations achieve the above objective. KPMG offers tailored R&D tax services, including full outsourcing.

Contact Marion on (09) 367 5941 / mariontasker@kpmg.co.nz or Scott Olding on (09) 363 3664 / solding@kpmg.co.nz

About the Tax Credit

The PDMA New Zealand also offers the following sites for information about the New Zealand R&D tax credit regime: www.ird.govt.nz/rd-tax-credit and, for a copy of the handbook “Making Innovation Pay” by Auckland Plus and MoRST visit www.aucklandplus.com/subsites/aplus/news-and-events/news/making-innovation-pay.cfm

An enterprising New Zealand developer has also developed a website which helps businesses comply with the regime, and file the necessary paperwork. See www.rdtools.co.nz

By Elizabeth Coleman, Product Innovation Manager, IAG

Many firms have taken ideas from their customers to develop the way in which they deliver their products and services. Focusing on service has the advantage of directing customer efforts to how the product is delivered rather than only to the product itself.

Service ideas can be captured through customer research methods such as telephone surveys, through ‘walking with the customer’ or focus groups. Online customer interaction now provides an unlimited resource for capturing customer service ideas. To manage the ideas, a structured evaluation process can be very beneficial.

In some cases, a traditional product development approach may be useful when reviewing new service ideas for further development. Go-no go decisions should preferably be made by carefully chosen teams at critical stages of the service concept development. At the early stage, a team decision should be informed by industry best practice approaches and service quality measures.

For quick wins, the “Just Do It” approach may still need a go-no go decision before a service is added or implemented. For either approach, an end to end process map can be beneficial for designing and testing services.

Prototype services can be tested in contained environments, allowing feedback throughout the design process. When customers are engaged in this research, the results can be very powerful.

Companies such as Merck & Co, GM and Orbitz use their online interactions with customers to develop new and better services. These build greater customer trust, first through greater personalisation, then customisation to create high value for the customer.

GM uses the Auto Choice Advisor (ACA) tool to assess customers’ needs before matching car options to those needs. This online trust-based advisor is designed for people who are shopping for a car and are not sure which make and model suits their needs. The advisor selects from 150 cars (not all GM) and recommends cars that fit the customer’s needs.

Merck &Co has moved away from product-centric approach toward a more customer-centric approach, matching the customer to the product. Instead of using the web to inform customers about each product, Merck creates web sites that support interaction and dialogue. Enriched information (including online interaction) helps people make decisions

Orbitz, in business since 2000, has 1 million customers each month. The company provides unbiased travel information through the delivery of the product, but goes beyond that to offer customer care while the consumer consumes the product. The customer care programme includes highway information and air systems alerts for customers, warning them of any potential delays or developments that will affect their travel. By adding a dimension of service that eases some of the hassle of travel, Orbitz differentiates itself from its competitors.

While providing the customer interaction and dialogue, these companies capture new and valuable service ideas from their customers. In our next issue, I will look at communities of interest co-creating in service design.

(Reference: Management: Inventing and Delivering its Future, Thomas A Kochan, Richard Schmalensee)

Potential sponsors, who see benefit in being ‘in on the groundfloor’ during the establishment phase of a new organisation with enormous potential in New Zealand should take note!  2008 is the set up and establishment year for the PDMA-NZ.

Product innovation in New Zealand is:

• At the cutting edge of new ground for New Zealand export. Export will be a leading buzz for New Zealand business over the coming years
• A calling card for many talented professionals who want to work for the most forward thinking, vibrant and growth orientated companies. Sponsors who line up to support the PDMA will be placing themselves at the front of the pack. 
• Part of the new wave of New Zealand creativity and innovation

Key sponsorships packages will be structured in consultation with partners including PDMA-NZ website positioning and profile at networking events and seminars.

Please call PDMA-NZ Sponsorship; Andy Blackburn 021 484 904

Auckland

Planning is underway for the next PDMA-NZ event due to be held in Auckland in the first week of November 2008.

