Entrepreneurs/ SME: Progressing Innovation in Hong Kong

Top innovation experts share their insight on strategies for business to stir entrepreneurial ingenuity within their organization and how the city can push forward local innovation

By Nan-Hie In


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Hong Kong has made incredible transformations over the last 150 years, having reinvented itself from a fishing village to a manufacturing centre to a financial services hub and more. “It’s in Hong Kong’s DNA to be constantly innovative,” says Egidio Zarrella, a clients and innovation partner at KPMG. However, he added that currently many inhabitants sense the city’s need to make great leaps forward in light of much competition from neighboring cities such as Shanghai, Shenzhen and Singapore. “The government recognizes it, but now people are starting to see that Hong Kong has got to change.”

How should the city advance further to remain competitive? How can companies from start-ups to major multinationals stir entrepreneurial ingenuity within their organization? These issues and more were covered at the first event of the Innovation and Technology Event Series, a forum by the American Chamber of Commerce in collaboration with the Australian and British Chambers. Four of the best minds on innovation, including Zarrella, shared some startling revelations that could help entrepreneurs and policy makers rethink how to approach innovation.

19. Darrell Mann
Darrell Mann

The Nature of Innovation

The most eye-widening views stemmed from Darrell Mann, an engineer who participated in more 400 inventions and is the CEO and technical director at Systematic Innovations. The British expert dispelled the misconception that innovation is correlated with research and development and the company’s revenue. “It doesn’t matter how much you spend on research and development, as its impact on the growth of your company is going to be zero.” Such statement challenges many businesses and governments that pour funds into research and development.

Additionally, only a fraction of innovation projects transform into successful, viable businesses. “We have analyzed 4.5 million case studies and found the failure rate at around 98 percent; you’ve got a better chance of hitting the right number on a roulette wheel than being successful in your innovation project,” he says.

Entrepreneurial attempts fail for many reasons. One popular cause of failure is the “coordination factor,” where management structures inside an organization stifle innovation, says Mann. “The challenge for most organizations now is that they are set up as efficiency engines for operational excellence, but being good operationally and being good from an innovation perspective are two totally different things,” he explains.

To be successful, one must identify which stage of innovation it is in first. He shared a five-level scale of innovation capability: seeding, championing, managing, strategizing, and venturing (or societal innovation, the highest level). He ranks Silicon Valley, a technology and entrepreneurism capital in California, level five from this scale, thanks to its innovation encouraging eco-system. However, he ranks Hong Kong at a level one or two of innovation capability. “If it wants to be more successful, it needs to have more innovative processes,” advises Mann. The high-profile innovator also shared some effective drivers of innovation.

Innovative management direction is one example. He cited Korean tech giant Samsung as an example, which swung from a level one innovation capability ten years ago, to a level three currently, thanks to its leadership. “The CEO had a big mission, which was a mission statement to beat Sony. That was a great way to get all their employees to understand exactly what their job was,” he says, adding that the leader gave the tools and methods needed to deliver this mission, which led the company to achieve this ambition.

Another strategy is the long haul approach. “When people think they are headed in the right direction, they will keep going.” He says creating a sense of progress – by getting those early success stories – helps advance innovation in an organization.

17. Richard Lancaster
Richard Lancaster

Innovation Needs in Utilities Sector 

From an energy industry perspective, Richard Lancaster, chief executive officer of CLP Holdings, also took to the podium to stress the breakthroughs needed to progress the power landscape. While much technological revolution has dramatically shifted the worlds of computers and telecommunications thanks to powerful and efficient chips, the utilities industries did not achieve an equivalent rate of progress.

“The laws of physics have constrained what we can do with energy,” he says, adding that current research and innovation in this sector is focused on squeezing the last 1 to 2 percent from existing technologies. “We have all the technologies needed to generate electricity from coal, nuclear power, gas, and renewable energy from a variety of sources – all those technologies have been invented more than a century ago. But to get the most out of them, there is still a huge amount of innovation and R&D needed,” explains Lancaster.

Meanwhile, appetite for energy is escalating. He cites the example of powering a data center: 20 years ago, it required around 1 megawatt (or a million watts of power). “Today we’re looking at a typical data center that requires 50 megawatts. By the end of this decade we will be looking at typical data center that require around 100 megawatts, one hundred times bigger than the data centers we had 20 years ago.” Lancaster says the technological breakthroughs to enable such scaling up of energy supply is lacking. Additionally, the executive says energy innovation should not be too focused on how we produce energy, rather how we consume and use power in future.

Sarah Clarke, Darrell Mann, Richard Lancaster, Charles Mok and Egidio Zarrella
Sarah Clarke, Darrell Mann, Richard Lancaster, Charles Mok and Egidio Zarrella

From a Societal Perspective

Mann and Lancaster joined a panel with Zarrella and Charles Mok (legislative councillor who represents the information and technology sector) to discuss how the community can push forward in innovation.

Mok pointed out the obstacles at the forefront of entrepreneurs’ minds, including market issues. “Many say our market is too small, and that our innovative products and services cannot get to the market.” The politician adds, “How can we create market demand big enough that lets some of these companies get out of their early stage to move on to a major stage so they can grow?”

The lawmaker claims there is a dearth of venture capital funding for companies to grow big. “A lot of companies see big issues in trying to get venture funding. Whether there should be some government policies in terms of financial policies to allow, for example, crowd funding innovation ideas to encourage more venture level funding, or loans made available in Hong Kong for some of these startups are something the government should do.”

However Lancaster says the city needs visionary leadership more than money, citing Samsung’s success. “Visionary leadership will get us looking outside the confines of our relatively small area,” he says. The energy expert points out that much of the resources are within reach, such as a highly educated work force. “We have all the ingredients here, but we need a leadership that will take us on an inspirational mission.”

Mok revealed that the administration has been trying to play a bigger role in innovation, citing the latest example with the establishment of the innovation technology bureau (which hasn’t come to fruition yet due to political deadlock at the local legislature). He added that many of the issues aired at the forum point to creating a better environment for innovation in the city.

Zarrella concurs that a more innovation-friendly environment is needed in the city but prefers the government role to have hands-off approach than official meddling. “The nature of entrepreneurism is that it goes against what everyone else does including what corporations are doing. Being told what to do is not what they want, and that is not what government should do.”

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