The event will be an opportunity to share this year’s success stories and achievements. It will be a chance for you to network and meet like-minded people. We are looking for special guest speakers. Any volunteers or suggestions on who you’d like to listen to?

It will be really good to catch up with everyone, before you head off for a break. So, watch this space for the details of the event, and be there.

Christchurch

Richard Mander (leader of PDMA-NZ’s activities in Christchurch) left New Zealand in August to take up a new CEO position in Seattle. Richard is now heading up Big Screen Live www.bigscreenlive.com, a start up developing a computer environment for seniors to use the web and connect on line more easily. Our thanks and best wishes go with Richard for his future success.

Taking over from Richard for PDMA Christchurch is one of Richard’s former Humanware colleagues - Russell Watson. Russell will be helped out by Mike Ullrich and Grant Wells. The team will work to put together an initial networking events programme, including for the months leading up to Christmas. If there are any PDMA-NZ members with views on topics they would like to see discussed, speakers they would like to hear from, views on the events, or companies who would sponsor or host an event contact Russell Watson on 021 532 897.

Meanwhile, AuCom has organised an Innovation & Design Forum, and PDMA-NZ members are warmly invited.  Click here to see details of the event.

The winners of the 2008 Bayer Innovators Awards was announced at a cocktail reception, held at the Hyatt Regency Hotel on Tuesday August 5.

The winners of each category are:

Science and Health – Olaf Diegel, AUT

Design and Engineering – Chris Mardon and Tom Mackenzie, Energy Mad Ltd

Agriculture and Environment – Johan Verbeek, University of Waikato

ITC – Mike Carden and Mark Hellier, Sonar6

Research and Development – Ray Avery, Medicine Mondiale

Manufacturing – David Percy, Pertronic Industries Ltd

For more details, click on the following links

http://www.bayerinnovators.co.nz/

http://www.nbr.co.nz/article/the-bayer-awards-2008-winners-33873

We know that you’d love to get the PDMA-NZ newsletter on a more regular basis. So – has anyone got articles or topics they’d like to contribute?

Also, just let us know of any news you have seen that we can link to on the internet. And lastly, if there's an upcoming event that you think that other may be interested, we can include it on our events tab.

Some of you may already use LinkedIn (www.LinkedIn.com). It's a great business-oriented social networking tool that allows you to build up a network of people you know and trust in business. Whether it be just keeping in touch with people you have worked with in the past or finding someone you know who can introduce you to someone you want to do business with, it's a great way to network.

We’ve set up a LinkedIn group for PDMA-NZ. This allows us to form an online community of people interested in product innovation in New Zealand. Since setting up the group (and today is the first time we have promoted it), we have already 28 people who are now members of the group!

So if you’d like to join the LinkedIn PDMA-NZ group, click on this link:
http://www.linkedin.com/e/gis/77069
 

Guess what – we now have 80 paid-up members of PDMA in New Zealand!

If you aren’t already a member and want to find out what you are missing out on, just go to our website and click on the membership tab. There you will find details of membership benefits as well as a link to become a member.

Visions Magazine is an award-winning industry magazine published quarterly by our parent PDMA organisation and delivered to members. It contains articles on practical tools and techniques dealing with a wide variety of product development and management issues.

You may not realise it, but you don’t have to be a PDMA member to access it online - check it out at: http://www.pdma.org/knowledge_visions.cfm

But of course we’d love you to become members! Maybe from reading this magazine you might find it valuable and be a good reason to become a member which will also give you access other PDMA information on the website that is available to members only, such as PDMA Body of Knowledge (BOK) and the Journal of Product Innovation Management (JPIM).

The newsletter articles can now be found on the “News & Blog” tab. This means that you are able to leave comments on any of the newsletter articles. Plus it will give you access to past blogs and newsletter articles under the archives. Those of you who are familiar with RSS feeds, you can set it up to alert you when ever any new news or blog entries are posted.

And remember the Discussion Forums – a great way to connect with other PDMA-NZ members, ask questions or answer others questions.

We’d love to have your feedback!

Dimond recognised for innovation excellence

The Dimondek 630 roof fixing system by Dimond was one of three finalists in the prestigious building category of the bi-annual DuPont Australia and New Zealand Innovation Awards. The system was one of 98 entries for the awards and the only New Zealand entry to make it through to the finals.

The Awards are presented to winners in 7 categories covering: building, medical, sustainability, agriculture, food, high performance materials, and tertiary student research. Each entry must have been commercialised, and is judged against criteria that include: degree of innovation, scope of application, commercial significance, collaboration, and environmental sustainability.

The awards this year attracted the most entries ever, and the standard was extremely high. The finals night and award presentations are the culmination of what has become a prestigious event, providing exceptional market exposure for innovators in Australia and New Zealand. Unfortunately there was not a high representation from New Zealand in the finals, and it is up to New Zealand’s innovative streak to come to the fore for the next awards. There will be much that New Zealand can offer to make this a truly Australia and New Zealand event. More information on the awards can be found at www.dupontinnovationawards.com.

More about the Dimond entry
At the heart of this innovation is a revolutionary plastic fixing clip made from Zytel® nylon. The unique composition and design of the Dimondek 630 clip means that as well as facilitating movement of the roofing sheet with minimal friction it also provides an exceptionally strong connection with the roofing sheet. This allows a greater level of freedom in the design of buildings and for the installation of large sheets of roofing up to 100 meters in length to be fixed free of penetrations. The innovative system has made possible the creation of some of New Zealand’s most impressive and iconic buildings.

For more information on the Dimond innovation, and experiences with the DuPont Australia and New Zealand Innovation Awards please feel free to contact Ian McClew, Dimond Innovation Manager, ianmc@dimond.co.nz

The Winning Product - Dimondek 630 roof fixing system


The interlocking end of the clip is placed over the last post on the previous clip to ensure the dimensions and placement of it is correct.


Auckland’s Vector Arena. The roof consists of two tilted elliptical planes covered in Dimondek630 with lengths as long as 47.5 meters.

By Aruna Shekar, Senior Lecturer, Product Development, Massey University

The success of a product is determined in the market by its users. But it is too late to discover at the product launch whether the product will be attractive or not to them. Instead products should be initiated and developed in response to users’ needs or problems, well before they reach market.

One of the main differences between successful and unsuccessful products is the lack of understanding of users of the product. Product development can be clearly improved through a shift from the product to a broader view that includes the users’ needs, benefits and usage context. It is also important to take a holistic view that takes into consideration the product’s impact on society and the environment when the product is produced and disposed.

Traditional methods to investigate user-needs include focus groups and surveys, but other methods such as contextual analysis, task interactions, lead user analysis and ethnography are becoming more popular. They provide rich insights into user behaviour and usage conditions that can contribute directly to product design.

Take a pair of crutches, for instance:
To develop a new pair of crutches, we provided diaries to users for a week to note down their likes, dislikes and the problems they experienced (along with details such as time, place and tasks to be done). We observed, took photos and videotaped users going about their ‘normal’ activities using crutches. We gathered valuable information including identifying problems with crutches for youth such as: storage in theatres or classrooms (and the inability of crutches to fold); the crutch tips slip and are noisy; issues on gravel and so on. We also looked at different types of users and their requirements.  

   Sample crutches designed by students

Heard the expression ‘Form follows function’ in new product development? But ‘feelings’ should also be considered when developing products. Products need to relate to their end users, they need to evoke the right emotion and mood in the user. A product can be seen to be ‘mature or youthful, formal-informal, for fun or serious, rugged or soft. In the case of crutches, younger users preferred something that did not remind them of “hospitals or accidents, or being disabled”. They wanted something that looked ‘cheery and colourful, and suited their lifestyle’.

Some of these opportunities for improved features were gathered mainly by observing the product being used in its natural context. They clearly demonstrate how products can be designed with both the consumer and the end use in mind.